Analysts: Data-Cap Rates at the Center of Department of Justice Pay-TV Probe

[Satellite TODAY Insider 06-15-12] Analysts believe a recent data-rate cap feud between Comcast and Netflix prompted the Department of Justice to launch an investigation to determine whether or not pay-TV cable and satellite operators are engaging in business practices that could derail the emergence of competing broadband distribution services.

   Internet video-on-demand service Netflix accused cable broadcaster Comcast of favoring its own Xfinity video service over those of competitors when used via Microsoft’s Xbox 360 video game console. Netflix said the video it provides to Comcast counts against its data limits, while Xfinity video does not.
   Sanford Bernstein Analyst Craig Moffett agreed with reports that the U.S. Department of Justice investigation would likely be wide-ranging, looking at such topics as contracts between programmers and distribution companies and how that affects consumers and competitors, and caps on the amount of data that cable subscribers can use for downloads.
“It is reasonable to assume that Netflix is a principal mover of the Department of Justice probe,” said Moffett.
   In May, Sen. Al Franken (D-Minn.) wrote a letter to the Justice Department encouraging it to investigate whether Comcast was engaged in anti-competitive behavior with regards to Netflix. The examination started several weeks ago when the Justice Department sent letters requesting information on deal-making and business practices. According to a recent report from News Corp.-owned Wall Street Journal, The Justice Department has sought information for the probe from Comcast, Time Warner Cable, Netflix, Hulu, Walt Disney Co. and News Corp.
   Last month, Comcast said it would to end its 250-GB-per-month cap on the amount of data that Internet subscribers can access, and would start testing tiered pricing for customers who use more than 300 GB.
   In a recent report published by the E-Commerce Times, Wolf, Rifkin, Shapiro, Schulman & Rabkin Partner Roger Goff said the Department of Justice may be concerned that cable companies are creating circumstances which give their own programming an unfair technical advantage over Internet-based competitors
   “Data caps on the Internet side of the cable companies’ business could have the effect of making the cable companies’ own programming a more attractive alternative – or in some cases, perhaps even the only alternative,” he said. “If consumers know that watching too much Netflix or Hulu could cause them to lose their Internet service at some point in the month, they will naturally limit their use of those services.”

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