Indeed, content sellers like Disney and Time Warner have expressed similar concerns that online advertising doesn’t generate enough revenue to pay for quality programming—at least not yet. That means programmers are still reliant on cable and satellite distributors for the bulk of their revenue. So if those distributors frown on content sales to Internet companies, it’s not hard to guess with whom the programmers will side.
The Dark Lord of Broadband
Indeed, there are few rules that require Comcast to play nice with Internet competitors and, well, its reputation for just the opposite is pretty well known. Comcast was awarded “The Worst Company in America” award for 2010 by The Consumerist, a blog published by Consumers Union, which opposes the merger. Wired once dubbed Roberts “The Dark Lord of Broadband.” Its lengthy article described a bloody battle over Internet freedom, a fight that has some resonance with arguments being raised today by Netflix distributor Level 3 against the Comcast-NBC Universal merger.
In 2007, Comcast was accused of blocking file-sharing applications over its broadband Internet network, preventing users from sharing music and other content. The company denied it was playing Big Brother and shutting down so-called peer-to-peer traffic, but it later pledged to change how its network operated in managing bandwidth-sucking applications. The FCC at the time issued a scathing report that suggested the company was trying to kill a competing technology that threatened its own budding video-on-demand cable service. The federal agency did not fine Comcast but ruled that the company had violated the agency’s Internet discrimination policy. Comcast appealed that finding and won its challenge in a federal appeals court.
Competitors worry that Comcast will block competitors both on its TV and its broadband systems.
Bloomberg, LP owns BTV, a business news network that competes with CNBC, the NBC Universal-owned provider of financial news on cable. Its rival controls about 85 percent of the market for financial news, Bloomberg says in an FCC filing.
Comcast has “already demonstrated its ability to restrict or degrade service, to place restrictions on the online distribution of network programming as a condition of carriage,” says the Bloomberg filing, referring to the fight over file-sharing networks.
Comcast will have “every incentive available to harm and discriminate against BTV to protect CNBC” as well as “the incentive and ability” to give CNBC the best channel position and to locate competing business channels far away. Comcast might even refuse to carry Bloomberg TV, the company wrote.
“There are already laws in place that govern these concerns,” Fitzmaurice responded. “If Bloomberg or any other competitor has a concern, there are already mechanisms in place for them to file a complaint.”
Access to All?
The chances of the development of a healthy, competitive, and profitable market of online competitors to cable are slim without some form of government intervention.
It took an act of Congress to make programming available to the direct broadcast satellite industry. DirecTV would have been a flop were it not for the Satellite Home Viewer Act of 1988 and the creation in 1992 of “program access” rules. The rules gave companies like DirecTV access to cable content on a non-discriminatory basis.
That protracted fight marked the last time there was a major new competitor brought into the pay-television business and it had a profound effect on the market. The second and third-largest providers of pay-TV service—DirecTV and Dish Network Corp.—are both satellite companies.
Today, the debate is about extending those “program access rules” to online content distributors—a condition that has been suggested for approval of the merger.
Comcast will “wield a powerful mechanism to retain its video services revenue stream by killing off emerging Internet-based competition before it can even get off the ground,” reads a joint filing by the Consumer Federation of America, Consumers Union, Free Press, and the Media Access Project.
The filing points to Vuze, a company that tried to create an online TV company, “but lacked access to much premium content.” After many years and more than $34 million in private equity, Vuze abandoned its first business model of competing with cable TV distributors, according to the filing.