Why the FCC Should Cut the Cord on the Comcast/Time Warner Cable DealFebruary 14, 2014
A merger between Comcast and Time Warner Cable would create a dominant gatekeeper for content providers and would only lead to fewer choices and higher prices for consumers.
Fortunately, you can make your voice heard: tell Congress to oppose the Comcast/Time Warner Cable merger.
If you were watching the news yesterday you probably saw that Comcast had bid to purchase fellow cable company Time Warner Cable. Public Knowledge opposes this merger because a combined Comcast/Time Warner Cable would create a cable behemoth with about 30 million subscribers and give Comcast leverage against content creators, internet companies, and networks that must interconnect with Comcast. This would decrease choice and raise prices for Comcast’s rivals and business partners and ultimately for the consumer, who gets stuck paying the bill.
If Comcast takes over Time Warner Cable, it would wield unprecedented gatekeeper power in several important markets. Comcast is already the nation’s largest ISP and largest video provider, and one of the nation’s largest home phone providers. It also controls Universal Studios, the NBC broadcast network, and many popular cable channels. A merger with Time Warner Cable would help Comcast use all of those business divisions as leverage to protect its cable video and broadband offerings (and bundled offerings) against competition.
Squeezing Out New Services
A post-merger Comcast would control access to 30 million subscribers. That is an enormous segment of the US broadband and video market.
So if you’re a television programmer or an online service, an even-larger Comcast would have even more significant power over you, because if you’re not carried on Comcast’s network you don’t reach Comcast’s subscribers, which means you’re out of business.
In the traditional cable market, video programmers that aren’t affiliated with Comcast need to strike deals with Comcast to be included in its cable video offerings. If Comcast now controls access to 30 million customers, those video programmers will have much less leverage and will have a much tougher time staying in business. Meanwhile, Comcast can wield its own newly-expanded programming as leverage against other cable providers that need to offer Comcast’s channels to their subscribers.
As a result, we’ll see fewer and fewer non-Comcast options in the market for video content, and those that can get sustainable deals are more likely to be other media behemoths.
But the merger would also be terrible news for online video providers and their customers. Online video providers like Netflix need to find some way to connect with Comcast in order to reach its broadband subscribers. But remember, Comcast owns NBC and Universal Studios, in addition to its own cable channels. The company already has every incentive to favor its content over that of competitors. This merger would extend this conflict to millions more customers and would give Comcast even more leverage over the companies that need to connect their networks with Comcast’s.
To argue that a Comcast/Time Warner Cable merger wouldn’t matter because customers already have no choice in the market is to accept (somewhat complacently) that customers will always see little or no competition in the broadband/video market and to ignore the power Comcast has over the content providers and other networks that need to connect with it to reach Comcast’s subscribers.
Imagine if there was a different cable company/ISP per town. To subscribers, it would still be a monopoly—but to programmers and online services, no one cable company would have life or death power over your business. So, from the perspective of an online video company, Comcast has a monopoly over access to Comcast subscribers. A bigger Comcast would have even more power as such a significant customer and business partner of other media and Internet companies. By itself, it would be able to dictate terms, ensure that it always gets the most favorable treatment, and limit the ability of rivals (including online video) to access content.
But wait, there’s more! Comcast can also use its own content holdings or its leverage over other programmers to restrict online video providers’ access to content. Comcast could do this by directly withholding its own programming, and/or through contractual provisions whereby if a programmer lets another distributor put its content online Comcast pays less for it, or through “most favored nation” clauses that give Comcast the right to offer content online if any other distributor gets that right.
By raising the costs of its rivals and business partners, an enlarged Comcast would raise costs for consumers, who ultimately pay the bills. It would be able to keep others from innovating, while facing little pressure to improve its own service. New equipment, new services, and new content would have to meet with its approval to stand any chance of succeeding.
Triple Play Packages
This also isn’t just abot standalone cable or broadband service. Comcast would be able to use this merger to leverage all its broadband, cable, and phone service in a “triple play” offering. If you look at the triple play market, a post-merger Comcast would control half of the market. And by the way, Verizon–Comcast and Time Warner’s competitor in the triple play market–has effectively agreed to focus on wireless and get out of Comcast’s way in the wireline broadband space.
Every equipment manufacturer, every programmer, and every online developer would need to deal with the combined Comcast/TWC to stay viable. And ultimately, consumers pay for that kind of concentrated power through higher prices and fewer choices.
The Merger Must Be Blocked
Luckily, we consumers have antitrust agencies and the Federal Communications Commission (FCC), which are empowered to step in and block this deal to protect the public’s interest in a robust and competitive marketplace. For this merger to go through, Comcast and Time Warner Cable would need to convince regulators that this merger is not just neutral but affirmatively serves the public interest. For all the reasons I described above, this deal falls far short of that standard.
And make no mistake, this merger needs to be blocked. Approving the merger with conditions that try to ameliorate the public interest harms just won’t work as well as blocking the deal altogether.
Conditions on mergers are time limited, they can have unintended loopholes, and they’re only as effective as their enforcement. When Comcast bought NBCU the FCC imposed several conditions that were supposed to make the deal palatable for consumers, but Comcast has managed to push the boundaries of what it can do under those conditions and has stalled when it does get called out on its antics. For example, PK’s petition to stop Comcast from exempting its own Xfinity service from its data cap when streamed over the Xbox is still unanswered well more than a year later.
Basically, letting Comcast gain even more market share and more power over all of these markets harms everybody who depends on a well-functioning marketplace. An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content.