Comcast's Cohen: No Justification for Exclusivity Ban

Says he doesn't see business model for national Google Fiber build-out

By John Eggerton -- Broadcasting & Cable, 9/26/2012 10:45:56 AM

Comcast executive VP David Cohen says that in the current competitive marketplace, there is no remaining justification under statute for the program exclusivity ban to remain in place.

"I don't think the chairman had a choice to circulate the order that he circulated," said Cohen.  The FCC has proposed to sunset the ban on exclusive contracts between distributor and co-owned program networks, though anticompetitive deals would still be subject to unfair practices rules that remain on the books.

Cohen was being interviewed for C-SPAN's Communicators series, which airs later in the week.

"Life is long," he said, of the fact that Comcast is under its own exclusivity ban, per the NBCU deal conditions, until 2018. "But after that period of time, we should be treated like everyone else. "

Cohen said he does not think that on Oct. 5, when the exclusivity ban is scheduled to sunset, there will suddenly be a flurry of exclusive contracts. "My own suspicion, at least for existing mature networks, is that you aren't going to see a lot of disruption or fundamental changes in the business model."

Cohen said he did not view Google's new fiber broadband/video service in Kansas City as a disruptive force. He pointed out the NBCUniversal has not had any problem reaching affiliate deals with Google Fiber -- Google has indicated to the FCC that it is having some issues with getting access to regional sports nets. 

The expense of the build-out of the Kansas City experiment demonstrates the magnitude of cable's investment in building out its infrastructure, said the Comcast exec.  "I just don't know that I see a business model for the expenditure of that level of money to build out a national fiber network."

He pointed out he said the same thing when Verizon came to market with FiOS, and said AT&T must have thought the same thing since they opted not to build out a national or even regional fiber network. "We're not afraid of competition. We like our product and our position," he said. He said competition just makes Comcast a better company.

Cohen said that for purposes of homework, specifically Comcast's Internet Essentials broadband program, a smartphone is not an acceptable substitute for a netbook, laptop or desktop for educational purposes.

Comcast's program, which is now in version 2.0, has just extended the hardware side beyond netbooks to include laptops and desktops. The program offers low-cost broadband -- $9.95 per month -- and discounted computers -- $149 -- to households with at least one child eligible for low or no-cost school lunches.

He conceded that studies show a higher uptake of mobile broadband by the minority communities, but also said that kids could use up a mobile data plan in one night's worth of homework, so that Comcast's offering an all-you-can eat broadband for $9.95 a month is more attractive than any mobile plan.

Cohen said expanding the Internet Essentials program to seniors is "always under consideration," but he also said that research shows that the best value-added population to target is low-income with kids. He said the problem with populations like seniors and veterans is that it is a more complicated population to target and reach.

Asked about TV Everywhere, which is the term for providing cable subs access to that programming on a variety of platforms, including computers and mobile devices, Cohen called it a "very customer-friendly and a very programmer-friendly model" since it allows customers to get content when and where they want it without having to pay extra.

Asked if that threatens the traditional cable delivery model, Cohen said no. "The beauty of the concept is that it is fully respectful of the business model." Users can only access that content by authenticating that they are paying for that content via a traditional cable subscription.

Does it threaten the content business model? Cohen said no again. He said once the customer is paying for the content, authentication just makes it more valuable but protects the company from piracy and unpaid views.

Together, he said, that protects the significant affiliate fees distributors like Comcast are paying that allows that content to be created. "TV Everywhere is a way to ensure that content is a continuing revenue stream to pay for the content people want to watch."

Cohen said that, generally, the cable industry doesn't view Netflix as being competitive, per se, with the cable distribution model, but complementary, because it is almost all library content that you may have once watched on cable but can't today. He also said it was complementary because in order to view Netflix you need a broadband connection. "So, even if you want to watch Netflix, you've got to watch it over our broadband connection."

Cohen called the flap over Comcast's delivery of Xbox VOD content a tempest in a teapot. He said it is wholly appropriate and does not violate the FCC's Open Internet order, which does not apply to private network services like Xbox VOD.

Comcast's Xfinity video service over the public Internet does count against consumption-based billing thresholds, as does Netflix, but not the VOD content delivered via an Xbox app through a set-top. Netflix has complained about that disparate treatment and the Justice Department is reportedly looking into TV Everywhere in general and its impact on competitors. FCC chairman Julius Genachowski has also recently signaled the FCC is keeping an eye on consumption-based billing, suggesting consumers need enough "monthly" bandwidth not to have to choose between doing homework, watching video and getting remote health screenings.

Cohen also pointed out that Comcast has scrapped its data cap, that most of Comcast's markets don't have either a data cap or a usage threshold and that Comcast is testing consumption-based billing in some markets, with a data usage threshold of 300 gigabytes per month, which Netflix CEO Reed Hastings himself has said would not affect the service.