Bloomberg News

Justice Department Is Said to Investigate Cable Companies

June 13, 2012

The U.S. Justice Department is investigating whether Comcast Corp. (CMCSA:US) and other cable companies are violating antitrust laws by limiting competition from Internet video providers, two people familiar with the matter said.

The department is examining whether Comcast and Time Warner Cable Inc. (TWC:US) are using their status as providers of programming and high-speed Internet to put online video providers such as Netflix Inc. (NFLX:US) and Hulu LLC at a competitive disadvantage, said the people, who weren’t authorized to speak publicly.

Authorities are probing whether Philadelphia-based Comcast broke the law by creating incentives to consumers to watch programming through its cable services instead of through the online video providers, the people said.

The department also is reviewing whether cable companies signed deals to obtain television programming at lower prices than online providers are charged, the people said. Such agreements may violate the law, they said.

Increasingly, Comcast and other cable companies are finding questionable ways to quash competition from video providers, said Mark Cooper, director of research at the Washington-based Consumer Federation of America.

Long-Term Costs

Without low-cost access to online video, “consumers will suffer in the long term,” said Cooper, who urged the Justice Department to start an investigation and hasn’t been briefed on the probe. “Prices will be higher and choices will be fewer” for programming, he said.

Jennifer Khoury, a spokeswoman for Comcast, and Alex Dudley, a spokesman for Time Warner Cable, declined to comment. Netflix spokesman Joris Evers and Elisa Schreiber, a spokeswoman for Los Angeles-based Hulu, declined to comment. Charles Miller, a Justice Department spokesman, declined to comment.

Cable companies are offering consumers more ways to view programming, said Brian Dietz, a spokesman for the National Cable & Telecommunications Association, a Washington-based industry trade group.

“The innovative offerings by cable companies are positive developments for consumers, and represent accepted and legitimate business practices as well as sound network management,” he said in a statement.

The Wall Street Journal reported on the probe last night.

Choice Access

The Justice Department and the Federal Communications Commission have said they want to foster the growth of online video to provide consumers more viewing choices.

“The government wants to see that the consumer has more access for less money,” said Jeffrey Jacobovitz, an antitrust litigator with McCarthy, Sweeney & Harkaway PC in Washington.

Before approving the purchase of NBC Universal last year, the government imposed conditions on Comcast to ensure the company wouldn’t unfairly compete against online video companies.

The Justice Department’s inquiry into whether cable companies are illegally obtaining programming at lower prices than online providers is similar a case it’s pursuing in the electronic books market.

The department is seeking an end to a clause in Apple Inc.’s contracts that require book sellers to provide the maker of the iPad with the lowest prices they offer competitors, two people familiar with the matter have said.

Application Videos

In the online video investigation, the department also is looking at how Comcast in March said it wouldn’t count videos viewed on its Xfinity application via Microsoft Corp.’s Xbox toward a monthly limit on the amount of data users can view.

Comcast counts video viewed through Hulu or Netflix against the limit, leading to charges by Los Gatos, California-based Netflix that the change is an attempt by Comcast to unfairly penalize its customers.

“The cap should be applied equally or not at all,” Netflix Chief Executive Officer Reed Hastings said on an April 23 earnings conference call.

Comcast last month increased its data limit for all customers to 300 gigabytes, over which the user pays extra. Most users don’t risk added charges because the median Comcast customer uses 8 gigabytes to 10 gigabytes a month, according to Cathy Avgiris, the company’s executive vice president.

Time Warner Cable doesn’t have a data limit, and in a commercial that ran during the Super Bowl earlier this year promoted the advantages of Netflix running over its network.

To contact the reporter on this story: Jeff Bliss in Washington at jbliss@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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Companies Mentioned

  • CMCSA
    (Comcast Corp)
    • $55.98 USD
    • 1.25
    • 2.23%
  • TWC
    (Time Warner Cable Inc)
    • $152.77 USD
    • 3.76
    • 2.46%
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