Policy

Fear and Loathing Over The Top

6/18/2012 12:01 AM Eastern

Washington — The
Department of Justice
investigation into the
cable industry’s relationship
to over-the-top
video created a
symphony of breastbeating
in public activist
circles, and
certainly caused angst
in the executive suites
of the largest U.S. cable
operators.

What’s notable is
that the Justice Department
is hardly
alone in trying to figure
out that relationship. It’s something the FCC and Congress
— and even cable operators themselves — are trying
to figure out as well.

Comcast, in particular, has been a target of criticism for
its data caps, which the nation’s largest cable operator announced
it was moving away from last month in favor of
usage-based pricing. It has also continued to defend its
practice of not including its Xfinity On Demand on Xbox
product within those caps.

‘TV EVERYWHERE’ PROBED

According to a source familiar with document
requests to the two largest U.S.
MSOs, Comcast and Time Warner Cable,
the investigation includes looking
into the “TV Everywhere” model of online
distribution and authentication,
as well as data caps, usage-based pricing
and so-called most-favored-nation
agreements in content-distribution contracts.
The probe was confirmed to Multichannel
News
by that source after it was
initially reported by The Wall Street Journal
last week.

Cable-operator stocks were largely
unaffected by the news last week, a
sign that investors aren’t worried by the
probe — or the glacial pace and tight
flow of information in DOJ investigations.

“Consumers are the beneficiaries of
tremendous choice, competition and innovation
in the video marketplace with
dozens of alternatives now available
for viewing content on multiple devices
through a variety of service options,” National
Cable & Telecommunications Association
spokesman Brian Dietz said.
“The innovative offerings by cable companies
are positive developments for consumers and represent
accepted and legitimate business practices as well
as sound network management. All the industry’s actions
are intended solely to ensure consumers get the highest
value for their subscription.”

A Justice Department spokesman had no comment on
the investigation last week. The DOJ typically does not
confirm or deny ongoing probes. “Investigations are just
that, investigations.”

The Justice Department can either launch an investigation
on its own dime, or in response to complaints from
outside. Either could be the case with the cable investigation.

The FCC is currently trying to figure out what program
access and carriage rights, if any, online video providers
are entitled to, so there is clearly a recognition in Washington
that those questions need to be asked and answered,
if broadband is where video is moving.

It’s more likely, though, that the probe is a response
to the DOJ’s conversations with cable critics. Public
Knowledge, for example, confirmed to Multichannel
News
last week that it had held such
meetings over the past few months
and had called for an investigation.
But it was likely not alone.

Net lix and some public-activist
groups have complained, for example,
about Comcast’s not counting the
Xfinity video service it offers through
Xbox against its broadband data caps,
but doing so for other video services
via Microsoft’s game console.

A spokesman for Netflix would neither
confirm nor deny it had talked with
the Justice Department, but the company
has made no bones about its disaffection
with what it believes to be unfair
consideration for the Xbox/Xfinity traffic or Time Warner Cable’s iPad app.

Netflix executives last month pitched
FCC staffers on the argument that Xfinity
for Xbox, TWC’s iPad app and AT&T’s
U-verse via Xbox product were all in violation
of the FCC’s network-neutrality
rules.

Public Knowledge has twice, without
success, asked the FCC to look into
the issue, Art Brodsky, the public-interest
group’s vice president of communications,
said. The FCC had no comment.

“I can confirm that over the past six
months or so, we have been in to let
Justice know of our concerns,” Brodsky told Multichannel
News
. “The cable industry is doing all it can to try and
squash competition. The only people who don’t seem to
realize it are the FCC.”

The DOJ investigation could go “a long way to determining
the future of video competition,” Brodsky said. That
future is certainly the 64-Gigabit question for cable operators
looking to be both traditional video providers and
put their content everywhere screens are going these days.

The FCC did not apply its network-neutrality regime, including
nondiscrimination rules, on wireless broadband.
Scott Cleland, chairman of Netcompetition.org — a lobbying
group whose members include the NCTA, Time Warner
Cable and Comcast — blogged last week that he saw
the hand of Verizon/SpectrumCo critics, who were also
critics of the FCC’s exclusion of net-neutrality rules on
wireless, in the DOJ investigation.

A CONTINUING SAGA

“This is just the latest episode in the six-year political
soap opera, ‘All My Net-Neutrality Children,’ ” Cleland
said. “Net-neutrality activists, Free Press, Public
Knowledge and others who oppose any Internet-usage
limitations are pressuring the DOJ and the FCC
to either: block the pending Verizon [Wireless]-cablespectrum
transaction; or to somehow force wireless
net-neutrality conditions on Verizon as payback for
Verizon challenging the FCC’s net-neutrality regulations
in court.”

Comcast and Time Warner Cable are principals in the
SpectrumCo consortium being offered $3.6 billion for
their advance wireless spectrum.

The FCC did put online-video access and carriage
conditions on its approval of the Comcast-NBCUniversal
deal, saying over-the-top providers were potential
competitors that need protection from the combined
companies’ specific market power to discourage that
competition. But the commission has yet to weigh in on
whether online video services are sufficiently like traditional
MVPDs to warrant market-wide access and carriage,
including must-carry and retrans rights.

It could soon. Just last week, reply comments were
due to the FCC in the complaint of over-the-top provider
Sky Angel against NCTA member Discovery Communications,
which stopped selling its channels to Sky Angel,
a predominately religious content provider, when
it switched from direct-broadcast satellite to Internetbased
distribution. The commission has recognized that
the definition of MVPD and channel has wider implications
than whether or not Discovery has to sell its programming
to Sky Angel.

The combination of what the FCC decides is that definition,
and what the DOJ decides — not taking any action
will be a decision as well — will definitely steer
the course of cable online video and Washington’s response.

“The subcommittee will examine how advances in
consumer electronics, broadcasting, cable, satellite,
the Internet and other platforms are changing how
consumers access video content, how those changes
are impacted by existing regulations, and what type of
regimes should apply going forward,” Walden said last
week.


Todd Spangler contributed to this report.
September