Apple and Comcast talking about joint venture

Apple and Comcast are engaged in preliminary discussions about using Apple’s set-up box and receiving special treatment on Comcast cable service to ensure that it bypasses web congestion. Both companies reportedly have a common goal of advancing set-box technology so that television is more similar to the easy-to-use apps and streaming video services that are popular with consumers. Content owners and operators are seeking innovation because of pay-television subscriber losses and worries that younger consumers will ultimately not pay for any television.

Apple has long sought to enter television. It wants separation of the new television service traffic from Internet traffic over the portion of a cable operator’s pipes, which are connected to customer’s homes. This portion of the internet is prone to become clogged when too many users in a region attempt to access too much bandwidth at the same time. This would help ensure that users do not see interruptions in service while streaming Web video, and it would allow the internet to meet consumer demands for online video.

Comcast could add and keep companies by forming a partnership with Apple. The Apple device could be sold at retail instead of being leased like a traditional cable set-top box. This could eventually lower Comcast’s capital expenditures.

Comcast would have to significantly invest in network equipment and other back-office technology. Apple and Comcast also disagree on the relationship that Apple would have with Comcast’s customers. Reportedly, Apple wants users to sign on the new device using its login IDs, control customer data and receive a portion of monthly subscription fees. Comcast wants to keep substantial control over the relationship with customers and the data.

It is unclear how the Federal Communications Commission will address situations in which Apple and other providers seek enhanced treatment for a cloud-based service in partnership with an operator. The FCC has indicated that it is drafting rules that would prohibit Internet service providers from blocking or impeding access to Web content providers that do not pay a toll.

Consolidating technologies and separate companies is daunting and requires extensive business planning. Joint ventures and other consolidations must navigate a myriad of regulatory compliance, legal and technological hurdles. Legal advice will help assure that business formation is successful and complies with the law.

Source: The Wall Street Journal, “Apple in talks with Comcast about streaming-TV service,” Shalini Ramachandran, Daisuke Wakabayashi and Amol Sharma, Mar. 23, 2014

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