How big cable uses its muscles to prevent online competition

17 Comments

Rumors that Apple (s AAPL) may launch a full-fledged TV set to finally take on the TV business have been around for years. So why hasn’t Apple launched such a product yet? One reason could be that cable companies don’t want it to.

Bloomberg reported Wednesday that Time Warner Cable has been using its negotiating muscles to keep TV networks from licensing content to Apple and others. An industry insider who declined to be named confirmed this account in a conversation with GigaOM, saying that the company has been aggressively pushing for these kinds of clauses in its recent contract negotiations.

At the center of the dispute are so-called virtual cable operators — companies that operate pay TV services without having any physical infrastructure of their own. Instead of using their own satellites, cables or phone networks to get TV signals to the consumers, virtual operators would simply stream their programming over the internet.

There have been reports that Apple was considering a plan to launch such a virtual operator in the past, and other companies have looked into launching these kinds of businesses as well. One of the more notable efforts is Intel’s (s INTC) forthcoming TV service, which the company wants to launch before the end of the year.

To compete with traditional cable, these operators would have to be able to offer much of the same programming. And that’s something that cable companies apparently want to prevent. Richard Greenfield of BTIG Research first reported Tuesday that at least one or more of the existing operators had added clauses to their contacts with TV networks that would prevent the networks from licensing their content to companies who don’t control their own infrastructure.

Bloomberg was able to get Times Warner Cable CEO Glenn Britt on the record about contracts featuring these provisions:

“We may well have ones that have that prohibition.”

It’s worth pointing out that cable companies wouldn’t be able to keep all kinds of programming inaccessible with these kinds of provisions. NBC and Comcast (S CMCK) are specifically barred from these tactics as part of their merger conditions, as Greenwald points out. However, other TV networks don’t have these kinds of restrictions, and some may be inclined to follow the demands of cable companies in order to protect their growing retransmission fee revenue stream.

In the past two years, we have seen a number of disputes arise between networks and operators about the amount of money operators have to pay to carry certain channels. In the end, most of these disputes ended with networks having the upper hand because operators simply couldn’t afford to lose key programming. But it’s possible that barring competitors like Apple and Intel from access to the same content is one of the benefits that networks now have to throw in to sweeten those deals.

17 Comments

Andrew Baron

Time Warner is competing against Apple and GigaOm is ON IT!

MV

This smells of collusion and the Govt should step in to put a stop to this oligopolistic stronghold on the distribution pipeline. I am not a big fan of Apple but there is no denying that they’re products have reinvented the way we consume media- for the better. I can’t wait to see how they will to reinvent the way we consume television but if they are stymied by these anti-competitive moves, the consumer is the loser.

steve

With NSA monitoring all call and email one should be able yo know if this or the ibook story are correct.

OVD startup

Janko,

You forgot to mention that Comcast/NBC’s agreement with the DOJ states they must provide to OVD providers, but the second part of that clause is that the OVD provider must first have an agreement from any one of the other major content owners, walling themselves off, so since the other 5 big guys practice anti-competitive behavior, they get the benefit.

CableVet

The real story that was missed here is the FCCs decision last year to let program access laws expire. Cable companies are no longer required to sell the cable channels they own to competitors. Cable companies had been required to sell the must-have channels to competitors on reasonable terms. Now, competitors have to file individual complaints if they feel a cable operator is unfairly denying access. Comcast, Time Warner Cable and other large cable operators argued that the rules had become obsolete now that the pay-TV market had become more competitive.

Snap

Cable companies have bought and paid most politicians, local and national, to prevent any competition. Look at your local city and see for yourself. Our town looked into creating their own cable service only to have a state senator create a law preventing such. Internet access is the key and there are only two choices for most people in this country. Pathetic.

carlso2

The TV guys have already had a middleman to deal with, its the cable guys. This love-hate relationship goes for 50 years or so. TV guys know that Apple, Intel, Google and others are just another middle man waiting in the wings. So where is the incentive to get into bed with them?

Shows cost huge money to make and promote. Where are the Apple’s and Google’s with TV production? Perhaps they should pry loose some of their billions and get into joint program development with the TV guys and the distribute as a part owner… a-la-carte.

No this is starting to sound like an idea.

You are welcome.

John Halbig

Carlos, you are very close to the mark here. Amazon, Netflix, and even Hulu have started to fund their own shows for exactly this reason. Cable’s obstruction will only delay the inevitable result of their own avarice.

naija news

It quite unfortunate that Apple is capable of doing all this but if the federal government should see to this case they must have in mind that competitors likes this Apple as it is said here that In the past two years, they have seen a number of disputes arise between networks and operators about the amount of money operators have to pay to carry certain channels. In the end, most of these disputes ended with networks having the upper hand because operators simply couldn’t afford to lose key programming. But it’s possible that barring competitors like Apple and Intel from access to the same content is one of the benefits that networks now have to throw in to sweeten those deals. so you see.

Golden

The fact that Apple could purchase all of said cable companies for cash and be done with it shouldn’t be a consideration. Oh, wait.

ecommerce services

I think it is going be a great announcement. Apple is a universal brand. I think Apple will cover the market of televisions also and beta its competitors like Sony, Samsung and others.

Virtuous

The appropriate government agency should investigate. Such behavior is clearly anticompetitive. The problem is that rarely does the government lift a finger to protect consumers.

Da'Von B.

Reblogged this on Today In Tech and commented:
This is why you won’t see innovation in this field, also why an actual Apple television doesn’t make sense without content deals (an actual television set doesn’t make too much sense at all but alas…). And yet there’s no investigation into what’s going on here, all eyes are pointed to an iBooks trial where Amazon basically commanded 90% of the eBook market before others jumped in.

mds

As I just commented yesterday; the prospect of a true AAPL TV hangs on content.

iansterne

So where is the DOJ investigation here? Looks like it is more deserved here then in the iBooks trial.

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