Justice Department Probing Internet TV Interference (Report)

Glenn Britt | Time Warner Cable
Sylvain Gaboury/PatrickMcMullan.com/Sipa Press/Newscom

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The United States Justice Department is investigating whether cable and satellite distributors are illegally interfering with efforts by companies like Intel to launch virtual cable networks, according to a report in The New York Times.

Word of a possible antitrust probe comes after Time Warner Cable CEO Glenn Britt raised eyebrows this week by reportedly telling analysts at the National Cable & Telecommunications Association show that some of its contracts prohibited the delivery of content to online pay-TV services. Bloomberg picked up on the comment and reported that pay-TV operators were offering incentives to programmers agreeing to withhold content from Intel and Apple.

Intel made a splash earlier this year with confirmation that it was pursuing an online-TV service to be launched later this year. The tech company has been looking at offering consumers an a la carte choice of channels as well as "cloud DVR" and other apps. To do this, Intel needs content and has reportedly been offering to pay a premium to programmers.

Perhaps sensing a threat of cord-cutting, pay-TV distributors are allegedly interjecting themselves.

Carriage agreements routinely have "most favored nation" clauses that allow specific pay-TV distributors to be granted the same online rights as competitors. Britt said as much to analysts.

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But Britt's reported comment at the Washington, DC conference suggested its contracts went further. “We may well have ones that have that prohibition,” said Britt, according to Bloomberg. “This is not a cookie-cutter kind of business.”

TWC is certainly not the only distributor that has been aiming to hold back content online. For example, as The Hollywood Reporter detailed during Dish Network's trial against ESPN this past February, the satcaster originally demanded that ESPN not allow any affiliates to stream the network online "for fee or otherwise" before arriving at a contract that stated, "ESPN shall not distribute the ESPN Networks … via the Internet without imposing a subscription fee specifically for such distribution." When other companies like TWC and Verizon began offering its customers online access to ESPN, Dish claimed breach of contract.

On Tuesday, BTIG analyst Rich Greenfield asked whether the Federal Trade Commission needed to investigate the multi-video programming distributors for being "one of the key impediments to the launch of a virtual MVPD." On Wednesday, John Bergmayer at Public Knowledge echoed the concern and stated that policymakers needed "to apply existing law to prevent anti-competitive restrictions that prevent programmers from distributing their content more widely."

According to the NYT's sources, the Justice Department's antitrust division is now "looking into the issue as part of a broad investigation into cable and satellite company practices."

E-mail: eriq.gardner@thr.com; Twitter: @eriqgardner