Comcast (CMCSA) Hits Back At WGA: Semantic Dispute As TWC Merger Review Approaches

An ongoing scuffle between Hollywood writers and the country’s largest cable provider may finally reveal if the pen is mightier than the cord.

Less than two weeks after the Writers Guild of America filed a scathing report asking the FCC to block the proposed merger between Comcast Corporation (NASDAQ:CMCSA) and Time Warner Cable Inc. (NYSE:TWC), Comcast is swinging back, calling the report factually inaccurate and characterizing the WGA as an anti-media-merger trade union with an axe to grind.

In the March 21 filing, the WGA painted the Philadelphia-based Comcast as an autocratic behemoth looking to squelch the interests of unions -- and general public -- at every turn. Specifically, the guild warned that a merged Comcast-TWC, which would control almost 30 percent of the cable and Internet market, would be in an even greater position to limit competition from competing video-streaming services like Netflix Inc. (NASDAQ:NFLX). The concern, according the guild, is that Comcast has already demonstrated its willingness to impose data caps -- limits to the amount of content that can be transmitted -- on competing services, even as its own video service, Xfinity Streampix, is exempt from such caps. To opponents of the merger, this is a taste of how a consolidated Comcast-TWC will behave when it’s in an even greater position of power.

Sena Fitzmaurice, Comcast’s vice president of government communications, said the WGA has its facts wrong. “We don’t have data caps -- and haven’t for about two years,” she wrote in an email. “We have tested data thresholds where very heavy customers can buy more if they want more -- but that only affects a very small percentage of our customers in a few markets.”

Indeed, in 2012 Comcast announced plans to replace its data caps with “improved data usage management approaches.” These new approaches, which have since been rolled out in a small number of test markets, include a sizeable 300 gigabyte usage allotment for Internet services. Customers who go over that allotment can buy additional data for $10 per 50 gigabytes. If you still think that sounds like a data cap, you’re not alone. Numerous articles and tech blogs describe the plan as just that, particularly when comparing it to plans offered by Time Warner Cable, which imposes no limits on the amount of data its customers use each month.

At most, the dispute is a matter of semantics. In a 2013 report on usage-based pricing, the FCC’s Open Internet Advisory Committee said that, historically, the term “data cap” referred to limitations on hours of use, such as those imposed by ISPs during the days of dial-up. Today, however, no ISP in the United States simply cuts off service when a user exceeds his or her allotment. In the modern sense, therefore, the term “data cap” is characterized by several phenomena, including being subject to additional charges after exceeding one’s allotment.

Put more simply, cable providers may distinguish between terms like “cap” and “threshold,” but your wallet won’t know the difference. As the report’s authors put it, “A cap is usually better understood as a threshold after which the user is subject to a different set of conditions for access, such as movement to a higher-priced tier.”

Admittedly, Comcast’s threshold only affects a small percentage of its customers within the test markets. (The 300GB limit is enough to stream dozens of high-definition movies, according to the New York Times.) But frequent binge-watchers still have to be careful. As to whether or not Comcast gives preferential treatment to its own video services over its competitors, the company denied that in 2012, and still does. “[W]e have consistently treated all video carried over the public Internet the same whether it comes from our sites or anywhere else on the public Internet,” it said in a press release. “XfinityTV.com, nbc.com, Hulu, Netflix or YouTube, and every other Internet video site (whether our site or a third-party site) is treated, and will continue to be treated, exactly the same. That's consistent with FCC rules and consistent with what we have always done and continue to do.”

Comcast said it plans to file its Public Interest Statement next week, which will start the formal review process for the merger once the FCC issues a public notice. The WGA’s opposition to the merger is not surprising, seeing how the union fought Comcast’s 2009 takeover of NBCUniversal and has been involved in numerous labor disputes with the Peacock’s parent company over the last several years. In an email, Fitzmaurice said that history should be telling. “The opposition so far on the deal is really mostly the same group of people that have opposed most media mergers, including the WGA,” she wrote. “They’ve opposed most recent mergers and have come out against NBCUniversal in issues unrelated to the transaction in the past.”

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