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Something smells fishy about that Comcast–Apple TV story

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News that Apple (S AAPL) is talking to Comcast (S CMCSK) about building a joint TV service offering took the internet by storm Sunday. But details and timing of the story seem just too good to be true.

The Wall Street Journal reported late Sunday that Apple was talking to Comcast to launch a live TV service, which would run on an Apple-built device, but use Comcast’s cable infrastructure, and bypass any potential internet slow-downs by essentially running as a managed service. That quickly resulted in critics crying foul for violating the spirit of net neutrality — but the real deal breaker here seems to be Comcast’s merger with Time Warner Cable.

Apple and Comcast both want to own the experience

On the surface, the story seems like yet another Apple TV rumor. Apple has been for some time trying to figure out how to capture the living room, and most recently, it had been talking to cable companies to basically build a better cable box. The idea was, according to several reports over the last two years, that Apple would present live TV programming with an Apple look and feel, but in partnership with cable companies, and thus without the need to buy the rights to each and every network.

One of the cable empires mentioned in those previous reports was Time Warner Cable. Now, Comcast is buying Time Warner Cable, so it would only make sense that Apple would continue those talks with Comcast, right?

Well, not so fast. Comcast has long been the company most concerned about owning the relationship with the customer. For example, Comcast subscribers haven’t been able to access HBO’s HBO Go app on the Roku because the cable company would like customers to go through its own apps instead.

And, in all fairness, Comcast is also one of the pay TV operators that has invested the most resources into building next-generation pay TV experiences for its customers, including its X1 set-top-box, its impending cloud DVR and its upcoming X2 platform. It’s unlikely that Comcast executives would feel the need for Apple to build the company a better TV user interface.

That’s some curious timing for a dicey issue

Now take that already unlikely scenario, and add another red herring: managed services. Apple wants Comcast to treat its service separate from the public internet, and ensure that it’s not subject to last-mile congestion when the rest of the neighborhood is busy binge-watching House of Cards on Netflix (S NFLX), according to the Wall Street Journal.

On the surface, that’s again something that we have heard about before. Comcast already treats its own TV Everywhere app on the Xbox 360 as a managed service, and for example exempts any video streams requested through that app from its data caps. Net neutrality activists have long taken issue with this, but the FCC decided not to go after managed services after it got push-back from ISPs.

But the real issue here is not net neutrality, or at least it’s not the primary issue. Comcast has been subject to strict conditions about how it deals with competitors ever since it merged with NBC, and chances are, those conditions will be extended and possibly even tightened when the merger with Time Warner Cable goes through.

Shining a light on managed services just when the severity of these conditions is up for debate seems like a very strange coincidence indeed. It’s almost as if someone said: Hey, here is this big operator that is soon going to own 30 percent of the country’s pipes going into people’s homes, and it wants to strike a special deal with Apple. Shouldn’t regulators make sure that others get the same treatment? For example, what about Dish, DirecTV or Sony, all of which are looking to compete with Comcast with their own TV offerings?

Call me a skeptic

That’s why I don’t believe that we will see a service like the one painted by the Wall Street Journal anytime soon. Now, I’m sure the two companies have discussed this, just like they have probably discussed a whole range of other options. But that this one surfaces right now seems just a little too convenient.

Image courtesy of Flickr user  Robert S. Donovan.

29 Responses to “Something smells fishy about that Comcast–Apple TV story”

  1. Jay Viradiya

    Fantastic!! Apple inc. is about to turn our bedrooms and halls into virtual world of internet and gift an opportunity to experience Tony Stark’s Laboratory with speechless J.A.R.V.I.S !!

    The appearance seems so innocent, turning its capability invisible and the most amazing advantage under consideration is its compatibility with various television products, even 2-D Televisions!!
    Awesome exploration!!
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  2. Do you think that Comcast might have tee-ed this up as a sacrificial lamb so that the regulators can force this to be removed as they approve the TWC deal…making all parties look good…SEC/FCC seeming to be pushing for a form of NN, Comcast gives up on this and is seemingly is under control, Apple continues to look like an innovator and friend of the people. Just a theory!

  3. Michael Coppens

    Could Apple be approaching Comcast the same way they approached record companies during the advent of the iPod and iTunes? Seems plausible given their newly acquired content catalog.

  4. hundoman

    It can’t be much longer before all US citizens are required to own a qualified Apple product or face deportation.

    Oh and it will also require a propriety, expensive Apple ONLY dongle to work

  5. I agree that the chances Comcast is letting Apple in between them and their customers is next to nil.

    I think this does shine a light on the potential dangers of “strong” net neutrality. While we might prefer Comcast improve its network without extracting tolls from OTT providers, banning that practice may result in a much slower move to OTT. These de facto monopolies need to have an incentive to improve their networks, and while their customers’ needs don’t seem to provide much incentive, perhaps the Netflix and Amazons can. For example, under strong net neutrality Comcast might upgrade its interconnections for free but do nothing else to ensure the OTT experience is amazing. If Netflix can use payment as a bargaining chip, they can incentivize Comcast to improve their network all of the way down the line, from interconnection to TV. Cable companies really only care about profits, and if providing a great OTT experience is more profitable than protecting their pay-TV, they’ll switch over.

    Of course, real competition from multiple providers at every household would completely destroy any need for net neutrality or government interference. But that just isn’t going to happen in this political environment.

  6. Blog writers benefit from fishy stores. They get traffic to their site and it doesn’t matter if it’s good or bad traffic, since it may lead to some type of revenue generation for them.

  7. Samroberstson

    Considering that Apple is busy building 4 huge data centers, NC, OR, NV, and Hong Kong, I think Apple is more interested in supporting net neutrality.

    Remember, Apple used to own a minority share in Akamai.

    I don’t think Apple is going to sell out when it comes to net neutrality, as it would only benefit an unproven unreleased product, not the rest of their portfolio. It would hurt the cost of the data distribution of FaceTime calls, iMessages, and the trillions of push notifications that they send out.

    • How is net neutrality at all helpful to the products you mention? In fact, those are exactly the kind of products that could benefit from the higher quality of service that net neutrality prohibits.

      • Samroberstson

        Those data centers have to pass data thru Cogent and Level3. Why would Apple want to pay extra $ for priority when they would prefer all data be treated the same.

        A lot of the WSJ article is vague.

        Could the talks just be about getting Comcast live and VOD services equal treatment on the AppleTV box as a Comcast STB?

        Has anybody alleged that iTunes video will get priority treatment over the Netflix video on the same box?
        Or that Netflix on an an AppleTV will get priority over Netflix on a Roku box?

        Too many people are speculating on so many unknowns….

        Does Time Warner TV Everywhere currently give their own apps (video streams) on tablets and Rokus, priority over the Netflix apps on those devices? I don’t know.

        • I can imagine an end user might want FaceTime packets treated with higher priority than a movie download. Why should this be prohibited? Seems to me we have more of a shortage of network capacity than network applications. How does prohibiting network operators from charging more for higher quality network service help increase network quality? If you think they are just getting rich on all the money coming through the door, why is Comcast worth only 131B, which is less than Facebook, only about 6 times Netflix?

  8. vulcan33

    Your attempt to defuse this story with several roadblock scenarios falls on it’s face when confronted by Apple’s design – fit & finish.
    If Comcast does not play ball with Apple are they willing to let a competitor partner with an Apple best in breed player?
    Worked quite nicely for ATT & the iPhone rollout.
    I also feel this Apple -Time Warner partnership pushed Comcast into the merger talks.

  9. realjjj

    Getting the same deal as a company that has over 150B in cash might be a huge problem too and we go back to neutrality. If Apple “invests” a bunch of billions into killing others ,getting the same deal would be something they would insist on.Doing things like this is in their nature.
    Of well, the internet was fun while it lasted.