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Report: Justice Dept. Investigating Cable Online Video Access

13 Jun, 2012 By: Erik Gruenwedel

The U.S. Justice Department reportedly is probing domestic cable operators to determine whether they manipulate monthly user data caps, among other issues, in order to mitigate burgeoning online video competition from sources such as Netflix, Amazon Prime and Hulu.

Specifically, investigators are examining Comcast’s rapidly expanding Xfinity TV platform, in addition to other cable TV Everywhere services, to see if their data caps and subscriber authenticated programs unfairly tax competing Internet-based subscription video-on-demand options, according to The Wall Street Journal, which cited sources familiar with the ongoing investigation.

Indeed, Comcast, the nation’s largest cable operator, which recently launched its own SVOD service, Xfinity Streampix, could be found in violation of antitrust provisions it agreed to when acquiring majority stake in NBC Universal from GE. 

Consumers watched 21.7 hours of online video in March, up 47% from 14.8 hours during the same month in 2011, according to comScore. Average daily unique video viewers increased 30% 105 million from 81 million. Viewers watched 204 videos in March, up 20% from 171 million videos in 2011. The average video watched was 6.4 minutes, compared with 5.2 minutes in March 2011.

The issue garnered national attention in April when Netflix CEO Reed Hastings complained in a post on his Facebook page that a weekend spent streaming repurposed programming from the Internet via Netflix, HBO Go, Xfinity and Hulu apps on his Xbox 360 elicited different usage rates from his cable provider: Comcast.

Specifically, the CEO said he watched “Saturday Night Live” on April 15 via the Hulu app, which ate up about 1 gigabyte of his monthly data cap allowance. He said watching the same program via Xfinity didn’t use up any of his cap limit.

“The same device, the same IP address, the same Wi-Fi, the same Internet connection, but totally different cap treatment,” Hasting wrote on his Facebook page. “In what way is this neutral?”

Comcast said the reason it doesn’t tap subscribers’ data usage caps for Xfinity TV access is due to the content being stored on its servers, as opposed to Netflix, HBO Go and Hulu Plus, which access content on separate third-party servers.

The cable operator believes it can bypass net neutrality guidelines by virtue of being classified a “specialized” or “managed service,” which provide end users (subscribers) valued services, supplementing the benefits of the open Internet, according to BTIG Research analyst Richard Greenfield.

The cable industry has been under siege in recent years as hundreds of thousands of video subscribers dropped service — some say due to the recession, while others attribute it to the rise in popularity of less expensive SVOD services. Indeed, the average monthly bundled cable bill currently stands at $86 — a fee that is expected to reach $123 by 2015 and $200 by 2020 as cable operators lop together pay-TV channels, broadband access and telephone, according to The NPD Group.

By contrast, subscribers pay just $7.99 monthly to access Netflix or Hulu Plus, or $6.58 ($79 annually) for Amazon Prime.

Meanwhile, Comcast has quietly increased individual subscriber data caps from 250GB to 300GB — a tally most subs won’t surpass when accessing SVOD. And as previously reported, Verizon Wireless June 28 will allow subs to use a singular data (“Share Everything”) plan that covers up to 10 separate devices, including the PC, mobile phone or tablet computer.

“More people are using multiple devices and they don't want to have to worry about overage on their voice or text messaging,” Verizon spokeswoman Laura Merritt said in a statement. “And they want to the ability to share data between devices.”

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