justice2 Justice Department Investigating Cable Providers, Net Neutrality

The US Justice Department is looking into antitrust claims against various cable companies throughout the US to find out if they've been acting anticompetitively when it comes to the distribution of online video through their networks.

The U.S. Justice Department has begun conducting a large, wide-ranging antitrust investigation into cable companies and whether or not they are attempting to stifle upcoming competition from online video providers. Officials have spoken to several online companies, including Netflix and Hulu, as well as cable providers like Comcast and Time Warner Cable, about issues such as data caps. No comment was given about the investigation.

The problem arises from the fact that cable companies, which provide bundles of television channels as well as high-speed internet access, are having their traditional channel bundles as well as video rental on demand services bypassed by customers using online services such as Netflix, Hulu, and Amazon. Companies, having invested billions of dollars into the construction and maintenance of their networks, have little to no incentive to get out of the business of providing television channels, and major entertainment groups with multiple television stations are highly invested in the current model of television viewing, because by requiring cable companies to license packages of channels rather than picking individual channels, they ensure that all their channels, no matter how popular, make it into homes, and are able to receive fees for stations that would otherwise wither and die from lack of viewership. The probe from the Justice Department serves as a highlight into how shifts in patterns of television viewership are shaking and reverberating through the television entertainment industry.

The Justice Department has already shaken the eBook publishing industry with a lawsuit that alleges publishers colluded with Apple to fix prices on eBooks, rather than letting the market set the prices. Several publishers settled in April, but Apple and the remaining publishers continue to fight the suit. In the cable probe, the Justice Department is taking a close look at data caps that have been used by TV providers like Comcast and Time Warner have used to try and deal with the rapid growth of online video traffic. The limits are needed, the companies claim, in order to stop heavy users from overwhelming their networks. Online video providers like Netflix, however, have accused cable companies of using the limits at stopping consumers from dropping their television services and switching completely to online video services. There is also concern that the cable companies’ online video offerings, many of which have begun service in just the past year, will get an unfair advantage by not affecting data cap limits or receiving priority traffic on the networks. Comcast did nothing to alleviate those accusations when they announced in March that its Xfinity app on the Xbox 360 would not be counted against their subscribers’ data caps, unlike every other video service available on the system.

Because of this announcement, the Justice Department is examining whether or not Comcast violated legal requirements made of the company in 2011 in order for them to secure approval for the takeover of NBCUniversal. Under those legal terms, Comcast cannot “unreasonably discriminate” against other companies transmitting data over its network or treat its own content differently than it treats theirs. Comcast claims that they have not, in fact, violated those requirements, because they are not treating data from the Internet any differently; they are claiming that they have a loophole in that Xfinity uses data only from Comcast’s internal network, not the public Internet. “We have consistently treated all video carried over the public Internet the same whether it comes from our sites or anywhere else on the public Internet,” the company said.

Another issue being investigated are paywalls around certain content providers that require users to have an active cable subscription, such as ESPN’s WatchESPN service, which can only be accessed in mobile form after entering your cable subscription details. The Justice Department is investigating whether these paywalls are anticompetitive, as well as whether contracts signed by providers and entertainment groups are anti-competitive by requiring subscribers to purchase packages of channels, whether or not they actually watch those channels.