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An Inquiry That Might Do Justice

6/18/2012 12:01 AM Eastern

In a week where the biggest news
story in cable was a newspaper report about
an extensive inquiry by the Justice Department
into cable operators’ business practices,
one thing surprised me.

Stocks in publicly owned cable companies
went up a little.

One reason for that could be that investors
think nothing much will come from what The
Wall Street Journal
, in its front-page article last
Wednesday, called “a wide-ranging antitrust
investigation into whether cable companies
are acting improperly to quash nascent competition
from online video.”

Another take is the inquiry will benefit cable
companies by affirming a practice the Federal
Communications Commission has already endorsed:
charging broadband customers based on how much bandwidth
they use.

Sanford Bernstein’s Craig Moffett pointed out how the
slow build toward user-based (or metered) broadband fees
has grown out of, ironically, a 2008 complaint to the Federal
Communications Commission that Comcast was blocking
some traffic from the BitTorrent file-sharing site.

Since then, the commission and chairman Julius
Genachowski — most recently at last month’s Cable Show
— have said usage-based pricing can benefit consumers
at the low-use end of the scale. “It could help drive efficiency in networks, increase consumer choice
and increase fairness,” the chairman said at
the Boston gathering.

Netflix, presumed to be at least backing the
Justice Department’s move, hates usage-based
pricing and benefits most when its subscribers
get unlimited bandwidth. As Bernstein notes, citing
Sandvine research, Netflix streams account
for one-third of all bandwidth used on fixed
broadband networks in the U.S.

Cable’s move to metered pricing could open
new opportunities to add broadband customers
who currently can’t afford or don’t want to
pay for expensive all-you-can-eat service, but
would opt for a cheaper service with a lower
bandwidth allotment.

Justice also is said to be examining whether authentication
systems — in which programmers create online versions of
their pay TV channels for use by pay TV subscribers — are
unfair. But the programmers behind HBO Go, WatchESPN
and other extensions are fully behind these arrangements,
which enhance and extend their core businesses. If Justice
wants to probe whether content bundles are legal, Moffett
notes the Supreme Court has already declared them so.

Government intervention is something cable operators
never welcome.

But government affirmation of something the industry
wants to do anyway would be.

 

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