As you’ve heard, the Justice Department
is in the midst of an antitrust investigation of cable companies,
namely Comcast and Time Warner Cable. The
investigation focuses on data caps put in
place by these cable giants for their Internet
services and allegations that they favor their
own content over others’ when counting data
transmitted against these caps. There are a
few parts of this discussion worth examining.
Currently, Comcast sets its data caps at 250 Gigabytes
per month. A typical streaming video is
around 2 GB of data. A subscriber would have to
stream about four videos each day for an entire
month just to reach the data cap limit. For the average
consumer, the current cap size shouldn’t
be an issue, as long as data caps remain in line
with the market and consumer needs.
But there are some subscribers, which cable
companies consider “heavy” or “excessive” users, who are
caught in the crossfire and are charged extra for going over
the monthly allowance. Most of these subscribers abandoned
pay TV in favor of streaming shows and movies over
the Internet — “cutting the cord” — and, in my opinion,
shouldn’t be penalized for keeping up with the trend. The
industry should expect more cord-cutting because, according
to survey results released by Deloitte earlier this
year, 9% of TV homes cut their cable services in 2011, while
another 11% said they planned to do so.
The disconcerting part of this discussion, and the catalyst
for the investigation, is when Netflix CEO Reed Hastings
complained on Facebook that Comcast applied data
caps inconsistently and unfairly by not counting viewing of
its own Xfinity streaming content against those caps in the
same way it counted Netflix and Hulu content. This behavior
creates an anti-competitive market and is clearly unfair.
Data caps are fine; holes in cap regulations exposed by ISPs
for preferential treatment of data are not.
From a consumer standpoint, if over-the-top providers
expose issues such as preferential data treatment,
the general public will have an opinion
about it. People enjoy the flexibility of doing
what they choose with their data allotment.
If ISPs begin to monopolize content, they can
bet that their subscribers will migrate to other,
more flexible service providers.
Content providers are sensitive to news like
this, which affects their production and distribution
strategies. But for OTT service providers
like us, data caps have not been crippling
yet. Our solution is to continue innovating.
Ideally, the FCC will enforce net neutrality and
will be able to identify which types of activities
cross the line and which don’t. The market
should police itself as long as the FCC enforces net neutrality
regulations, which were put in place for a reason.
In the meantime, cable companies will look for other
ways to maintain their revenue and market share as
more consumers “cut the cord.” Perhaps this investigation
will push some companies to do what mobile operators
do and move toward usage-based pricing for
broadband Internet. This will be good for cable operators,
but bad for consumers who prefer to watch more
on-demand content online.
It will be extremely interesting to watch how this investigation
plays out — if it’s happening at all — though
it does seem highly likely. If the Justice Department
rules against the cable companies, it will have profound
repercussions for the entire industry.
John Gildred is founder and chief technical officer of SyncTV.