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Cable Technology Feature Article

June 13, 2012

Are Big Cable TV Companies Violating Antitrust Laws when Competing with Online Video?

By Ed Silverstein, TMCnet Contributor

The federal government is investigating whether major cable TV companies are violating antitrust laws as they compete with online video services, according to a news report.

Industry practices like data caps – how much data a subscriber can download a month – and “cord-cutting” – if subscribers can avoid paying for channels they don’t view – are being scrutinized by the inquiry.

As part of the inquiry, Justice Department investigators interviewed officials at such online video companies as Netflix and Hulu, and cable companies like Comcast (News - Alert) and Time Warner Cable, according to The Wall Street Journal.

The lure of lower-cost online video service from Netflix and Hulu could encourage viewers to give up pricier cable TV packages, according to Reuters (News - Alert). Netflix says data caps may be a way to keep consumers with cable TV.

At the same time, the typical U.S. cable TV bill sees prices increase and one projection said it will jump to $200 a month by 2020, according to a report from TMCnet blogger Peter Radizeski. According to data from NPD Group (News - Alert), the average bill was $86 a month last year. It could be $123 a month in 2015.

To further complicate matters, cable TV companies are apparently handling their own online video offerings differently when counting up data caps. Comcast, for instance, said earlier this year that videos watched on its Xfinity app on Microsoft's (News - Alert) Xbox is not counted the same as those videos watched through Netflix, Hulu or other apps. This action may be looked at by the Justice Department inquiry as it relates to agreements Comcast entered into when taking over NBCUniversal.

It was reported that Comcast recently chose to stop using data caps, but still has its heaviest users pay more for their increased data use.

"We have consistently treated all video carried over the public Internet the same whether it comes from our sites or anywhere else on the public Internet," the company claimed last month, according to The Journal.

In its defense, cable TV companies contend data caps are needed to handle the ever-increasing traffic on networks.

Another focus of the inquiry is whether cable TV companies are forcing viewers to get a cable subscription in order to gain access to certain online programming. Comcast, in particular, forces viewers to submit subscriber details before watching ESPN's (News - Alert) programming on an iPad. The issue relates to the TV Everywhere option.

One other focus of the investigation will be favored status where programmers offer large cable TV companies their best prices, according to WSJ.

It appears, too, that U.S. Attorney General Eric Holder backs a policy of subscribers being able to “cut the cord" rather than paying for cable channels they don't watch, WSJ reports said, based on statements Holder made this week before a U.S. Senate committee.

In a related matter, TMCnet reported recently that over-the-top apps such as Netflix and Hulu Plus are “resonating more” with consumers than the TV Everywhere apps offered by multichannel operators, based on an SNL Kagan study. Consumers have reportedly been “lukewarm” to the TV Everywhere apps.

Edited by Braden Becker

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