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Justice Department Launches Antitrust Investigation Into Data Caps

Phillip Dampier June 13, 2012 Competition, Consumer News, Data Caps, Online Video, Public Policy & Gov't 16 Comments


The Justice Department has been quietly conducting a wide reaching investigation into whether cable operators are using Internet Overcharging schemes like usage caps and metered billing to squash online video competition, according to a report in this morning’s Wall Street Journal.

The Antitrust Division has spoken to major online video providers like Netflix and Hulu as well as cable operators, including Time Warner Cable and Comcast.

At issue are data caps — limits on how much a subscriber can use their broadband account.  Justice officials are exploring whether major broadband providers like Comcast and AT&T are using usage limits to protect their video businesses from cord-cutting — canceling a cable subscription to watch shows online.

Providers of online video like Netflix are particularly concerned about operators showing favoritism to their own video platforms. Comcast, for example, exempts partnered content from its usage allowance while continuing to count Netflix viewing against its cap. Comcast’s Xbox “free pass” is attracting particular attention in the Justice probe, in part because it could violate the merger agreement with NBC-Universal which requires the company to not discriminate against third party video content.

Some cable operators claim usage caps protect their networks from heavy users overwhelming their facilities. Comcast claimed its decision not to count Xbox video traffic against the operator’s monthly usage cap was fair because the video content did not travel across the Internet. Now the company has temporarily suspended  usage caps altogether in preparation for testing a new usage limit that also carries overlimit penalty fees.

Federal Communications Chairman Julius Genachowski last month publicly announced his support for usage limits and metered billing, describing both as innovative and enabling customer choice. The Justice Department probe would indicate otherwise, because it suggests customers are finding their options increasingly limited, possibly in violation of federal antitrust laws.

The Justice Department is also investigating the industry’s TV Everywhere project, which provides access to cable network online video exclusively to those with an existing cable television package. Most cable networks specifically prohibit online streaming of their live content, which itself might run afoul of antitrust rules.

The Journal notes Attorney General Eric Holder on Tuesday suggested he would like to be a cord-cutter himself, picking and choosing only the channels he wants to watch. At a recent Senate hearing, Sen. Al Franken (D-Minn.) said cable bills were “out of control” and consumers want alternative options to watch shows online. Holder responded, “I would be one of those consumers.”

Currently there are 16 comments on this Article:

  1. digitlman says:

    About damn time. Of course, this is the same Eric Holder who has done jack prosecuting those who stole and committed fraud during the “Financial Crisis”, so I won’t hold my breath. But, it’s a start.

  2. I thought I would come to read this article, and find a comforting article about all kinds of data cap abuses, both wired and wireless, and sure there are some major ones here, but they are all the wired ones! What about the mobile broadband, particularly for rural areas?!

    Do they think we are made of money in rural America?!

    More info here: http://www.dslreports.com/comment/2957/84727 in the review and the comments.

  3. Duffin says:

    Seriously, why did this take so freaking long? They’ve been abusing people with caps for years now. Hell, I /found/ Stop the Cap due to the original Data Cap War in Rochester. I really hope they put the same scrutiny they put into the T-Mobile/AT&T merger, even moreso. I want them contacting every single tech person they can find so they completely understand how networks work, so they can realize that bandwidth isn’t some finite resource like water or coal. It works more like a phone line. I mean, they never felt the need to cap phone calls, right? Despite every single person in America pretty much having a phone. The internet is just a humongous network. Need more bandwidth? Add some more gateways and routers. There, you have more bandwidth.

    • What I find interesting is Julius Genachowski at the FCC is supposed to be the point person on this, but he has evidently sold out to Big Cable praising their ridiculous UBB plans up and down. I suspect he’s going to end up following Son of Colin (Michael) Powell through the revolving door into the telecom industry by the next administration.

      Data caps on DOCSIS 3-upgraded cable networks and on U-verse are simply ridiculous. There is a ton of capacity available there and with their incredible profit margin, the costs to leave their customers alone and not hassle them about usage are minuscule.

      I do believe there is some interest in protecting against cable cord-cutting, but I personally suspect the biggest driver here is Wall Street’s endless demand for more ARPU. They can’t get it from TV or phone, so they are after broadband customers who evidently don’t mind paying more.

      Unfortunately, a lot of customers are easily duped by the “pay for what you use” propaganda that really makes no sense.

      • Yes, Phillip, it’s downright shameful the way they are passing out propaganda like it’s candy and so many are buying into it that they think they can get away with this!

        It’s downright infuriating.

    • I totally agree Duffin. This whole thing is a bunch of smoke and mirrors that they wish to pull over our eyes.

      But the whole Wireless Internet situation is so much worse!

      Wired solutions are saying their caps are 150, 250 or 300 GB PER MONTH! WOW! To me in Rural America that would be heaven when I am paying $190 for 21GB two months ago.

      But I do know what you mean it’s all nuts. All these caps are absolutely nuts.

  4. Kimberly Cosby says:

    I believe something has to be done about these caps. AT&T already hit us with an over charge bill as it is. I sorry but can’t afford cable. All I have is my Internet (which is my computer, Xbox 360 and my playstation 3) those are my source of intertainment. Since no cable I watch a lot of TV shows and movie plus chill
    In chat with family and friends. Now I can’t really do any of that because it eats up all of my data. I can even play online games with friends. This is just terriable. I talks to my father yesterday (he all the way in Thailand) and told him sorry dad. I can video chat with you cause I’ll go over my limit. I just ended up crying.

    • Kimberly Cosby says:

      Sorry I realized I misspelled something I meant CAN’T do anything

    • I hear you. We certainly can identify.

      We haven’t been able to do any of that since the Unlimited 3G went away. We used to have unlimited Wireless 3G from Alltel and then Verizon Wireless (when they absorbed a good portion of Alltel’s network, including us), but then had to change accounts (we had been sharing with a family member but needed to get our own account) which turned out to be a change which made us lose our grandfathered unlimited 3G.

      We often can’t even get updates except for the desktop computers since they are not portable.

      We can’t watch TV shows, movies, and only a few very short (5 min or less) YouTube videos per month.

      We also can’t use cloud backup services to protect our data against major catastrophes.

      We very rarely can even download things like music or audiobooks, unless they are small. I usually end up having to go to places like Starbucks or the library to download stuff like that.

      So after all we are already paying for Internet, we still have to go elsewhere and be inconvenienced to download what we need because we just can’t afford $190/mo for only 21GB of data for JUST internet per month (or more to get what we need). And even doing that, we still are at our monthly cap with 10 days left to the month and it was very similar last month. So we do end up going over regardless. Just not as much as we did a couple of months ago when it was 21GB.

      I even had to give up the remote assistance account I was paying for because doing remote assistance costs so much more than just the monthly fee; it was really driving up the cost of bandwidth as well. It was part of the reason for the 21GB $190 month we had. It turned out that it would make the amount I would have to charge customers way too much to be a viable service. Which means it was actually costing me a fair amount of money to even offer to provide that service. It’s sad when it’s actually less money to make house calls (paying outrageous gasoline costs) then to do remote assistance…

      So, yeah, I totally understand about the danger of caps and how much it can cost users.

      • It’s especially sad to have to go through such hoops when they have the wonderful offerings from places like LearnOutLoud.com, ChristianAudio.com, Tantor.com, and the Summer YA Sync free audiobook downloads at audiobooksync.com. As well as Librivox.org, and human read audiobooks at Gutenberg.org etc.

        • Kimberly Cosby says:

          That is just crazy. AT&T gave us a cap of 150 GB a month. Still to me is not enough. With 4 people in my house using the same Internet it goes very quickly. With this cap I sometimes don’t even want to touch the computer in fear of over charges. Not only that I live out in the country side, which makes AT&T the only provider we have. On top of that I was lay off my job. My huband can’t work and mother can my mother-in-law. We are just struggling trying to keep the bills payed. This cap is just adding to money we don’t have. We really need internet to pay our bills not only that it’s a way to communicate to people. This is just down right wrong putting this cap saying that it’s helping us save money. BS it’s like controling our useage with out your parent say no to you in high school.

          • You are so right! It is nuts. It is downright ludicrous!

          • Thankfully at the moment AT&T doesn’t have their act together and does not seem to be enforcing their caps. Their DSL cap is 100GB lower than their U-verse cap.

            If AT&T does warn you, threaten to cancel your service and see what they offer in return.

  5. Candi says:

    ALL companies with caps need to be investigated. Some of these caps are set so low, with high prices to go along with them, you can’t even use the internet for more than a few days before you max out the cap. These caps are about greed and nothing more. Other countries can have no caps, more users, and a “weaker” system…and still get the same speeds. All these companies here are trying to convince people that even 5 GB is more than an average user needs in a month. Maybe if they watch NO videos, do NO updates, and do absolutely nothing. That’s not an average user. I’m finding $50/month plans capped at anywhere from 512k to 5G.

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