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Internet data caps targeted by antitrust probe

By Stephen C. Webster
Thursday, June 14, 2012 13:57 EDT
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An Internet 'fat cat' sits on money while surfing the web. Photo: Shutterstock.com, all rights reserved.
 
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U.S. cable companies have become the subject of a wide-ranging antitrust probe launched in secret by the Department of Justice, The Wall Street Journal reported Wednesday.

Pay TV companies like Comcast, Time Warner Cable and AT&T have been questioned by investigators who are looking into whether they’ve conspired or colluded to artificially limit options for online video distribution. The report noted that officials have also spoken to Netflix and Hulu, two of the leading distributors of online video.

Cable companies have, in recent years, focused on bundling their television and Internet services for a lump sum, but an even more recent development has seen those same companies limiting the amount of data customers can access via the Internet each month, and charging “overage” fees if a customer downloads too much.

While that is not anti-competitive in an of itself, some worry that cable TV operators who also provide Internet services are favoring their television platforms more and using their control over the networks to restrain competition from the Internet, in spite of federal “Net neutrality” regulations that require them to treat all traffic equally on the public Internet.

That’s why Netflix CEO Reed Hastings nearly blew a gasket earlier this year, when Comcast said it would deliver streaming video via its Xfinity service over a “private IP network” that does not count against customers’ bandwidth caps.

In a post to Facebook, Hastings explained that he sat down in front of his television to watch an episode of Saturday Night Live on a Xbox gaming console running a Hulu application, then watched the same episode through Comcast’s Xfinity service running on the same console, only to be charged against his bandwidth limit for using Hulu, but not Xfinity. “The same device, the same IP address, the same wifi, the same internet connection, but totally different cap treatment,” he wrote. “In what way is this neutral?”

By drawing a distinction between “the public Internet” and its own high bandwidth “private” network, Comcast proved its critics were right to suggest that weakened neutrality rules would lead to the creation of “super tiers,” where more bandwidth would be available to the owners, operators and, potentially, anyone who can pay enough.

Appearing to be sensitive to this criticism, Comcast later removed mention of their “private” network in a customer FAQ and explained that it had never discriminated against data carried over the public Internet, as it promised to avoid doing during its acquisition of NBCUniversal. The company later announced it would remove its bandwidth caps and implement a tiered system that simply charges customers more for additional blocks of data, as opposed to cutting off a user’s bandwidth when they reach the cap.

More than half of Americans’ broadband Internet accounts have become data-limited in recent years — a fact that led activist groups Public Knowledge and The New America Foundation to file a request last year that an investigation be launched into the cable operators’ potentially anti-competitive activities.

The Wall Street Journal added that investigators are also looking at whether cable companies stifle competition by selling channels by the bundle and implementing policies that block network partners from offering single channel subscriptions over the Internet. Critics of these policies point out that limiting a service like HBO Go, which is only available online to cable subscribers, tends to drive up the rate of Internet piracy, and the networks lose out on a potentially huge audience because of the restrictions on distribution.

If the investigation does conclude that the practice is anti-competitive, U.S. media consumers could see new options for video entertainment that do not require large lump payments every month for access to additional content they may not want.

Reacting to report of the probe, Public Knowledge legal director Harold Feld praised investigators for taking steps to protect consumers.

“Media and telecommunications giants, which can be one and the same, should not be able to take advantage of their size and reach to eliminate competition and to harm consumers through data caps which favor some content over other based on business relationships, through contract terms that could restrict where programming can be shown, or other means,” he said in prepared text.
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Photo: Shutterstock.com, all rights reserved.

Stephen C. Webster
Stephen C. Webster
Stephen C. Webster is the senior editor of Raw Story, and is based out of Austin, Texas. He previously worked as the associate editor of The Lone Star Iconoclast in Crawford, Texas, where he covered state politics and the peace movement’s resurgence at the start of the Iraq war. Webster has also contributed to publications such as True/Slant, Austin Monthly, The Dallas Business Journal, The Dallas Morning News, Fort Worth Weekly, The News Connection and others. Follow him on Twitter at @StephenCWebster.
 
 
 
 
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