Report: Justice Department Investigating Broadband Providers over Data Caps

According to the Chicago Tribune, the Justice Department has launched an investigation into the practice of cable broadband providers using data caps. The investigation, according to a source "close to the situation," will focus on whether cable providers are using broadband data caps to promote their own video services while discouraging customers from using services such a Netflix which count against their data caps.

Streaming media companies who feel that they have been treated unfairly by data caps implemented by service providers have been pushing for the Justice Department to look into the practice, but one analyst says that this could cause many providers to change to a business model that will hurt streaming content providers in the long term.

"Be careful what you wish for," wrote Bernstein Research analyst Craig Moffet in a note Wednesday. "We believe that Comcast's recent move to eliminate usage caps and instead move to variable rate pricing…was largely taken in order to resolve any ambiguity in front of the FCC. Variable rate pricing is, of course, what Netflix is really afraid of."

Moffet believes an investigation by the Justice Department could, for some providers, accelerate a shift towards usage based pricing for broadband. This, he says, could "slow the pace of innovation and reinforce the closed nature of the cable infrastructure, reducing the opportunity for outsiders – – say, Apple or Google, for example – – to get access to cable video feeds. Both would be bad news for online video providers."

Last month cable operator Comcast decided to eliminate residential caps temporarily, and experiment with new pricing models in select areas throughout the country.

Source: Chicago Tribune

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