Comcast-TWC merger could threaten online video, render net neutrality moot, critics say

Could Comcast (NASDAQ: CMCSA) own the online video experience? If the merger between the cable giant and Time Warner Cable (NYSE: TWC) goes through, a majority of American consumers could find themselves locked into OTT options controlled by the new mega-Comcast, a recent op-ed in technology publication Backchannel suggests, squeezing out OTT competitors.

"If Comcast has its way, Xfinity will be Americans' window on the world. Basically, our only window," wrote Susan Crawford, a Backchannel contributor, visiting Harvard Law professor, and frequent thorn in the side of communications service providers.

The key to Xfinity's dominance is its cloud-based technology: Ultimately, it will replace the provider's set-top box and deliver everything from the user interface to streaming content directly to consumer viewing devices, Crawford notes. Comcast has been licensing its Xfinity technology for free to vendors, hoping to spur wide adoption.

Should Comcast be in a position to ply only its branded Xfinity service to U.S. consumers, it wouldn't matter what net neutrality rules are passed--the cableco would control access, speed and usage at the consumer level, Crawford said.

While this sounds like a theory only Overly Paranoid Rob Lowe could cook up, recent legislation could increase the possibility of a monopoly cable company controlling consumers' viewing in much the same way that Ma Bell controlled nearly every piece of telephone technology some forty-odd years ago, Crawford said. It's a danger that consumer advocacy groups like Free Press have warned about since the merger was announced.

The December passage of STELAR included an end to the FCC's ban on integrated security features in set-top boxes (aka the CableCARD law). While that seems like a good thing on the surface, some argue that without the integration ban, consumers have even less opportunity to buy their own set-top DVRs and other devices.

To prevent this, the FCC needs to get a move on with its DSTAC (Downloadable Security Technology Advisory Committee) effort, Crawford wrote. The committee met for the first time on Tuesday, Feb. 17, and has until September to propose new rules regarding secure gateways, with the plethora of viewing devices on the market in mind.

How realistic is this monopolistic scenario Crawford presents? The possibility of the merger going through continues to drop, analysts told The New York Times last week. And analyst firm MoffettNathanson on Tuesday dropped its probability of the deal being approved from 70/30 to 60/40, citing "stiffening political headwinds."

Still, as incumbent providers continue to consolidate, the threat to OTT competitiveness and innovation may remain. For example, AT&T's merger with DirecTV presents yet another opportunity for a single provider to control the video experience for a large segment of consumers.

For more:
- see this Backchannel story
- The New York Times has this story
- see this MoffettNathanson report (sub. req.)

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