|Posted on June 26, 2012 at 7:20 AM|
On June 13, 2012, the Department of Justice launched a formal investigation of data caps and alleged antitrust issues that are part of our subscriptions from internet providers. The investigation hasn't received a ton of press, but make no mistake about it - Netflix has got people listening (and it's not because they have a PAC!) See this article.
Meanwhile, Aereo has been embroiled in a lawsuit for a couple of months from entertainment companies who claim Aereo is rebroadcasting (free network) content without permission. It's important to note that if you have an antenna, you can watch this content for free (as long as you live close enough to pick up the airwave signals, and as long as your community allows antennas). This particular case is crucial because there are two compelling arguments. Aereo says they are renting consumers antennas and then providing the content that consumers themselves can get free via antenna . . . but paying for a (very reasonably-priced) subscription streamed over the public Internet. In fact, the subscription is probably more than half what a basic cable or satellite subscription costs with just local programming. On the flipside - entertainment companies say that Aereo is rebroadcasting content without permission, while cable and satellite TV companies PAY for right to rebroadcast this free content (which is why they charge for it).
Comcast has been blamed for discriminating against Netflix data packets by promising to not charge Comcast subscribers against their data cap if they stream Comcast content over their Xbox.
Now, according to Bloomberg DirecTV and Dish are said to receive requests from the DOJ about their pricing contracts with television networks. Let's go back to the Aereo paragraph. I noted that "cable and satellite TV companies PAY for rights to rebroadcast this "free" content." However, what has now emerged is that it appears cable and satellite TV companies get a gi-normous break on the fees they are charged compared to Over-the-Top content providers like Netflix, or our friends at Aereo.
Conservative Anne Madison, owner of Streaming 411,
finds herself agreeing with Al Franken over the appearance of antitrust violation
of entertainment companies and pay television providers
All of these various investigations are part of one larger probe by the U.S. Government to determine if monopolies are being protected today in America, harming U.S. consumers. As a Republican who leans a bit to the right on a majority of issues, I find myself agreeing wholeheartedly with far-left leaning liberal Al Franken that there appears to be something fishy going on, and it is hurting the U.S. economy. My husband was duly shocked at this proclamation . . . but hey, when Al Franken is right, he's right! And that doesn't make Anne Madison off her rocker.
And what it appears to be is that Pay Television providers are receiving "most-favored-nation" price breaks from copyright holders for their content, who are charging an arm and a leg to streaming providers for the same content. In the meantime, these subscription TV providers are holding us ransom with uber-high (and climbing) bundled TV subscription costs. In fact, you can expect to pay an average of $200 / month on cable TV by 2020 according to industry analyst and market research group NPD.
Let's examine what "most favored nation" clauses and pricing are supposed to be for. According to Wikipedia, is it a "status or level of treatment accorded by one state to another in international trade." This means low tariffs and breaks for high import quotas. They imply "reciprocal bilateral relationships following both GATT and WTO norms of reciprocity and non-discrimination." This is a lot of legalese and fancy talk for special price breaks for friends . . . in this case, the friends are countries who share similar belief systems when it comes to how to run a country, how to treat its citizens, etc. All members of the World Trade Organization get to enjoy "Most Favored Nation Status" which means they all trade with the same benefits as other members. This helps smaller nations not get crushed by big nations like, say, the United States.
These doctrines were not meant to provide protection in a monopolistic way to a small group of companies within the United States, as entertainment companies and pay television companies appear to be using these doctrines for. In fact, if you look at Netflix as a little fish in a big pond, then things look even more fishy than before.
Bloomberg notes "If most-favored-nation clauses were struck down as anti-competitive, Netflix and other online-video providers might be able to expand their video offerings by buying programs at lower prices - possibly in smaller chunks than what gets sold to the cable companies."
So - does this mean that we have front-row seats to the breaking of a real, live, bully monopoly and we don't even know it? We continue to watch with bated breath how all of this turns out. If the Obama administration were savvy, they would take this opportunity to really shake things up right quick before the elections this fall. Remember, I'm a Republican - I'll still vote for Romney - but would have to grudgingly give credit where credit is due if the Obama administration kills 3 birds with one stone here. You read it here first, and I keep my promises In the spirit of AL FRANKEN, former Saturday Night Live comic and esteemed US Senator from Massachusetts!