June 27, 2012 / 10:10 PM / 7 years ago

U.S. lawmakers seek review of broadband data caps

* Eshoo, Waxman call for examination of data caps

* Say concerned could be stifling innovation, consumer choice

* Cable group says data caps, usage-based pricing about fairness

By Jasmin Melvin

WASHINGTON, June 27 (Reuters) - Two Democratic lawmakers said Congress should examine whether major wireless carriers and cable companies are stifling the growth of online video services like Netflix Inc and Hulu by limiting the amount of content Internet subscribers can download each month.

Online video providers have argued that data caps are keeping more Americans from accessing their programming as they worry bandwidth-heavy shows and movies could interrupt their Internet service.

“When you couple limited broadband competition with a strong desire to protect a legacy video distribution business, you have both the means and motivation to engage in anticompetitive behavior,” David Hyman, Netflix’s general counsel, told the House Commerce subcommittee on communications and technology on W e dnesday.

The Justice Department is investigating whether cable operators are improperly suppressing competition from Internet companies and online video services, according to two people with direct knowledge of the probe. [ID :nL1E8HDHAO]

“While we don’t know the extent of this inquiry, it falls on this subcommittee to thoroughly examine the issue and ensure future innovation is not curtailed,” said Anna E s hoo, the top Democrat on the panel.

She noted carriers like Verizon Wireless, a joint venture of Verizon Communications Inc and Vodafone Group Plc , and AT&T Inc are eliminating unlimited data plans, and reports that broadband providers like Time Warner Cable are also moving toward tiers of pricing.

Henry Waxman, ranking member of the full House Energy and Commerce Committee, said he was concerned about potentially anticompetitive practices that could be restricting consumer choice. He also called for a careful examination of data caps.

Cable operators are also the leading Internet service providers, prompting worry that they could be trying to discourage their video product subscribers from jumping ship for cheaper, Internet-based viewing options.

Michael Powell, head of the National Cable and Telecommunications Association, argued that data caps and tiered, usage-based pricing were simply about fairness.

He likened usage-based pricing to consumers’ summer air conditioning bills, where those who keep the cool air blasting all day will pay more than those that choose to open the window instead.

“This is about how do you fairly allocate the cost of the network among users that have different uses,” Powell said.

“How to do that fairly is the question cable companies are experimenting with,” he added.

Comcast Corp, the largest U.S. cable company and the top broadband provider, said last month it would experiment with usage-based billing in some of its markets and suspend enforcement of its data caps.

Earlier this year, Netflix Chief Executive Reed Hastings complained in a Facebook post that Comcast was favoring its own Xfinity TV app on the Xbox because watching TV through the app did not contribute to a user’s cap.

Gigi Sohn, president of consumer advocacy group Public Knowledge, acknowledged that data caps are not inherently bad, but could be used in an anticompetitive manner. Thus, Congress and the Federal Communications Commission should review how data caps are set, evaluated and changed over time to prevent abuses, she said.

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