Justice Department probing cable companies’ Internet data limits

The Justice Department has focused its sights on yet another industry being wildly disrupted by the Internet: television.

The enforcement agency has been engaged in a month-long investigation of cable firms’ policy of imposing Internet data limits on consumers, according to people familiar with the probe. Critics say the practice hampers companies providing Web-based entertainment, which is threatening to upend cable’s dominance.

The inquiry signals a more active role by antitrust officials in the fast-moving tech sector, as Internet firms increasingly complain to federal officials that telecom and media giants are unfairly using their dominance to squash competition from the Web.

Decisions by antitrust officials are being closely watched — and their agencies are being heavily lobbied — for how they will shape the way consumers watch videos, listen to music and read books.

“Antitrust officials are taking on the massive transition of hard media to digital media, and in some cases there are whole new questions in antitrust analysis,” said Andy Gavil, a law professor at Howard University. “And the trick is to figure this out while being sensitive to how fast things are changing.”

Given the pace of change, Washington regulators have been stepping up oversight of technology firms as well as traditional media companies.

The Justice Department has already charged Apple and publishers with unfairly colluding over e-book pricing. Apple, Barnes and Noble, and some authors groups complain that the action cemented Amazon’s dominance in the e-books market. And the Federal Trade Commission is investigating allegations that Google is using its primacy in Web search to rank its travel, restaurant-review and other services higher than those of rivals.

In the online video investigation, Justice is studying whether tiered data policies — which charge users by how much Internet data they consume — are anti-competitive. Comcast and other cable and satellite providers are also being questioned about their own streaming video services, which they sometimes do not count against monthly data limits, according to people familiar with the matter, who spoke on the condition of anonymity because the investigation is ongoing.

“Be careful what you wish for,” said Craig Moffett, an analyst at Sanford C. Bernstein. “The proceeding is likely to slow the pace of innovation and reinforce the closed nature of the cable infrastructure, reducing the opportunity for outsiders — say, Apple or Google — to get access to cable video feeds.”

Data limits have been endorsed by Julius Genachowski, chairman of the Federal Communications Commission. But after complaints by companies including Netflix, Justice Department officials launched probes into those practices, which could violate antitrust laws as well as a pledge by Comcast to fairly offer Web content from its rivals. The cable company agreed to this commitment as part of its federally approved joint venture with NBC Universal in 2011.

Netflix, which drives as much as 30 percent of broadband traffic within homes, says data limits encourage consumers to shy away from its streaming video service. Chief executive Reed Hastings has complained that Comcast, for instance, offers a streaming video service, which does not count against its data caps, to households that have Microsoft’s Xbox gaming console. That, Hastings says, violates its 2011 merger agreement.

Comcast has rebutted the claims, saying its Xfinity service on the Xbox should not count against data caps because it is not streamed on the public Internet but over the company’s private network.

Netflix, Comcast, Time Warner Cable and the Justice Department declined to comment for this story.

Consumer advocacy groups say action by antitrust officials is crucial to protect Web entertainment options for families.

“We are glad the DOJ is taking a good look at cable operators’ use of these arbitrary data caps,” said Matt Wood, policy director at Free Press, a public interest group. “Caps can discriminate against competing online video services.”

The Wall Street Journal first reported on the antitrust probe of cable companies’ data limits.

Cecilia Kang is a national technology reporter, writing about tech and Internet policies at the Federal Communications Commission and Federal Trade Commission and how regulations affect businesses and consumers.
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The Justice Department has focused its sights on yet another industry being wildly disrupted by the Internet: television.

The enforcement agency has been engaged in a month-long investigation of cable firms’ policy of imposing Internet data limits on consumers, according to people familiar with the probe. Critics say the practice hampers companies providing Web-based entertainment, which is threatening to upend cable’s dominance.

The inquiry signals a more active role by antitrust officials in the fast-moving tech sector, as Internet firms increasingly complain to federal officials that telecom and media giants are unfairly using their dominance to squash competition from the Web.

Decisions by antitrust officials are being closely watched — and their agencies are being heavily lobbied — for how they will shape the way consumers watch videos, listen to music and read books.

“Antitrust officials are taking on the massive transition of hard media to digital media, and in some cases there are whole new questions in antitrust analysis,” said Andy Gavil, a law professor at Howard University. “And the trick is to figure this out while being sensitive to how fast things are changing.”

Given the pace of change, Washington regulators have been stepping up oversight of technology firms as well as traditional media companies.

The Justice Department has already charged Apple and publishers with unfairly colluding over e-book pricing. Apple, Barnes and Noble, and some authors groups complain that the action cemented Amazon’s dominance in the e-books market. And the Federal Trade Commission is investigating allegations that Google is using its primacy in Web search to rank its travel, restaurant-review and other services higher than those of rivals.

In the online video investigation, Justice is studying whether tiered data policies — which charge users by how much Internet data they consume — are anti-competitive. Comcast and other cable and satellite providers are also being questioned about their own streaming video services, which they sometimes do not count against monthly data limits, according to people familiar with the matter, who spoke on the condition of anonymity because the investigation is ongoing.

“Be careful what you wish for,” said Craig Moffett, an analyst at Sanford C. Bernstein. “The proceeding is likely to slow the pace of innovation and reinforce the closed nature of the cable infrastructure, reducing the opportunity for outsiders — say, Apple or Google — to get access to cable video feeds.”

Data limits have been endorsed by Julius Genachowski, chairman of the Federal Communications Commission. But after complaints by companies including Netflix, Justice Department officials launched probes into those practices, which could violate antitrust laws as well as a pledge by Comcast to fairly offer Web content from its rivals. The cable company agreed to this commitment as part of its federally approved joint venture with NBC Universal in 2011.

Netflix, which drives as much as 30 percent of broadband traffic within homes, says data limits encourage consumers to shy away from its streaming video service. Chief executive Reed Hastings has complained that Comcast, for instance, offers a streaming video service, which does not count against its data caps, to households that have Microsoft’s Xbox gaming console. That, Hastings says, violates its 2011 merger agreement.

Comcast has rebutted the claims, saying its Xfinity service on the Xbox should not count against data caps because it is not streamed on the public Internet but over the company’s private network.

Netflix, Comcast, Time Warner Cable and the Justice Department declined to comment for this story.

Consumer advocacy groups say action by antitrust officials is crucial to protect Web entertainment options for families.

“We are glad the DOJ is taking a good look at cable operators’ use of these arbitrary data caps,” said Matt Wood, policy director at Free Press, a public interest group. “Caps can discriminate against competing online video services.”

The Wall Street Journal first reported on the antitrust probe of cable companies’ data limits.

Cecilia Kang is a national technology reporter, writing about tech and Internet policies at the Federal Communications Commission and Federal Trade Commission and how regulations affect businesses and consumers.
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