By Cecilia Kang
Washington Post Staff Writer
Monday, January 4, 2010; A09
Public interest groups on Monday will call for federal antitrust watchdogs to investigate an industry-wide strategy by television service providers that they say will strap users to unnecessarily high monthly subscription fees and stifle competition.
Free Press and other public advocacy groups are sending letters Monday to the Justice Department and the Federal Trade Commission calling for a probe of the "TV Everywhere" plan by cable, satellite and phone companies that brings television shows and movies to computers and devices, but only for those that subscribe to both television and high-speed Internet services.
The result, the groups say, would allow Comcast, Time Warner Cable, AT&T, Verizon and Direct TV to unfairly maintain dominance over the burgeoning online video industry by elbowing out online video competitors such as Apple, Hulu and Vuze.
Comcast and Time Warner Cable, the nation's largest cable service providers, declined to comment. The Justice Department and the FTC did not respond to requests Sunday for comment.
Cable companies are by far the largest providers of paid video services. Comcast, the nation's biggest cable and Internet service provider, launched its version of TV Everywhere, called XFinity, two weeks ago, allowing subscribers of Internet and television services to access some shows -- such as "Mad Men" and "Entourage" -- for free over computers and devices. Time Warner Cable and other television service providers are conducting trials of similar services and are expected to follow suit.
The public interest groups allege collusion between video service providers such as Comcast, Time Warner Cable, Cox, Verizon and Direct TV to keep video content behind a subscription-based pay wall.
Programmers of content -- Viacom and NBC Universal, for example -- are inclined to keep traditional business arrangements with cable and satellite video companies who have subscription fees and a guaranteed audience that advertisers like, according to the public interest groups. As such, they are "starving" new competitors to cable and satellite firms such as Boxee and Vuze who need access to choice shows and movies to attract viewers.
Kyle McSlarrow, chief executive of the National Cable and Telecommunications Association, disagreed with the claims of collusion. He said TV Everywhere strategies give free online content to subscribers.
"The fact that market participants are experimenting with models in addition to fee- or advertiser-supported models is not a sign of anti-competitive conduct," he said. "It is a sign of a dynamic and rapidly changing market in which no one knows the ultimate outcome."
Hulu, with 44 million viewers, is a broadcast industry collaborative that puts some television shows online for free. But the online service is struggling to make money.
"The old media giants are working together to kill off innovative online competitors and carve up the market for themselves," said Marvin Ammori, a law professor at the University of Nebraska and senior adviser to Free Press. Ammori wrote a report submitted to Justice and the FTC on how TV Everywhere could affect video distribution online.
The public interest groups point to reports by the general media and trade publications that say cable, satellite and telecommunications providers met secretly to launch the TV Everywhere initiative. The competitors agreed to divide markets, raise prices, tie products and exclude new competitors, Ammori wrote in his report.
The letters by the public interest groups come at a pivotal time for the television and movie industries. Comcast is seeking regulatory approval of its $30 billion merger with NBC Universal, which would marry the nation's largest cable and broadband Internet service provider with a media powerhouse. The combined company would control about one in five hours of television content.
At the Consumer Electronics Show later this week, a major theme will be online entertainment and innovations in the distribution of television and movies over devices and computers. On Friday, a federal court will hear oral arguments in Comcast's appeal of a federal ruling against it for blocking the online file-sharing application BitTorrent on its Internet network. Consumer groups say BitTorrent was in direct competition with Comcast for video services.
"TV Everywhere is designed to eliminate competition at a pivotal moment in the history of television," Ammori said. "The antitrust authorities should not stand by and let the cable cartel crush Internet TV before it gets off the ground."
Albert Foer, president of the American Antitrust Institute, said that if regulators investigate, they will explore how the industry plans could be a collaborative effort to restrain trade.