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Forbidden Fruit

Discussions centered on Apple’s desire to forge a streaming video pact with Comcast are exactly that – mostly talk.

Multiple industry sources confirmed reports that Apple and Comcast have explored a deal that would enable an Apple-powered device to offer a mix of live TV and other subscription video services in partnership with Comcast, but that the two sides have been discussing it for more than two years, and that Comcast has been unwilling to bend to Apple’s will.

According to The Wall Street Journal, Apple has been seeking a deal that would allow it to supply its own interface, offer services over a managed IP network that did not mingle with “best effort” broadband service traffic, and also take a cut of the subscription fees.

An industry source familiar with those talks said the discussions between Apple and Comcast go back the better part of two years, with Comcast rebuffing Apple’s advances every time the sides have come together.

“Those talks have never gone anywhere and probably never will,” the source said, noting that Apple had previously tried to squeeze revenues out of Comcast for its app for iOS-powered smartphones and tablets, but eventually gave up on that idea. “Apple just wants too much.”

On top of that, Comcast is already well downstream with X1, its next-gen video interface, which covers not just the set-top box, but tablets, smartphones, and PCs, and eventually smart TVs and other types of IP-connected devices.

The timing of the leak is also suspect, as it surfaced as regulators prepare to vet the proposed merger between Comcast and Time Warner Cable, which may ultimately include network neutrality-related conditions. That has led to speculation that Apple, which is expected to release a next-gen version of its Apple TV product later this year amid an increasingly competitive market of video streaming devices, is trying to exercise its influence during the review process, perhaps to get streamlined access to the MSO’s last mile network.

Comcast declined to comment. Apple did not respond to a request for comment.

Still, Comcast has made some strides in the development of managed IP-based video services and applications. Comcast’s X1 product and its cloud-based VIPER multiscreen video distribution platform, for instance, are putting the operator on a path toward an IP video migration. Comcast’s authenticated VOD application for the Xbox 360, for instance, uses dedicated bandwidth and the VIPER system. Another example is Xfinity On Campus, a new IPTV service Comcast is testing on a handful of college campuses in the northeastern U.S. that is said to be relying on the MSO’s Metro Ethernet platform in the last mile, rather than on its more traditional hybrid fiber/ coax network.

But those are relatively small in scale compared to the sort of service Apple would likely have in mind. And, according to people familiar with Comcast’s plan, delivering a highly-utilized, all-IP video service over its HFC plant would be costly, both in terms of capital and bandwidth. The operator would need to reclaim more spectrum it’s using now to support its traditional MPEG/QAM-delivered video service, and splash out more cash on new set-tops and gateways to support a service with a questionable return on those investments.

Although Comcast and Apple appear to be far apart on sealing a streaming deal, this is not to say that the MSO has no interest in the Apple TV platform.

Matt Strauss, Comcast’s senior vice president and general manager, video services, said at the Next TV Summit in New York earlier this month, that Comcast is starting to test TV Everywhere authentication with “certain programmers” on both the Apple TV and Roku platforms. He didn’t identify any programmers or TVE apps by name, but authenticated apps currently offered on the Apple TV include HBO GO, Watch Disney, Watch Disney XD, Watch Disney Junior, and Watch ESPN.

TWC has been in talks with Apple regarding support of its TWC TV app, which supports both VOD and hundreds of live TV channels, for the Apple TV platform. Those discussions have been in a holding pattern ever since Comcast and TWC announced their deal, the WSJ said.