A coalition of consumer groups asked the Department of Justice, the Federal Trade Commission, and Congress to investigate Comcast's "TV Everywhere" online video initiative today, claiming it could block competition in the burgeoning Internet TV market.
The new platform, called "Fancast Xfinity," allows Comcast subscribers to watch various TV shows and content online, but only if they have already subscribed to traditional cable television service. In their petition, the coalition said such a service "rests on an illegal agreement among competitors specifically designed to undermine emerging Internet-based competition and consumer choice in video programming delivery."
"TV Everywhere is...designed to ensure consumers cannot cancel their [cable] subscriptions and turn to competing TV services that use the Internet, Internet-connected televisions and set-top devices, which perhaps include over-the-air digital streams," the letter said. "By tying online television to incumbent...subscriptions, TV Everywhere is designed to undermine new forms of competition and consumer choice currently emerging over the Internet."
Media reform group Free Press, part of the coalition, recently released a report documenting the cable industry's battles against, and now wary embrace of, the growth of Internet television and online video distribution.
According to report author Marvin Ammori, all the major incumbent cable and telecom providers engaged in off-the-record discussions about building subscription-based video platforms.
"Because of fears of violating antitrust law through colluding, the cable TV executives did not seek an antitrust exemption; instead, they attempted to hide their actions by eliminating a paper trail," Ammori said, citing reports from The New York Times and the Wall Street Journal on the matter. "They deliberately engaged in only unwritten, verbal conversations."
Ammori said that any platform that involved agreement or support from all the incumbent cable and telecom companies could present a major hindrance against competition by third-party online video distributors.
"[A]n independent online programmer must recoup its costs through charging users or advertisers for content. It must compete with 'free,'" he said.
Kyle McSlarrow, president and CEO of the National Cable & Telecommunications Association (NCTA), dismissed the accusations of collusion as "strange." "Contrary to Free Press' suggestions, the antitrust laws do not prohibit, but encourage collaboration, even among competitors, that lead to innovation and new products and services for consumers," he said.
A model that would give consumers the option to get more value -- by access to online content -- as part of the TV subscription they already pay for is something that consumers should have the right to embrace or reject," he said.
McSlarrow also claimed that the deal was designed to ensure content providers are fairly compensated for their work. "Programmers invest tens of billions of dollars a year to produce high quality content; they have the right to experiment with different business models and determine how to recoup that investment," he said.
In his report, Ammori documented many battles between content providers and cable networks over both transmission fees, and the attempts to distribute content online, including Time Warner Cable's threat to drop all of Viacom's channels if it put its content online in 2008.
Ironically, Time Warner Cable found itself advising its customers on where to view shows online in late 2009 when News Corporation demanded hefty increases in the fees paid to license its content for airing on cable. The two sides worked out a deal to continue showing programming in the last few hours of 2009.
The concerns regarding "TV Everywhere" come as federal regulators prepare to tackle the merger of Comcast with NBC-Universal, creating a potential media juggernaut that would own both the nation's largest cable company and a content provider of multiple cable channels and dozens of broadcast and cable television shows.
Consumer groups such as Free Press have claimed that the merger, if approved, would accelerate the push to place free online Internet TV sites such as Hulu behind "paywalls," incorporated into subscription-only services under the "TV Everywhere" model.
Comcast is already in the crosshairs of the Federal Communications Commission over its blocking of access to the BitTorrent file-sharing engine. The FCC ruled that Comcast should be penalized for its actions, a ruling the cable giant is currently appealing.