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Comcast has reportedly turned its back on promises not to data discriminate

Internet video has a problem.  Many of America's top cable providers -- such as Time Warner Cable, Inc. (TWC) and Comcast Corp. (CMCSA) -- also happen to be cable television providers.  The last thing they want is people ditching cable TV for cable internet video, which hits them with a double whammy of extra bandwidth demands and less subscriber revenue.

I. Are Cable Companies Violating Their Promises?

According to a report in The Wall Street Journal, the U.S. Department of Justice (DOJ) has initiated a probe into concerns that Comcast and others are working to quash internet video.  It's talked to Hulu and Netflix, Inc. (NFLX), leading net-video providers as well.

The DOJ probe could have major impact if the department decides that antitrust violations have occurred.  The government agency has made waves in recent months sinking AT&T, Inc.'s (T) acquisition bid of Deutsche Telekom's (ETR:DTE) T-Mobile USA and by suing Apple, Inc. (AAPL) and top e-book publishers for price fixing.

Among the decisions that triggered the new probe was Comcast's decision to offer free data to customers who use its Xfinity app on Microsoft Corp.'s (MSFT) Xbox 360 console.  Both Netflix and Hulu's apps count towards users' capped data limits, but the ISP's own app does not.

Comcast Xfinity
Comcast has been accused of data discrimination by rivals. [Image Source: Zachary Kaufman]

The issue is complicated by the fact that some major internet video providers are actually owned by the same companies looking to damage them.  For example, while Comcast's decision may damage Hulu, Comcast is also a major owner of Hulu, along with News Corp. (NWS).

Comcast is treading on thin ice as it promised in 2011 to treat competitors' data the same as its own, as part of its purchase settlement with the DOJ regarding its purchase of NBCUniversal.  Now it appears to be forgetting its promises.

II. Channel Providers Pressured Into Bundling

The DOJ is also examining the "fairness" of contracts that cable providers push channel providers into.  One practice under investigation is cable providers' efforts to block channel providers from individualling selling a channel, instead forcing them to opt into authentication schemes.

In other words, ESPN might want to offer to sell you its channel for $2.50 a month with open access, but cable companies have currently nixed that option.  The cable companies instead force you to buy their TV packages, which run $30 USD per month or more, in order to gain access.  Only customers who authenticate themselves as cable subscribers can then access ESPN on mobile devices.

ESPN app
Cable providers have fought to only allow mobile channel access to authenticated bundled cable subscribers. [Image Source: Howard Forums]

At a Tuesday Senate hearing, Attorney General Eric Holder let it be known where his sympathies lie.  When Sen. Al Franken (D., Minn.) suggested that some customers wanted to ditch cable and watch internet video instead, the Attorney General remarked, "I would be one of those consumers"

Source: WSJ

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RE: Throw the book at 'em
By sorry dog on 6/15/2012 12:45:49 PM , Rating: 2
Additionally, the lack of ability for consumers to purchase ala-carte programming is KILLING the cable industry. The execs swear up and down that they have to sell "packages" or the costs will be too high for consumers to afford. I beg to differ. People who want ESPN will pay for ESPN--no matter if they have to buy a package or if they can buy ala-carte. The cost of each individual channel bears a price commensurate with whatever that channel provider wants to charge. Price yourself out of the range of most consumers, and demand for your product dries up. If some channels can't be sold at $.01 per month, then that's a big indicator that people aren't interested in that channel--and by rights, said channel should cease to exist.

I think Mick gets this part of the article wrong at least makes it confusing. The FCC is actually talking about a different issue with additional programming being only available to subscribers of higher than basic tiers of service such as having to have Expanded Basic or higher to view ESPN360 over the internet. Channels supplied through IP are specifically exempted from normal cable regulation, and is only starting to become address through net neutrality regs.

This is an entirely separate issue from bundling, and saying the cable co's are the primary one's forcing the bundling has it backwards. Most channels are owned by media groups with several channels. For example Viacom has Nickelodeon's, BET's, MTV's, Spike, TVland, CMT, etc. When Cable co. is negotiating prices is it not like it's newegg's shopping cart and you take this and that and cable co can bundle how they please. It's viacom saying you take it all at whatever price and we want the following channels to be in your basic expanded tier. Sometimes these negotiations get hard ball and turn ugly and that's when you hear stuff like last fall DirectTV may lose FX, Speed, NGC, etc. That is these media companies playing their trump card by scaring customers that they might lose their favorite channel (even if it's queer bait Bravo) and then Sat/Cable company better come to a deal fast before their competitors sales people can take advantage by saying "my competitor doesn't even carry Speed channel and I have it on Channel 42 in my basic package for $30...." ("for year and then it goes to $65 according the contract that you verbally agree to and I'm not really going to explain to you but it will cost you $300 to get out of when your pissed because you can only talk to Indians or their below IQ american managers).

Anyway, just look at who has been the bigger contributor to Congress lately. Media producers or Cable Sat companies?

I'm guessing media, for other reason than they have more disposable cash as sat/cable companies are usually and should be using their extra cash to upgrade networks, buy competitors, or servicing debt incurred from the first two. Only exception might be Comcast because they are so much larger than everyone else and they have bought some media assets lately.

However, I work in the industry and customer choice in my areas has been growing and competition has become much more fierce and prices have been falling for customers. There has been a lot of belt tightening industry wide as revenue per customer per line of business (big 3 lines of business are cable, internet, and phone) has been going all media/ISP providers are looking for ways to gain that revenue back such as on demand offering that are more competitive with Netflix or more bundling to steal other lines of business away from competitors.

This whole article strikes me as odd considering it's really media companies in driver's seat on the bundling issue and anybody in the industry knows that... so this article is highlighting Congress is mainly blaming TV providers. Either congress is highly mis-informed, bought off, or this article is completely missing the issue in it's coverage.

...Sorry for the super long post but there is a lot more to this issue than big bad cable co squeezing customers.

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