T-Mobile and Comcast Challenge Net Neutrality

Network_neutrality_poster_symbolBoth Comcast and T-Mobile have developed video plans that seem to be a direct challenge to network neutrality. In both cases they are playing favorites with video services in an environment where both carriers have data caps. I find it interesting that they would challenge the FCC in this manner while net neutrality is still being decided by the courts. Even should the FCC look at these cases, any decisions they make could be later changed by the court ruling. Carriers in general hate uncertainty and usually shy away from tackling regulatory matters that are under court review.

Comcast has come out with a skinny bundled they are calling Stream TV. It is being tested now in a few markets. The new service includes CBS, NBC, ABC, FOX, the CW, Univision, Telemundo, and HBO. It does not include the more popular cable networks like ESPN or AMC. The monthly price is $15, which is interesting since HBO NOW is sold at that same price if you buy it from HBO. It’s available only to Comcast broadband customers – it’s starting now in Boston and Chicago but should be available in the whole Comcast footprint by early 2016.

The service can be watched on any device in a home connected to the XFINITY network, but does not come to the Comcast settop box. A customer could watch it on a smart TV or by using Roku, Apple TV or similar devices. Comcast says this is a product aimed at cord cutters and at young viewers who don’t want to sit in front of a television. Everybody has been expecting these kinds of offerings from the big cable companies as a way to keep cord cutters sending them a monthly check.

There are two regulatory issues with this new offering. The first is that it does not fit into the scheme of the prescribed kinds of lineups defined by various cable laws enacted by Congress. It comes closest to being a basic cable line-up since it includes the network channels, but it excludes things like PBS and local government access channels. I think Comcast is trying to get around this by having this not delivered to the settop box. It’s instead delivered on the IP path. But there still seems to be room for a challenge to the legality of the offering because the various federal rules on cable tiers are silent about technology differences and the same sorts of line-up requirements apply to somebody like a Verizon FiOS network.

The net neutrality problem comes because Comcast is not going to count the bandwidth from the Stream TV service against their newly established 300 gigabit per month data caps, which are being trialed in a few markets but are expected everywhere. That seems to be a direct slap in the face to the FCC since net neutrality rules prohibit favoring your own products over those of competitors. It’s really hard to see how this can be allowed to stand. Watch Comcast without a data cap or some other alternate provider like Hulu and it counts against the cap.

The T-Mobile product takes a totally different tactic. T-Mobile has rolled out their own skinny bundle called Binge On. The product includes a wide range of channels like ESPN, HBO, Netflix, Showtime, and Hulu with a total of 23 choices. Customers must buy each of these separately, and the beauty of that is that customers get to put together their own skinny bundles of just what they want to watch.

The net neutrality issue is that none of the video viewing will count against a T-Mobile customer’s data cap. On quick glance that doesn’t look to be discriminatory since there is a wide range of possible programming to buy. But the rub comes in that if a customer watches other video on their phone from a site that is not part of the package then it counts against their cap.

This means that T-Mobile is picking winners and losers for video streaming. They are allowing a small handful of programming to be unmetered but exclude the other thousand sources of video. This exact situation was discussed by the FCC when they first proposed the new net neutrality rules and their worry was that allowing carriers to pick winners and losers would result in stifling new innovation on the web. If all of the carriers mimicked T-Mobile then a new video offering would have a huge uphill battle and we would have an oligopoly of a handful of the largest video providers.

Interestingly, FCC Chairman Tom Wheeler said that he didn’t see any problem with what T-Mobile is doing and that it sounded “highly innovative and highly competitive.” I don’t think that the video providers not included on the T-Mobile list agree with that, nor should they. It’s not hard to picture every large ISP making similar deals with the current OTT providers like Netflix, Hulu, and a few others and effectively shutting out any future new video providers from the majority of customers in the US.

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