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Comcast Bundles TV, Internet to Keep Customers

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Sen. Barbara Boxer (D-Calif.) said a Verizon DSL brochure touted file-sharing networks as an attractive feature for broadband Internet users. (File Photo/Ray Lustig - The Washington Post)


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By Christopher Stern
Washington Post Staff Writer
Wednesday, March 26, 2003; Page E01

Like millions of consumers, Nancy Levine is eager to take advantage of a special deal, but to her, Comcast Corp.'s latest promotion seems more like a shakedown than a marketing campaign.

The Berkeley, Calif., writer subscribes to Comcast's high-speed Internet service but relies on a satellite company for television programming. Last month, Levine received a letter informing her that her monthly fee for Internet service would jump from $42.95 to $56.95 unless she signed up for cable television as well.

"It feels like extortion to me," Levine said, noting that she has little choice but to pay the higher price for Internet service because she recently signed a one-year contract with Dish Network for television service.

Comcast spokeswoman Sarah Eder said the new pricing structure is an incentive designed to get customers to sign up for both cable and Internet service. "It is to reward our best customers with a price break on services," Eder said.

Comcast, like many other telecommunications companies, wants to offer more services to its customers, including telephone and Internet. Local telephone companies that offer high-speed Internet access and other services often provide discounts to customers who subscribe to more than one.

But the cable company's tactics have angered legislators and consumer advocates because of Comcast's dominating position in the cable television industry. Sen. Barbara Boxer (D-Calif.) wrote a letter to the Federal Communications Commission this week, asking the agency to investigate the Internet-only pricing structure as an "unlawful tying arrangement." Boxer said in her letter that Comcast's pricing plan "could constitute a troubling threat to the burgeoning competition for cable TV service from satellite providers."

An FCC spokeswoman said the agency had received the letter and was reviewing it.

Gene Kimmelman, director of the Washington office of Consumers Union, said he will ask the Federal Trade Commission and the Justice Department's antitrust division to investigate whether Comcast is violating antitrust law.

"Consumers love discounts but if they are designed to undermine competition, then they run afoul of antitrust laws," Kimmelman said. He worries that the discounts will disappear if cable succeeds in eliminating satellite as a competitive threat. Satellite companies offer no comparable Internet service.

"Cable has employed a variety of tactics over the years in an attempt to thwart competition and choice, all generally at the expense of the consumer," said Steven J. Cox, senior vice president of sales and distribution for DirecTV, the nation's largest satellite TV service provider.

Comcast said it could provide no exact number of subscribers who receive discounts for subscribing to both cable television and Internet services. Eder said the vast majority of the company's Internet customers also subscribe to cable television.

Internet service has been a huge source of growth for the cable industry, which has more high-speed Internet service customers than its main rival, telephone companies. Cable companies are expected to have 17 million broadband customers by year-end, compared with 7.2 million customers for digital-subscriber-line service, which uses telephone lines, said Cynthia Brumfield, president of Broadband Intelligence, a Bethesda-based research firm.

Comcast had 3.6 million Internet service subscribers at the end of 2002 and is adding almost 30,000 customers each week. Internet customers pay an average of about $42 a month.

But satellite companies have eroded cable's growth in its core television business in the past five years.

Levine noted yesterday that in addition to Internet service, she subscribes to local telephone service from Comcast. Levine was told that the discounted rate for high-speed Internet service applies only to customers of cable television and high-speed Internet.

"This shows that it is not just any bundle, it's the right bundle, the bundle that would undermine video competition," Kimmelman said.


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