Feds question operators on data caps, according to WSJ

As online video comes into its own, the Department of Justice is investigating whether cable companies are looking to edge out new rivals, according to a report in the Wall Street Journal citing people familiar with the matter.

DOJ officials have been discussing the issue with streaming video providers like Netflix and Hulu as well as cable operators including Comcast and Time Warner Cable. Concerns include data caps, which limit how much data subscribers download each month. Streaming video providers led by Netflix have been aggressively lobbying the DOJ to open a probe into cable companies’ data pricing policies.

A DOJ spokesman declined to comment on Wednesday. The department usually doesn’t speak to preliminary investigations.

Netflix CEO Reed Hastings has publicly criticized Comcast’s decision to allow the Microsoft Xbox to take Comcast’s video stream without it counting against Internet usage caps, calling it discriminatory and in violation of the FCC’s Open Internet Order.

“Be careful what you wish for,” said Bernstein Research analyst Craig Moffet cautioned in a note Wednesday.

Comcast last month moved to eliminate residential caps and experiment with new approaches in select markets.

“We believe that Comcast’s recent move to eliminate usage caps and instead move to variable rate pricing…was largely taken in order to resolve any ambiguity in front of the FCC. Variable rate pricing is, of course, what Netflix is really afraid of,” Moffet said.

He thinks an investigation could accelerate the industry’s shift to usage based pricing for broadband, “and perhaps precipitously so.” It could also “slow the pace of innovation and reinforce the closed nature of the cable infrastructure, reducing the opportunity for outsiders – - say, Apple or Google, for example – - to get access to cable video feeds. Both would be bad news for online video providers. ”

But the entire media industry is watching closely as an ever-larger chunk of video content is consumed outside out of traditional cable packages. Operators have been adding high-speed video customers, but new video subscriptions have generally been trending down. Both cable and content providers have been rolling out new services like Comcast’s Xfinity and HBO Go that, among other features, give viewers access to content on multiple devices but still require a cable subscription.

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