Join Us For The Net Neutrality Day Of AdvocacyRSVP For September 27-28
Comcast is unique among large Internet Service Providers and cable companies in how it can undermine online video competition in ways that go far beyond net neutrality violations.
Because it produces video programming itself, Comcast can simply decline to sell that programming to certain online video providers. (A condition on the Comcast/NBC deal that was supposed to remedy this has been ineffective, since the only way to enforce it is to let Comcast review its competitors’ contracts, which no one wants to happen.) Because it is the largest distributor of video programming, it can use its leverage in negotiations to put restrictions on the online availability even of programming it does not directly control. Because it controls the largest base of broadband subscribers, CDNs and Internet backbone companies that want to connect to its networks are at a disadvantage in negotiations. Because Comcast is so large, it has the most to gain by disadvantaging its competitors and ensuring that it maintains its dominance in video. But also because it is so large, even when Comcast is not motivated by competitive concerns, its actions can have a disproportionate impact on the industry at large. It's not healthy for a single company to have so much control of the future of the video marketplace. If Comcast is allowed to buy Time Warner Cable, all these problems would get worse, and new ones would emerge.
One of the less-understood ways that Comcast is able to direct the future of online video is through its control of "authentication." A lot of online video apps are not of much use to cord-cutters--they're tied to your traditional pay TV subscription (for example, cable and satellite). To use these services, you need to log in with credentials that are tied to your pay TV account, and your individual pay TV provider determines whether you can access a particular app, on a particular device. Most pay TV providers authenticate these apps as a matter of course--their customers are paying for service, and accessing these apps is part of the service they're paying for. But not Comcast.
Comcast, instead, has a long history of not allowing its customers to access particular apps on particular platforms. For a while it blocked people with Rokus from accessing HBO Go and Showtime. There is no technical reason for this--Comcast customers with other devices could access those apps, and non-Comcast subscribers could access those apps on a Roku. Given the scrutiny Comcast's practices are under during its merger review, it's not surprising that Comcast eventually allowed its customers to use those apps.
It was surprising, however, when Comcast recently reverted to the same behavior, even with all the attention it’s been facing. While if you're an AT&T, Verizon, or Time Warner Cable subscriber, you can access HBO Go on a Playstation 4, you can't if you're a Comcast subscriber. Once again, with no clear explanation, Comcast and Comcast alone is preventing its users from accessing online video apps on particular devices.
Maybe it shouldn’t be too surprising, though. While not all content on Hulu requires pay TV authentication, some does. And even though Comcast is a part owner of Hulu, Comcast does not authenticate Hulu, either.
In the absence of a logical explanation from Comcast that is not contradicted by the behavior of other cable companies, one can only speculate as to its motives. It may simply be that Comcast is so much bigger than other cable companies that it's naturally more slow-moving. It may be that Comcast would prefer people watch traditional video, and use Comcast-supplied set-top boxes and not third-party equipment like a Playstation 4. Or it might be that Comcast or HBO haven't opened their checkbooks. Or it might be some combination of all of the above. Whatever the reason, though, the effect is clear: Comcast customers are restricted in how they can watch video content in a way that customers of other companies are not.
Now, a lot of people want to frame this as a net neutrality problem. But net neutrality rules are about blocking access to apps via control of a broadband connection. Here, Comcast is acting in its capacity as a cable TV provider, and it is not "blocking" an app in a technical sense so much as preventing its users from using one by failing to take whatever routine steps are necessary to authenticate an app for its users. If you try to access HBO Go on a Comcast internet connection using Verizon-provided credentials, you can. And if you try to access HBO Go on a Verizon internet connection using Comcast-provided credentials, you can't. Despite the endless heated rhetoric about them, net neutrality rules are, and are intended to be, rather narrow. They're not designed to deal with the ways that companies like Comcast can use their other lines of business to achieve the same ends that net neutrality rules are designed to prevent.
There are several ways policymakers can cope with problems like this. The first and most obvious is that the Federal Communications Commission and Department of Justice need to block Comcast's acquisition of Time Warner Cable. If that merger goes through, bad problems would get worse. We can already see with authentication issues how Comcast is less customer-friendly than Time Warner Cable.
Second, policymakers should continue to take steps to ensure that online video becomes an independent, standalone alternative to the traditional cable bundle. This particular problem wouldn't occur without the "authentication" model that ties some online video to a pay TV subscription. One way to promote online video would be to extend the competitive protections some video providers already enjoy to online video providers. This could help ensure that standalone online video services can access more programming and become more appealing to cord-cutters.
A third thing policymakers should do is to promote a competitive market for pay TV set-top boxes. People shouldn't just be able to watch authenticated video apps on devices like the Playstation 4, but their complete line-up of programming. If more people viewed the content they pay for on devices they owned, instead of devices they rented from their pay TV company, it's less likely that companies like Comcast would be able to take steps to make those devices less useful.
The video marketplace grew up in an environment where distribution was difficult. The only way to compete was to string wires to every house in a town or launch a fleet of satellites into space. The competitive potential of a market with such high barriers to entry is obviously limited. Broadband internet does away with all that. It still costs money to deliver video--companies like Netflix have to build their own networks to connect with residential ISPs like Verizon, or pay providers like Cogent to do it for them. Servers are expensive, and content is expensive. It's not an "easy" market to enter by any means.
Nevertheless the barriers to entry to become a video distributor are much lower than they were before. Incumbent companies like Comcast are trying to find a way to preserve their dominance in video delivery in the face of this new potential competition. This takes many forms, from the big (consolidation via mega-mergers) and the subtle (leveraging the authentication process). The long-term solution to this problem is more online competition. In the short term, Comcast's behavior around authentication is one more reason why it should not be permitted to expand its reach by buying Time Warner Cable.