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“Coming Soon, The United States Of Comcast”: Comcast Time-Warner Merger Will Create Orwellian Monopoly

In George Orwell’s 1984, the world is divided into three totalitarian superstates, but in the world of broadband and cable television only a single company may soon reign supreme. Comcast announced today it has agreed to acquire Time-Warner, its largest and only significant competitor in the cable and broadband business.

Some financial analysts are claiming Verizon will still provide stiff competition to the new mega-company. “Verizon is offering video service in the most markets Comcast is participating in,” a Yahoo Finance reporter declared. But Verizon’s FiOS service is available to only 15 percent of Comcast’s existing customers, and in the fall 2011, Comcast and Verizon reached an agreement that solidified Comcast’s control over the non-wireless industry. In exchange for parts of the wireless spectrum that Comcast owned, Verizon agreed not to expand its FiOS network, which offers far superior service to that of Comcast or Time-Warner.

The combined company would now serve about thirty percent of the cable television market. That doesn’t seem large until you realize that it would have a virtual monopoly in 19 of the 20 largest media markets. (Here’s a useful map.) It would also serve over half of the customers who buy “triple-play” cable-telephone-broadband services. (I haven’t seen figures on the companies’ high-speed internet penetration, but according to the National Broadband Plan, only about 15 percent of consumers have a choice of more than one plan.) The companies claim that the merger wouldn’t threaten consumers because they operate in different markets. But that’s ludicrous. The merger would replace two monopolists (that is, very large companies with monopoly power over a market) by an even more powerful single monopoly, even better equipped to discourage competition.

Large companies, even monopolies, are not necessarily contrary to the public interest if they are strictly and intelligently regulated. But in the wake of the 1996 telecommunications act (which idiotically assumed that deregulation would lead to competition) and a pliant Federal Communications Commission, the big telecom companies have progressively avoided regulation. As a result, they are already committing many of the abuses that come with monopoly power, and if the new merger passes muster, will do so with a vengeance.

Monopolies make it more difficult for new entrants to compete. As a result, they allow the larger companies to raise prices without fearing a loss of market share. Since deregulation in 1996, cable prices have risen at about three times the rate of inflation. According to a study from the Free Press, prices for expanded cable service (what most consumers purchase) went up five percent from 2008 top 2013 –almost four times the rate of inflation. Monopolies also allow companies to neglect service to consumers. The American Customer Satisfaction Index rated Comcast and Time-Warner the two worst cable and broadband companies.

Monopolies can also have a corrosive effect on related industries. The big cable companies have been able to squeeze cable content providers—even to cut off access to customers, as Time-Warner did with CBS last fall.  If they also own content providers, as Comcast does, they can harm rival content providers—as Comcast seems to be doing to Netflix.

Monopolies also slow innovation, because companies have less incentive to replace older equipment. That was a major argument for the breakup of the old AT&T telephone monopoly in 1982. According to a report from the New America Foundation’s, Open Technology Institute, the United States has lagged behind other countries in the price and quality of its broadband service. The American city with the highest quality internet is Chattanooga, Tennessee, which gets its service from a municipally owned provider.

Under the new merger, the new company—let’s call it Xsanity—will be in an even stronger position to raise prices, neglect service to its customers, squeeze content providers, harm rival content providers and slow innovation. If local, state or national officials attempt to police them, the single big company will have even greater clout. Of course, Comcast will promise to keep prices down, enforce net neutrality, and spur innovation. There is reason, however, not to take these promises seriously.

When Comcast and Verizon were seeking FCC approval of their agreement in 2011, they promised that they would create a technology/research and development joint venture. Comcast Executive Vice President David Cohen told a Senate Subcommittee that “by enhancing the Cable Companies’ and Verizon Wireless’s own products and services, the Joint Venture will … spur other companies to respond, perpetuating a cycle of competitive investment and innovation.” Two years later, the two companies abandoned the joint venture.

In short, the only beneficiary of these merger will be Xsanity’s management and stock holders. Consumers will get screwed. The American telecom/broadband industry, already lagging behind South Korea and other upstarts, will fall further behind. Of course, the FCC or the Justice Department could block the merger. But what has happened before does not inspire confidence. Obama’s Justice Department did threaten to block the merge of AT&T and T-Mobile, USA, but Comcast has strong ties to the administration—Comcast’s CEO Brian Roberts is one of Obama’s golfing buddies and Cohen has been a major fundraiser—and in the past, the administration has been soft on the company. The FCC approved the merger of Comcast and NBC and the agreement between Comcast and Verizon.

The merger of these giants on the top of American business—not simply insulated from regulation but with the power and money to block any future attempt at regulation—is an awful prospect to contemplate, but it could well come to pass.

 

By: John B. Judis, The New Republic, February 13, 2014

February 16, 2014 Posted by | Cable Companies, Telecommunications | , , , , , , , , | Leave a comment

“It’s Bad For Consumers”: Merging Cable Giants Is ‘An Affront To The Public Interest’

When it comes to media, bigger is not better. And when it comes to the control of the infrastructure of how we communicate now, the trend toward extreme bigness—as illustrated by Comcast’s plan to buy Time Warner Cable and create an unprecedented cable combine—is accelerating at a dangerous pace.

In the aftermath of a federal court decision striking down net neutrality protections that were developed to maintain an open and freewheeling discourse on the Internet, and with journalism threatened at every turn by cuts and closures, the idea of merging Comcast and Time Warner poses a threat that ought to be met with official scrutiny and grassroots opposition.

The point of the free-press protection that is outlined in the First Amendment is not to free billionaire media moguls and speculators to make more money. The point is to have a variety of voices, with multiple entry points for multiple points of view and a communications infrastructure that fosters debate, dissent and democratic discourse.

When media conglomerates merge, they do not provide better service or better democracy. They create the sort of monopolies and duopolies that constrain America’s promise. Franklin Delano Roosevelt was right when he decried “concentration of economic power in the few” and warned that “that business monopoly in America paralyzes the system of free enterprise on which it is grafted, and is as fatal to those who manipulate it as to the people who suffer beneath its impositions.”

Merging the two largest cable providers is a big deal in and of itself—allowing one company to become a definitional player in major media markets across the country—but this goes far beyond cable. By expanding its dominance of video and Internet communications into what the Los Angeles Times describes as a “juggernaut” with 30 million subscribers, the company that already controls Universal Studios can drive hard bargains with content providers. It can also define the scope and character of news and public-service programming in dozens of states and hundreds of major cities—including Chicago, Los Angeles, Philadelphia, New York City and Washington, DC.

That’s too much power for any one corporation to have, especially a corporation that has been on a buying spree. Comcast already controls NBCUniversal and a broadcast and cable empire that includes NBC, CNBC, MSNBC, the USA Network, Telemundo and various other networks.

It’s bad for consumers.

“In an already uncompetitive market with high prices that keep going up and up, a merger of the two biggest cable companies should be unthinkable. The deal would be a disaster for consumers and must be stopped,” says Craig Aaron, the president of the media-reform group Free Press.

It’s bad for musicians, documentary makers and other creators.

“Comcast’s proposed takeover of Time Warner would give one company incredible influence over how music and other media is accessed and under what conditions,” says Casey Rae, interim executive director of the Future of Music Coalition, who noted “the ever present danger of a huge corporation like Comcast—which already owns a major content company—disadvantaging competition or locking creators into unfair economic structures.”

And it is bad for the democratic discourse of a nation founded on the premise memorably expressed by Thomas Jefferson in 1804 when he wrote, “No experiment can be more interesting than that we are now trying, and which we trust will end in establishing the fact, that man may be governed by reason and truth. Our first object should therefore be, to leave open to him all the avenues to truth. The most effectual hitherto found, is the freedom of the press.”

The idea that “all the avenues to truth” would be controlled by a monopoly, a duopoly or any small circle of multinational communications conglomerates is antithetical to the understanding of the authors of a free press, and of its true defenders across the centuries.

So yes, US Senator Al Franken—the Minnesota Democrat who has proven to be one of the most serious and savvy congressional watchdogs on communication policy—is absolutely right when he says, “There’s not enough competition in this space; we need more competition. This is going in the wrong direction.”

Franken has written to the US Department of Justice, the Federal Trade Commission and the Federal Communications Commission, urging each of them “to act quickly and decisively to ensure that consumers are not exposed to increased cable prices and decreased quality of service as a result of this transaction.”

The FCC, in particular, has broad authority to review telecommunications-industry mergers, with an eye toward determining whether they are in the public interest. And watchdog groups have been pressuring the commission’s new chairman, Tom Wheeler, to assert the FCC’s authority. For Wheeler, a former president of the National Cable and Telecommunications Association, the lobbying organization for the cable industry, this is will be a critical test of his leadership.

But challenges to this proposed merger must also come from the anti-trust lawyers at the Department of Justice and the congressional watchdogs over consolidation and monopoly issues.

“Stopping this kind of deal is exactly why we have antitrust laws,” says Free Press’s Aaron.

The congressional role cannot be underestimated. The Department of Justice, the FTC and the FCC get cues from Congress. And the voices of members of the House and Senate will play a critical role in determining whether the merger goes forward.

Some of the initial signals have been good.

“This proposed merger could have a significant impact on the cable industry and affect consumers across the country,” says Minnesota Democrat Amy Klobuchar, the chair of the Senate Antitrust Subcommittee, who announced: “I plan to hold a hearing to carefully scrutinize the details of this merger and its potential consequences for both consumers and competition.”

The ranking Republican on the committee, Utah Senator Mike Lee, supports the review, as do public interest groups ranging from Public Knowledge to Consumers Union.

But hearings will not be enough. The Senate, in particular, must send clear signals.

Former FCC Commissioner Mike Copps is precisely right when he says of the idea of creating an even larger telecommunications conglomerate, “This is so over the top that it ought to be dead on arrival at the FCC.”

Copps, who now serves as a special adviser to Common Cause’s Media and Democracy Reform Initiative, is also right when he says, “The proposed deal runs roughshod over competition and consumer choice and is an affront to the public interest.”

But the public interest will prevail only if the public, and its elected representatives, raise an outcry in defense of the robust competition that opens “all the avenues to truth.”

 

By: John Nichols, The Nation, February 14, 2014

February 15, 2014 Posted by | Cable Companies, Consumers | , , , , , , , | Leave a comment

   

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