Is IPTV Fundamentally Anticompetitive?

The FCC has said that a facilities-based service provider’s own broadband-delivered video is probably — but not necessarily always — kosher under the network-neutrality rules it adopted last fall.

To some people, however, cable or telco providers shouldn’t be allowed under any circumstances treat their own IPTV differently from over-the-top services (e.g., by giving it priority over other Internet services or excluding it from bandwidth-usage caps).

Netflix CEO Reed Hastings complained via his Facebook page on Sunday that “Comcast [is] no longer following net neutrality principles. Comcast should apply caps equally, or not at all.”

His beef? Comcast doesn’t count usage of its own Xfinity VOD app for Xbox toward the 250-Gigabyte cap on Internet subscribers, whereas other video apps on Xbox — including Netflix’s and HBO Go — do keep the meter running.

“In what way is this neutral?” Hastings asked rhetorically.

Comcast has defended itself by arguing that the VOD content doesn’t go over the Internet (see Hey, Keep Your Hands Off Your Network!, PK Slams Comcast In Push For Data Cap Inquiry and Comcast To Activate HBO Go On Xbox This Week).

But it looks odd, doesn’t it?

Hastings obviously has an interest in promoting totally unfettered usage of Netflix, but he makes a good point: “[I]f I watch last night’s SNL episode on my Xbox through the Hulu app, it eats up about one gigabyte of my cap, but if I watch that same episode through the Xfinity Xbox app, it doesn’t use up my cap at all.”

Note that AT&T is basically in the same boat here, and has been since last summer. The telco uses IP to deliver its entire TV lineup, including VOD, to subscriber set-tops (and since October 2010 to Xbox 360s). Last summer, AT&T imposed usage caps on all broadband customers — but of course, U-verse TV viewing does not count toward those limits.

So should Comcast and AT&T be forced to change their policies? Is it prima facie unfair for a broadband provider to carve out a piece of the network for its own video and offer toll-free usage, relegating everyone else to the proverbial “slow lane” that is subject to usage limits?

As cable operators migrate toward full-IP video delivery, the industry may find itself under increasing attack by Netflix and others who argue that MSOs (or telcos) should not be allowed to give their own video services any kind of preferential treatment under the FCC rules.

The FCC certainly leaves the door open for additional regulations if it determines operators’ managed services “supplant the open Internet,” but that’s pretty vague.

“We recognize that broadband providers may offer other services over the same last-mile connections used to provide broadband service,” the FCC says in its “Open Internet” order. “These ’specialized services’ can benefit end users and spur investment, but they may also present risks to the open Internet. We will closely monitor specialized services and their effects on broadband service to ensure, through all available mechanisms, that they supplement but do not supplant the open Internet.”

From a policy perspective, you want to give broadband providers incentives to make money from their capital investments (i.e., through IPTV value-added services). But you also want to foster competition from over-the-top guys.

So what happens when content available over the “open Internet” starts looking like traditional TV? And what, in the Internet age, constitutes a “multichannel video programming distributor” anyway? (See What’s a Multichannel Video Provider?)

The lines are about to become blurrier.


Programming Note: Don’t miss TV In a Multi-Platform World, Thursday, May 3 in New York City, presented by Multichannel News, B&C and TV Technology. Scheduled speakers include HBO’s Eric Kessler, ESPN’s Matt Murphy, Comcast’s Charlie Herrin, Turner Sports’ Matt Hong and many more. Click here for more info: