(By Mani) The WSJ reported that the Department of Justice (DoJ) is moving to investigate aggressively whether cable companies are hampering online video competition through unjust practices. The DoJ officials also reportedly spoke to streaming video providers including Netflix, Inc. (NASDAQ:NFLX) and Hulu.
It seems somewhat ironic that the DOJ is investigating whether cable is putting up barriers to limit online video competition given it has been the huge and consistent investment made in technology, infrastructure and bandwidth by cable that has allowed online video to exist and flourish in the first place.
If cable companies wanted to stop online video, they could have stopped investing in broadband capacity for digital subscriber line (DSL) only markets, and the broadband pipes would have quickly become clogged with too much online video demand, and not enough capacity to serve it well.
Actions that appear to have sparked regulatory interest include Comcast Corp.(NASDAQ:CMCSA) starting to charge Level 3 Communications (NYSE:LVLT) for termination of traffic after Level 3 picked up the Netflix contract.
In addition, the regulatory interest gained intensity after the cable companies implementing data caps and/or introducing usage-based pricing plans; Comcast started delivering Xfinity streaming on demand content via the Xbox, which doesn't count against internet usage limits; and the nature of programming deals including TV Everywhere rights and most favored nations clauses (MFNs).
Meanwhile, among cable companies, Comcast would be the most impacted as the DoJ is reportedly probing whether Comcast's Xbox policy violated its commitments in 2011 to secure antitrust approval for its takeover of NBCUniversal.
This makes Comcast's case unique as it has to live up to the regulatory regime entered into to garner approval of the NBCU acquisitions, which holds Comcast to a higher or different standard in some instances. As a result, there is a risk that Comcast has to shift its behavior while the rest of the cable industry does not.