Apple is negotiating with Comcast in an attempt to create "a streaming-television service that would use an Apple set-top box and get special treatment on Comcast's cables to ensure it bypasses congestion on the Web," The Wall Street Journal reported today. The usual "people familiar with the matter" revealed the companies' plans, which would involve streaming live and on-demand TV programming to an Apple set-top box, presumably the Apple TV.

If accurate, Comcast would have to be careful not to violate network neutrality obligations. The Federal Communications Commission's rules against Internet service providers giving special treatment to specific Web services were vacated by a court decision, but Comcast still has to follow the rules until 2018 because of commitments it made in exchange for gaining approval of its acquisition of NBCUniversal in 2011.

Comcast recently obtained payment from Netflix in exchange for a direct connection to its network. This was allowed because the net neutrality obligations cover only the "last mile," the path from Comcast facilities to consumer homes.

The Apple/Comcast deal as described by the Journal would have Apple's video streaming traffic "separated from public Internet traffic over the 'last mile'——the portion of a cable operator's pipes that connect to customers' homes."

But wait, there's a twist.

"Under the plan Apple proposed to Comcast, Apple's video streams would be treated as a 'managed service' traveling in Internet protocol format—similar to cable video-on-demand or phone service," the Journal wrote. "Those services travel on a special portion of the cable pipe that is separate from the more congested portion reserved for public Internet access."

"Managed" services could possibly be given their own path without violating net neutrality rules, which are vague in some important areas.

Apple is just asking for a separate "flow" rather than prioritization over other Internet-based services, according to the Journal's sources. "Those distinctions are important because of merger conditions Comcast agreed to as part of its 2011 acquisition of NBCUniversal," the report said. "Those 'net-neutrality' restrictions, which will be in place through 2018, say Comcast cannot 'unreasonably discriminate' in how it transmits network traffic."

It's not surprising Apple would be talking to Comcast about such a service. Rumors that Apple was teaming up with Time Warner Cable for video delivered on a new Apple TV set-top box cropped up last July and again in February.

Comcast subsequently announced that it intended to acquire Time Warner Cable, so it makes sense for Apple to talk to Comcast about a potential deal. The Comcast/Time Warner merger could take up to a year and face extensive antitrust scrutiny regarding net neutrality and numerous other topics.

The Journal said the Apple/Comcast talks are "still in early stages and many hurdles remain." For one thing, "[d]elivering the service quality Apple envisions would require Comcast to make significant investments in network equipment and other back-office technology." Apple and Comcast are also at odds over which company would control most of the customer data.

The easy way around net neutrality violations

As mentioned, the net neutrality rules Comcast must follow have an exemption for "specialized" or managed services, which are loosely defined. The agreement that let Comcast buy NBCUniversal said, "'Specialized Service' means any service provided over the same last-mile facilities used to deliver Internet Access Service other than (1) Internet Access Services, (2) services regulated either as telecommunications services under Title II of the Communications Act or as MVPD [multi-video programming distributor] services under Title VI of the Communications Act, or (3) Defendants’ existing VoIP telephony service."

So far, Comcast "has limited the managed-video services it offers only to its own cable TV services," the Journal wrote. Under the NBCUniversal agreement, Comcast could treat a third party's traffic as a specialized service as long as it offers similar terms to other companies.

Apple gaining a separate path on Comcast's network "certainly could violate the Comcast-NBC merger's Net Neutrality conditions, but it's not 100 percent clear," Matt Wood, policy director of consumer advocacy group Free Press, told Ars. "One of the many reasons that Free Press criticized the 2010 Open Internet rules as too weak was this managed services vacuum. No one could be entirely clear about what kind of services would be allowed. We've already seen Comcast try to take advantage of this loophole, and of its legacy cable TV status, to claim that certain video traffic is not subject to Net Neutrality requirements.

"I don't see how striking a special deal to provide a separate path for some video services—with the express purpose of avoiding the congestion that other content and services might experience during peak traffic times—could be seen as anything other than a way of prioritizing the favored video, evading the rules, and deterring the investments necessary to make the last-mile Internet connection less congested in the first place," Wood said.

John Bergmayer, senior staff attorney at consumer advocacy group Public Knowledge, said, "If there does end up being a 'specialized service' argument, it again shows what a loophole that concept is. You shouldn't be able to just slap a 'specialized service' label on a net neutrality violation. A specialized service should be some kind of service that cannot work over the normal Internet at all, or something that due to health or safety reasons has very low tolerance for jitter."

Internet congestion is likely greater at the interconnection points that join one network to another, rather than on the last mile, Bergmayer said. For that reason, it may make sense for Apple to strike a Netflix/Comcast-style peering agreement or build its own CDN, as has been rumored.

We contacted Apple and Comcast tonight but haven't heard back yet.