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Cable Cartel’s Plan to Kill Online TV: No Cable Subscription? No Online TV – Consumer Groups Call That Collusion

Phillip Dampier January 4, 2010 Comcast/Xfinity, Data Caps, Issues, Online Video 17 Comments

Comcast blocks C-SPAN programming for those who are not Comcast customers

Public interest groups today began an offensive against the cable industry’s attempts to stave off potential online video competition with an industry dominated and controlled online video platform that guarantees consumers won’t cut cable’s cord.

Free Press, Media Access Project, Public Knowledge and Consumers Union are sending letters to the Justice Department and the Federal Trade Commission calling for a probe into the industry’s “TV Everywhere” project, designed to weed out non-cable subscribers from accessing online video programming.

The undertaking, which the industry claims will eventually rival Hulu in size and scope, seeks to provide their broadband customers with on-demand access to as much programming as possible, as long as they subscribe to a corresponding video programming and broadband service package.

Known in the industry as a “pay wall,” the system would assure pay television companies affiliated with the project that they will not lose subscribers from customers cutting the cord to watch programming online for free.  Consumer groups call that collusion, and accuse the industry of secretly meeting to outline the TV Everywhere concept and may be violating anti-trust laws in the process.

“The old media giants are working together to kill off innovative online competitors and carve up the market for themselves,” said Marvin Ammori, a law professor at the University of Nebraska and senior adviser to Free Press. Ammori’s report: TV Competition Nowhere: How the Cable Industry Is Colluding to Kill Online TV, is included in the mailing to the federal agencies.

Ammori says the industry has a long history of controlling behavior.

“Over the past decade, they have locked down and controlled TV set-top boxes to limit competing programming sources; they have considered imposing fees for high-capacity Internet use in ways that would discourage online TV viewing; and they have pressured programmers to keep their best content off the Internet,” Ammori writes.

In addition, these companies, which already dominate the Internet access market, have threatened to discriminate against certain online applications or have already been caught violating Network Neutrality. Indeed, the FCC issued an order in 2008 against Comcast for blocking technologies used to deliver online TV, noting the anti-competitive effect of this blocking. While it may be economically rational for cable, phone and satellite companies to squash online competitors, the use of anti-competitive tactics is bad for American consumers and the future of a competitive media industry.

The latest method of attack aimed at online TV, however, may be the most threatening — and is also likely illegal. Competition laws aim to ensure that incumbent companies fight to prevail by providing better services and changing with the times, not by using their existing dominant position and agreements to prevent new competitors from emerging.

TV Everywhere has a simple business plan, under which TV programmers like TNT, TBS and CBS will not make content available to a user via the Internet unless the user is also a pay TV subscriber through a cable, satellite or phone company. The obvious goal is to ensure that consumers do not cancel their cable TV subscriptions. But this plan also eliminates potential competition among existing distributors. Instead of being offered to all Americans, including those living in Cox, Cablevision and Time Warner Cable regions, Fancast Xfinity is only available in Comcast regions. The other distributors will follow Comcast’s lead, meaning that the incumbent distributors will not compete with one another outside of their “traditional” regions.

In addition, new online-only TV distributors are excluded from TV Everywhere. The “principles” of the plan, which were published by Comcast and Time Warner (a content company distinct from Time Warner Cable), clearly state that TV Everywhere is meant only for cable operators, satellite companies and phone companies. By design, this plan will exclude disruptive new entrants and result in fewer choices and higher prices for consumers.

This business plan, which transposes the existing cable TV model onto the online TV market, can only exist with collusion among competitors. As a result, TV Everywhere appears to violate several serious antitrust laws. Stripped of slick marketing, TV Everywhere consists of agreements among competitors to divide markets, raise prices, exclude new competitors, and tie products. According to published reports and the evident circumstances, TV Everywhere appears to be a textbook example of collusion. Only an immediate investigation by federal antitrust authorities and Congress can prevent incumbents from smothering nascent new competitors while giving consumers sham “benefits” that are a poor substitute for the fruits of real competition.

Ammori

The benefits of controlling the marketplace of video and online entertainment is a lucrative one, earning players billions in profits each year.  Losing control of the business model risks the industry repeating the mistakes of the music industry, which overpriced its product and alienated consumers with annoying digital rights management technology and lawsuits.  It also risks a repeat of the newspaper industry which many in the cable industry believe made the critical mistake of giving away all of their content for free.

With online video services like Hulu generating enormous online traffic from its free video programming, the cable industry fears they might already be headed down the road newspapers paved.  TV Everywhere is part of a multi-pronged defense plan according to Ammori.

Indeed, what the industry cannot control themselves, Internet Overcharging schemes like usage caps and “consumption billing” can handily manage.

Ammoni notes:

Cable and phone companies have proposed cap-and-metered pricing for Internet service that appears to target online TV. Unlike the current all-you-can-eat monthly fee-plans, cap-and-metered pricing would charge users based on the capacity used. As a result, downloading or streaming large files will be more expensive than smaller files. In March 2009, Time Warner Cable announced metered pricing trials in four cities that would have made watching online TV cost prohibitive.

AT&T is testing a metering plan on its wireline U-verse service with hopes for national expansion. Even under generous allowances for bandwidth, users could not watch high-definition programming for many hours a day.

In response to trials by Time Warner Cable, a House bill was introduced in Congress, and Time Warner Cable dropped its immediate plans under consumer pressure. The company stated the plans would be reintroduced following a “customer education process.”

“Online TV is this nation’s best shot at breaking up the cable TV industry oligopolies and cartels. Permitting online distributors to compete vigorously on the merits for computer screens and TV screens will result in increased user choice, more rapid innovation, lower prices and a more robust digital democracy,” Ammoni concludes.

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Uncle Ken
Uncle Ken
14 years ago

I agree with this. Video is what got the whole mess going, you do not need
to watch TV on your pretty new I-pod. TV. Games, Music should be shut off. The
system was not built to handle all this. Go watch TV on your TV… your
slowing my internet down.

Tim
Tim
14 years ago
Reply to  Uncle Ken

People are “slowing” your internet down? Ok, and how did you come to that conclusion? For real, I would really like to hear your explanation.

Uncle Ken
Uncle Ken
14 years ago
Reply to  Tim

Twas the day after Christmas and all of the mice were signing up for new service accounts. While the children were asleep in their nest dad finding all sorts of streaming stuff and his share of porn. The children awoke and the party began with the streaming video, music and games knocking my speed down 30% on a system not built to handle this much. The same equipment feeds the wi-fi and wireless services. Over air is just one way of getting it out but the data needs to be fed to those systems. It happens every Christmas. 50% will… Read more »

Ron Dafoe
Ron Dafoe
14 years ago
Reply to  Uncle Ken

Uncle Ken – I am confused by your last 2 posts. Are you now for limits placed on internet connections? It sounds like it to me. Do you not agree that companies should increase their network capacity (split neighborhoods, upgrade equipment, etc) or manage their networks fairly and equally so people get equal speed?

Uncla Ken
Uncla Ken
14 years ago
Reply to  Ron Dafoe

Ron and Tim. No I am not for limits on hardwired house systems and yes I am for limits for the moment on over the air transmissions. There is just not enough structure to support it yet so the second question is yes im very much for providers making more structure but they will not without a huge price jump. TV is a fraud a smoke screen. Cost them the same to send 14 channels of Bonanza at the same time as it did 3 months ago yet up goes the price but that is another subject. Radio spectrum is… Read more »

Ron Dafoe
Ron Dafoe
14 years ago
Reply to  Uncla Ken

I understand what you are saying, but wireless carriers did this to themselves by making it mandatory to have a dataplan on smartphones. They can’t have it both ways. To me, by making every smartphone have a data plan, they are admitting that they are making huge profits off of it. They can’t complain when people decide to use what they are paying for.

Uncle Ken
Uncle Ken
14 years ago
Reply to  Ron Dafoe

Ron I understand your comment and the truth is if they promote a phone it should provide everything that was promised without those extra charges. Those in power have the ability but those billions keep rolling into their pockets. Who was it Maza? he is done the repubs are out to kill him. Shumer NY is still trying to figure out what to do with him. This should have been on the front page along time ago and never was and I don’t want phil to tell me about closed door deals.Thanks for being a friend I could use a… Read more »

Tim
Tim
14 years ago
Reply to  Ron Dafoe

Cell phone carriers really need to be put in check. There are so many things wrong the big carriers do it isn’t even funny. I really hope something is done soon.

Tim
Tim
14 years ago
Reply to  Uncle Ken

That is a local network problem and has nothing to do with the Internet if your children are hogging your connection. But I still didn’t see how other people like your neighbor are slowing your connection down. And on another note, is competition for a cable company bad? Why shouldn’t you be able to get content online and watch it? Lastly, I do watch video content downloaded on my TV. Most video cards have dual monitor access. You can run a HDMI/DVI cable from your PC to your TV and watch shows or movies on your TV, which is what… Read more »

Ron Dafoe
Ron Dafoe
14 years ago
Reply to  Tim

Or netflix, blockbuster, xbox360 downloaded movies – there are a ton of options right now. What about those Blu-Ray movies that came (not sure if they still do this or not) with a download key for a digital copy?

DirectTV on demand feature requires an internet connection to download the movie to the DVR.

Michael Chaney
14 years ago
Reply to  Uncle Ken

I do watch TV on my TV…..through my new home theater PC with a dual tuner. It’s a DVR, Netflix streamer, Bluray player, and online video device. I also do this via AT&T Uverse fiber to the home, so I’m not affecting any of my neighbors bandwidth. So why then should should online media be “shut off”? I’m sorry if you have cable instead of FTTH….not my fault. I’m sorry if you don’t have a computer to use for a HTPC….again not my fault. So how about rather than advocating for punishing me for wanting to embrace next-gen technology, you… Read more »

The family dog
The family dog
14 years ago

Yet another potential illegal behavior by Comcast is to disrupt the internet connection by a millisecond – enough to break your connection to the online program you are watching. Amazingly, this only happens to me when I am watching online TV. My graphics heavy VPN connection is often uninterrupted…

Ian L
14 years ago
Reply to  The family dog

How about no? I can watch online video just fine over an EvDO connection which has jitter of 10ms or so. Heck, throttling due to your normal tier speed caps interrupts a progressive download with a TCP forced idle for more than a millisecond.

KC
KC
14 years ago

It’s good to see academics contacting the government about this. I’m sure they would listen to people who know the law more than they would angry cable customers. Ken, people watching TV online isn’t slowing your internet down. You’d have to download massive amounts of stuff to slow anyone else’s internet down. Furthermore, the system was built to handle anything because it can simply be upgraded if more bandwidth is needed, but the cable co’s don’t want to spend the money so they are telling you they can’t handle it. Because saying they can’t handle it gives them access to… Read more »

Uncle Ken
Uncle Ken
14 years ago
Reply to  KC

Yes KC everything can be upgraded the question is if they want to. Here in Rochester that is a no brainier. It’s TW, frontier or nothing. You remember Frontier the provider with the 5 gig cap. The mail person does even deliver anything about either provider anymore because there is no reason. If TW doubled their price tomorrow you would have 3 choices TV, No TV, super slow internet and you know how anal people are with TV sell the kids to keep I love Lucy coming. More powerful then crack ever thought of being. Here is how I see… Read more »

Uncle Ken
Uncle Ken
14 years ago

Michael I re read all of my posts on the topic and see where I made some mistakes mistakes and people did call me out on them. They happen to be better readers and writers then me. I my case coax I have always thought of it as 2 things going on at the same time. The TV end and the internet end all through that single copper wire. I also thought TV signal was always there and on all the time and no matter how many TV’s were watching nothing ever seems to slow down. I also thought the… Read more »

Michael Chaney
14 years ago
Reply to  Uncle Ken

Ken, I don’t post as often as I’d like, and when I do I rarely take the time formulate complete arguments. When I do post, it’s usually because something I read really rubbed me the wrong way. So I’d like to take the time now to apologize for any sharpness of tone I have taken in past posts and will likely take in future posts 🙂 I do try to read every article and at least skim through the comments, and I’ve noticed how engaged you are in the conversations. For that I’d like to thank you, regardless of any… Read more »

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