New Streaming TV Services Could Weirdly Help Comcast

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POLICY

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• By Amy Schatz
• @amy_schatz
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• ETHICS

March 22, 2015, 3:46 PM PDT

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News that Dish’s new Sling online TV service had already attracted more than 100,000 subscribers (at least on a trial basis) would seemingly be a bad thing for Comcast* and other cable companies, which have been fighting to stem the flow of cord-cutters.

Weirdly, that’s not actually the case, at least for Comcast. The cable giant needs all the competition it can get these days, as it tries to convince regulators to approve its $45 billion deal to acquire Time Warner Cable.

Sling and other so-called over-the-top streaming TV services from Sony and Apple could be just what Comcast needs.

It’s been more than a year since the deal was proposed, but Justice Department and Federal Communications Commission officials still haven’t made a peep about what they think of the deal. That could change in the coming weeks, at least at the FCC.

Senior FCC officials have been obsessed for the past few months about new net neutrality rules for Internet lines, which would prohibit Internet providers, including Comcast, from blocking or slowing Internet traffic or creating fast-lanes for deep-pocketed content companies.

Now that the agency has released those rules, senior aides are turning their attention to both Comcast’s deal to acquire Time Warner Cable and AT&T’s deal to buy DirecTV. Two weeks ago, Comcast Executive Vice President David Cohen met with senior FCC lawyers, arguing that “claims raised in the proceeding that Comcast will gain greater leverage in programming and interconnection negotiations as a result of the transaction and will use it to harm online video distributors are unfounded.”

Even though Comcast is expected to help challenge the net neutrality plan — via the cable industry’s trade group — the rules actually alleviate some of the concerns raised about the deal: That Comcast’s large share of the consumer Internet market gives it too much power in negotiations with smaller Internet companies and providers.

The rules allow the FCC to investigate any complaints from Netflix, Amazon or other companies about reaching deals with Internet providers to exchange traffic, an issue that Netflix has been very vocal about. Those sorts of “peering” deals have been a major focus of Justice Department and FCC lawyers, according to several people close to the deal review.

If the net neutrality rules help ease some concerns about Comcast’s dominance in the Internet market, the rise of new streaming TV competitors could help on the pay-TV side of things.

Comcast’s main argument for why the deal should be approved is that it doesn’t compete with Time Warner Cable in any markets. That’s true, mostly because cable operators get franchises from local governments to offer service and that’s kept cable companies from competing directly with each other.

Streaming TV services like Sling or Sony’s new Vue service offer consumers tired of high cable bills a new source of competition (although they still have to buy high-speed Internet service — most likely from their local cable operator).

To help them, the FCC started the process of tweaking some rules to make it easier for online TV providers to get some of the same legal rights as more traditional cable or satellite TV providers.

Comcast lawyers have argued that new services like Sling or Apple’s upcoming TV service show there’s plenty of competition in the market.

What remains to be seen, of course, is whether the federal government agree with them.

Opponents of the deal aren’t buying it and are already saying that the FCC’s new net neutrality rules don’t make the Comcast deal any more palatable.

At a congressional hearing last week, Democratic Sen. Richard Blumenthal of Connecticut asked FCC Chairman Tom Wheeler about the new streaming TV services, expressing his worries that the Comcast deal could decrease cable competition.

“I’ve heard from so members of this committee about cable pricing and these kinds of things. The answer is in competition. That competition is coming over the top,” Wheeler told lawmakers. “It is coming over the top through the Internet. It is one of the reasons why there has to be an open Internet.”

“Historically, cable systems have chosen who will be on — I will take this service, not that service,” he continued. “We cannot be in that kind of situation if we want true video competition.”

*Comcast’s NBCUniversal unit is a minority investor in Revere Digital, Re/code’s parent company.