In August, Comcast subscribers began noticing extremely slow Bittorrent transfers, downloads cutting off and uploads refusing to seed. Comcast flatly denied rumors of interfering with Bittorrent traffic. The ISP said it didn't discriminate between types of traffic, instead dealing directly with customers who used “excessive” bandwidth.
Tests performed by the Associated Press this week show that Comcast was lying through its teeth. The ISP does filter Bittorrent and other filesharing traffic, which AP confirmed by trying to seed and download a 4.24MB file of the King James Bible (which is in the public domain). Comcast's filtering software works by posing as the host and sending a reset packet to a downloader – incidentally, the same technique as used by the Great Firewall of China. Comcast now maintains that this kind of “traffic shaping” is essential to ensuring a good experience to the majority of their customers who don't use p2p software.
Comcast could get in legal trouble a couple of ways from this. Impersonating one of the parties in the Bittorrent connection might run afoul of state anti-fraud laws. Lying to customers about reducing their quality of service almost certainly constitutes deceptive trade practices and/or unfair competition. And my ECPA-expert friend is scratching his forehead over whether Comcast's monkeying around with their subscribers' connections would be a violation of that statute (the Electronic Communications Privacy Act), which protects electronic communications from interception but allows ISPs wide latitude to manage their networks.
As with anything this dubiously-unlawful, the real judgment is going to come in the court of public opinion. Comcast's actions have people talking Net Neutrality again, and other service providers will have to think twice before exposing themselves to this kind of bad publicity.