Peter Kafka

Recent Posts by Peter Kafka

Why the Feds’ Cable Probe Means More Expensive Web Video for You

The Department of Justice is looking at the way Comcast and the rest of the cable industry deal with broadband and online video. So what does that mean for you?

Higher broadband bills — at least if you plan on streaming a lot of online video.

And no chance that today’s cable bundles go away anytime soon.

That’s the takeaway from Bernstein Research’s super-savvy Craig Moffett, in a note out this morning. It’s a great read, and if you can get your hands on it, you should. For those who can’t, here’s a quick summary of Moffett’s argument:

  • Broadband providers are already moving away from broadband plans that charge everyone the same price, as long as their use stays under a certain cap, and toward usage-based pricing. That move has been blessed repeatedly by federal regulators.
  • That’s a problem for Netflix, as well as for anyone thinking about getting into “over the top” video, because that will effectively increase the price of those services. With usage-based pricing, if you’re streaming a lot of Netflix — or Amazon Instant Video, or some other service that hasn’t launched yet — you’re going to pay more for broadband.
  • When Netflix complained that Comcast was giving its in-house streaming video service a boost over Netflix by not counting the Comcast service against its own broadband cap, Comcast responded by dropping its cap and moving to usage-based pricing.
  • A federal investigation means that all the cable guys move in this direction, with speed. “Additional scrutiny from the DOJ would likely definitively end caps … and instead usher in a regime of [usage-based pricing] that would ultimately be even more threatening to online video providers than caps themselves.”
  • Meanwhile, while The Wall Street Journal report raised the notion that the Feds are also looking into the cable industry’s practice of bundling channels — which means that you can’t watch the Disney Channel unless you also pay for ESPN — that’s not going to go anywhere. Because no one’s breaking any laws. “The reasons we have the unwieldy content bundles that we have today are not because Comcast or DirecTV won’t sell us individual channels, it’s because Disney and Viacom won’t sell them individual channels. We see little or no chance that the DOJ (or the FCC) will take on that issue. The Supreme Court has already made it clear that that is a losing battle.”

So, to recap: If you’re waiting for the cable/TV model to blow up, don’t count on any help from the federal government.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik