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Does Comcast's Stream TV Clash with Net Neutrality Rules?

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Leading U.S. cable multi service operator (MSO), Comcast Corp. 's CMCSA zero-rating plan for its newly launched Stream TV service has attracted a lot of criticism. The zero-rating plan, as the name goes, allows a customer to use the streaming service without affecting the 300 GB monthly data cap of the company's Internet service. Proponents of net neutrality view this as a violation of the FCC-enacted net neutrality rules.

Comcast had initially launched the Stream TV service in the Chicago and Boston area with expansion plans for other territories in the offing.

What's the Fuss About?

Comcast's new app is similar to T-Mobile US Inc.'s TMUS Binge On and Music Freedom service, whereby customers can use the service in an unlimited manner without exhausting the data allowance provided by the Internet service provider. This puts rival streaming service providers such as Netflix Inc. NFLX and Hulu on the back foot, as the data consumption of their service is counted in the consumer's data cap. This renders them uncompetitive in comparison.

This whole idea of preventing Internet service providers from throttling certain services while skewing in favor of others is referred to as net neutrality. However, as of now, the FCC doesn't impose any particular net neutrality rule for the zero rating schemes and judges them instead on a case-by-case basis.

Comcast, on the other hand, has a different interpretation of its service. The company categorizes its Stream TV service as a 'Home IP Cable' service delivered over its cable network, and insists that it has nothing to do with its public Internet service. The company thus holds that net neutrality rules do not apply to its Stream TV service. However, advocates of net neutrality have negated the view, stating that the service is not out of the confines of the Internet when it is being availed across multiple devices using Wi-Fi hotspot.

The Bottom Line

It is evident that the cable industry is facing chord cutting, and the pay-TV industry is facing serious threat from Over-the-Top (OTT) services like Verizon Communications Inc.'s VZ Go90 or Amazon.com Inc.'s Amazon Fire TV. Comcast is no exception to this competition. As the industry faces transition, more and more cable players are beginning to introduce their own Internet TV service over their wired Internet lines. While Comcast's Stream TV is an attractive offering for customers, an FCC intervention into its legitimacy may jeopardize future prospects of the zero-rating plan, potentially affecting the company.

Comcast currently carries a Zacks Rank #3 (Hold)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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