Cable Companies Colluding To Ban Hulu

Yesterday, consumer groups called for government agencies to investigate TV Everywhere -- a new scheme that would require Internet users to pay for a cable TV subscription if they want to watch popular shows online. As detailed in a new report issued on Monday, from the public record, TV Everywhere appears to be the product of collusion between major programmers and the big cable, satellite and phone companies to keep content off the Internet.

Spearheaded by Comcast and Time Warner Cable, the TV Everywhere initiative appears to be built on cable operators (and other distributors) agreeing to work together to pressure content providers to make their content available on the Internet only to viewers that have paid for a cable TV subscription in addition to an Internet connection. Thus, TV Everywhere ties online TV distribution to the existing cable, phone, and satellite distributors' TV subscriptions. (I refer to all these as "cable," for brevity.) Citing news reports, statements by industry executives and other evidence, the consumer groups argue there is enough evidence of collusion and other harms to warrant a full-scale investigation by the Justice Department or the Federal Trade Commission into the scheme. (Docs here; Huffpo post here.)

Unsurprisingly, the cable industry didn't welcome this critique of their plans. The head of the cable industry lobbying association (known as NCTA), Kyle McSlarrow, responded with a statement. McSlarrow is an effective lobbyist, but his response misses the mark.

His key argument is that TV Everywhere consists of collaboration, not collusion. He notes that the antitrust authorities encourage collaboration sometimes even among competitors, for the sake of innovation and other benefits. McSlarrow has a point that some collaboration is not presumed to be anti-competitive; indeed, the FTC and DOJ have issued guidelines on collaboration among competitors.

But the types of "collaboration" generally found not to harm competition and to further innovation are very different from TV Everywhere. Collaborations of some types are considered "per se," or automatically, illegal because they replace the competitive marketplace driving low prices, choice, and innovation with an agreement among incumbents effectively not to engage in competition with one another in certain ways.

Simply put, some forms of collaboration are clearly illegal and anti-competitive. These agreements include price-fixing and market allocation. TV Everywhere should be investigated because evidence suggests it includes both price-fixing and allocation.