Evolving TV market needs more competition, less cable control

One way or another, the way people watch TV is changing. New technologies, services, and devices promise to give people more control and a better experience than the traditional cable bundle that is tied to a rented set-top box.

But it takes more than new technology for consumers to truly benefit from a revolution in TV. For that, we need new business models, more competition, and fewer barriers between content creators and their audiences. That’s why it’s good news that the Federal Communications Commission is examining the state of video competition on a number of fronts.

{mosads}Part of this involves the Open Internet. We need rules in place that can make sure that broadband ISPs can’t take advantage of their privileged position to pick winners and losers in the video marketplace. The FCC’s recently-passed net neutrality rules clearly ban some of the most egregious ways that ISPs can do this.

Additionally, FCC Chairman Wheeler has announced that the agency is going to study the usage caps that some ISPs put on their customers. This is very timely. Recently, Comcast has been aggressively rolling out data caps on its broadband plans. This limits the amount that customers can use the Internet without facing expensive penalties. Data caps affect all kinds of Internet usage, but impact streaming video disproportionately because video streaming requires more data. A person watching the average four-hours of TV a day over their broadband connection rather than through a traditional cable service would quickly exceed Comcast’s cap, forcing the customer to pay an additional $35/month as a penalty for “cutting the cord.”

At the same time, Comcast has exempted its own new video service, Stream TV, from its own data caps. This practice is known as “zero-rating.” Comcast is calling this new streaming video service a “cable” service, but it works just like other streaming video services, like Netflix–you access it over your broadband connection, via your connected devices. But technology aside, cable TV is regulated by local franchising authorities and the FCC, and is subject to many rules that don’t apply to online streaming services. There’s little evidence that Comcast is truly treating Stream TV as a “cable” service in this sense. The only difference between Stream TV and other streaming services is the unfair advantages Comcast has given Stream TV. You can get unlimited access to Comcast’s “Stream TV” for $15/month, but unlimited access to Netflix will now cost $35/month, on top of your subscription to Netflix, to get the ‘unlimited bandwidth’ package.

There are a lot of reasons to think that zero-rating this service gives it an unfair advantage over competing services. This may violate either the FCC’s Open Internet rules, which state, among other things, that a broadband provider “shall not unreasonably interfere with or unreasonably disadvantage (i) end users’ ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers’ ability to make lawful content, applications, services, or devices available to end users.”

This practice may also violate the consent decree that Comcast entered into with the Department of Justice when it bought NBC Universal, which states that “Comcast, insofar as it is engaged in the provision of Internet Access Service, shall not unreasonably discriminate in transmitting lawful network traffic over a consumer’s Internet Access Service,” and that “If Comcast offers consumers Internet Access Service under a package that includes caps, tiers, metering, or other usage-based pricing, it shall not measure, count, or otherwise treat Defendants’ affiliated network traffic differently from unaffiliated network traffic.” Comcast made similar commitments to the FCC.

None of Comcast’s attempted defenses of this flouting of its obligations work. For example, Comcast has argued that it can discriminate in favor of any of its services that are not offered over the “public Internet.” But this would mean that Comcast can discriminate in favor of any service as long as it puts the servers on its own property. This line of reasoning flies in the face of the FCC’s thoroughly-reasoned Open Internet order and rules.

More fundamentally, Comcast is using its position as the nation’s largest broadband ISP and the nation’s largest video distributor to give preferential treatment to its own services at the expense of competing video services, content creators, and viewers. This could be a problem under antitrust law. Given these issues, it is the right time for the FCC to begin a serious examination of how practices such as Comcast’s can affect competition.

Another way Comcast leverages its power over consumers to raise prices and keep out competitors is by controlling the set-top box you need to get video programming. Opening up the cable box would not only let customers avoid excessive rental fees (the average cable household pays $230 a year on set-top box rental fees), it would also weaken the chokehold cable companies have over content consumers can see.

Today, the only way for third-party devices to access cable TV content is via CableCARD, an outdated and cumbersome technology that doesn’t even provide full access to cable services such as video-on-demand, and which has had limited success. The FCC is currently considering a successor to CableCARD, that would make it so that subscribers could access their video subscriptions on devices like smart TVs, Roku, and the Apple TV without the need for a cable-supplied set-top box and without needing to use a cable-designed user interface. A more open approach based on existing industry standards would lead to lower prices and better products for consumers than doubling down on the rented, proprietary cable box.

The cable industry, particularly Comcast, has massively opposed this effort in order to continue raking in set-top box rental fees. At the same time, Comcast is trying to make its own set-top box technology a de facto industry standard. This would not only allow Comcast to keep charging monopoly rental fees like the old “Ma Bell” did with your princess phone, it would cement the wall Comcast and other cable providers built between your TV and the online programming you want to watch.

With both the set-top box and the zero-rating issues, the FCC has a chance to protect competition and consumers. Comcast and other cable companies shouldn’t be prevented from offering its own services or promoting its own set-top box technology, but it shouldn’t use its market power to give its own services unfair advantages that distort the marketplace. As the TV marketplace changes, consumers should demand that new technologies lead to more competition — not more cable control.

Bergmayer is senior staff attorney at Public Knowledge.