Cable giant Comcast was slapped with a federal complaint on Wednesday alleging that its "Stream TV" service is anticompetitive and illegal, in the latest salvo in the ongoing battle over a controversial broadband industry practice called "zero-rating."
Public Knowledge, a DC-based consumer advocacy group, argues that Stream TV violates commitments Comcast made when it bought a controlling stake in NBCUniversal in 2011, and is inconsistent with US open internet protections, according to the 28-page complaint filed with the Federal Communications Commission.
The complaint increases the pressure on the FCC to clarify its position on zero-rating, which refers to a variety of practices that cable and phone companies use to exempt certain services from monthly data caps, effectively favoring those services at the expense of rival offerings.
More broadly, the Stream TV case represents an important test of the FCC's willingness to prevent the nation's broadband giants from abusing their market power to disadvantage the very online services that the FCC is counting on to increase competition in the video market.
"Comcast's actions could result in fewer online video choices for viewers nationwide, while increasing its dominance as a video gatekeeper," John Bergmayer, senior staff attorney at Public Knowledge, said in a statement. "If its behavior persists, prices will go up, the number of choices will go down, creators will have a harder time reaching an audience, and viewers will have a harder time accessing diverse and independent programming."
"Our Stream TV cable package does not go over the internet, so it can't possibly violate a condition which only applies to internet content."
Open internet advocates call zero-rating an attempt to evade FCC rules protecting net neutrality, the principle that all content on the internet should be equally accessible. Cable and phone companies counter that they're merely experimenting with new and innovative product offerings.
In its complaint, Public Knowledge points out that Comcast imposes a 300GB data cap on many of its customers and notes that Stream TV is not counted against that limit.
"While a user could easily hit her monthly cap watching services unaffiliated with Comcast such as Netflix, iTunes, or YouTube, she can watch Stream TV all day without the meter running," Public Knowledge says in its complaint. As a result, Comcast is giving preferential treatment to its own service, while creating an economic incentive for customers to avoid rival services, the group argues.
Comcast insists that issues related to net neutrality and zero-rating aren't applicable to Stream TV, because although the service is exempt from monthly data caps, it "does not go over the internet," but rather is delivered via the same "closed path" as its traditional cable service.
When the FCC and the Justice Department approved Comcast's 2011 purchase of a controlling stake in NBCUniversal—the cable giant bought the rest of the media giant in 2013—the company agreed to a variety of conditions designed to prevent it from abusing its market power.
"Among other things, both agencies prohibited Comcast from excluding its own services from data caps or metering, and required it to count traffic from competing online video services the same as its own," said Bergmayer. "Comcast's behavior violates the plain terms of its merger commitments and the consent decree."
Barbara van Schewick, Director of Stanford Law School's Center for Internet and Society and a leading expert on net neutrality, argues that Stream TV contravenes the FCC's open internet policy because Comcast is engaging in economic discrimination, through zero-rating, and technical discrimination, by giving its own video service preferential treatment.
"From a policy perspective, this is an obvious violation of net neutrality principles," van Schewick told Motherboard. "What Comcast is doing is a textbook example of an ISP using its gatekeeper power to pick winners and losers online, and that is one of the core things that the FCC's open internet rules were designed to prevent."
Van Schewick says the Stream TV controversy has implications that go beyond zero-rating and net neutrality, and could affect the competitive dynamics of the national video market as a whole.
"The cable TV market is extremely concentrated, which is why the FCC has so much hope that online video will bring greater competition," said van Schewick. "If they allow cable giants to leverage their market power to stifle online video services, it will have killed their hope of bringing greater competition to the market."
For its part, Comcast issued a strongly-worded statement in which it said that Public Knowledge "doesn't have the facts straight," and denied that Stream TV—which the company calls a "cable service"—violates either its NBCUniversal commitments or the FCC's open internet rules.
"Our Stream TV cable package does not go over the internet, so it can't possibly violate a condition which only applies to internet content," a Comcast spokesperson said in an email. "Customers do not access Stream TV through their broadband service. Period. Public Knowledge saying so over and over does not make it so."
The FCC has recently held discussions with some of the nation's largest broadband companies about product offerings that exempt certain services from data caps. In its 2015 open internet order, which was designed to protect net neutrality, the FCC did not explicitly prohibit zero-rating, nor did the agency condone it. Instead, the FCC said that it would address the issue on a case-by-case basis.
An FCC spokesperson declined to comment on Public Knowledge's complaint.