Time-Warner CEO: FCC approval merely “delayed”

Addressing TWC staff in a letter, CEO Rob Marcus seemed to ignore the public protests over the proposed merger. Marcus pointed out how overtaxed the FCC would be since the spate of proposed mergers that followed Comcast’s bid for TWC earlier this year. He went on,

“In the meantime, recent speculation about mergers and acquisitions in the content world are adding more fuel to the public debate about whether consolidation is good or bad for consumers. While it’s possible that all this noise could impact the review of our deal, we continue to work closely with Comcast on planning for a closing around year-end, understanding that it could take longer.”

All the “noise” at the FCC appears to be of little concern to the CEO and the merger staff who are moving forward as if the deal is already done. Is it telling that the authors of this deal are more concerned about “delays” than the serious questions surrounding approval?

Well, at least they are making ads to convince us!Comcast pro merger ad

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Against a Comcast-TWC merger

Here is a version of my public filing with the FCC. Here is where you can file yours.

“The FCC should consider more than mere ‘competition’ in distribution providers as they weigh the public interest aspects of Comcast’s proposed acquisition of Time-Warner Cable. Comcast argues that the merger is a boon to public interest because consumers will benefit from the synergies and efficiencies of combining the companies. They also argue that the companies did not compete in the first place, so there is no strength in the argument that the merger would undermine the competitive market place. But this is a shallow view of how competition functions in media markets. Let me break down Comcast’s argument and propose my own counter to the merger.

The merger represents clear benefits for Comcast, Time-Warner and other major players in the pay tv market. They argue this despite the mounds of evidence that distributors treat customers poorly as companies scale up. Existing criticism shows how little benefit there is for the American public in having choice restricted. The recent Comcast customer service fiasco illustrates the failure of their business model to achieve even basic consumer satisfaction. Despite this evidence, the argument from Comcast and similar large commercial stakeholders is that synergy will allow Comcast to lower costs for consumer due to consequent efficiencies in merging and reorganizing coverage areas. I ask the Commission to challenge the assumption that what is good for Comcast economically is automatically good for the public. It is not.

For evidence, see the recent market power demonstrated by Comcast in the defeat of FCC/Tennis Channel. The Tennis Channel called upon the FCC’s mandate to maintain competition in the marketplace, disputing Comcast’s refusal to place the independently owned Tennis Channel on its basic tier. This is important to independents like Tennis Channel because this means more viewers and a more viable business model as advertisers evaluate channels according to the viewers they can potentially attract. Comcast’s restriction of Tennis Channel to a ‘sports package’ pushes down this potential viewership and, thus, undermines Tennis Channel’s ability to compete with Comcast-owned sports networks . . . which, of course, are found on the basic tier.

Although a Comcast showed a clear preference for Comcast-owned content properties (a result of something economists call vertical integration), the appellate court threw out the Tennis Channel’s complaint citing insufficient evidence of Comcast’s use of market power to squeeze out competitors.

It was a poor decision. Judge Estrada’s reasoning used deeply flawed analogies. First, the majority opinion compared the FCC’s public-interest request for diversity in American programming with President Adams’ Alien and Sedition Acts (yes, from 1798). Second, the court’s opinion went on to compare Tennis Channel’s request to be treated equally to the federal government requiring the New York Times to give freelance journalists space on the front page against the paper’s best editorial judgment.

Whether these frail analogies are failures of reasoning or a failure to understand significant differences in media technologies and, shockingly, U.S. media law, I do not know. The trend is, however, obvious. Commercial power is protected by the political freedoms put in place to safeguard diversity of political perspectives. The irony is that the Alien and Sedition Acts were eventually defeated (thank you, Jefferson) for the sake of free expression and diversity in media. Estrada marshals this piece of history as a rationale for the continued centralization of media power (now held by corporate America rather than the executive branch), effectively limiting media diversity in the name of free speech protections for Comcast. Where Jefferson liberated newspapers from draconian Federalist overreach by dismantling the A&S Acts, Estrada helped to entrench commercial power to silence the voice of competition.

The point, dear Commissioners, is this. Diversity IS threatened by this merger, creating higher barriers to entry for new and independent content creators and smaller distribution companies. Comcast extracts “rent” from new channels seeking distribution. This puts media entrepreneurs and upstarts proposing new content in direct competition with established content creators like megacorporations Disney and Viacom.

Consider this larger complex of media distributors and creative industries making the shows. There are clear indirect anti-competitive consequences to Comcast’s control of over a third of U.S. household. How will smaller content entrepreneurs get a foothold in a market dominated by one main distributor when said distributor has preexisting profitable relationships with other massive companies like Viacom and Disney, companies whose content will be preferred due to preexisting economic relationships? The problem of incumbency is crucial. Small creative media start-ups will be dissuaded from the get-go, wary of the crushing power of the giants controlling the game and, increasingly, shaping the rules of the game. Moreover, venture capital will also dry up in such an investment climate. When there is no money in creating new, original programming and fostering innovation, a commercial media system will not do so. More reality television spin-offs, anyone?

Comcast may respond to the public-interest argument here by saying that TWC and Comcast do not compete for subscribers in discrete markets. This is true, but it, a) obscures the actual function of competition in media markets and b) should only serve to illustrate the anti-competitive climate of the distribution industry in its current state. Merger advocates claiming that ‘we don’t have competition anyway so let the merger go through’ should be a red flag for the Commission . . . not a sound argument for the continued horizontal concentration of already vertically integrated media industry.

Comcast’s ability to sweep aside public-interest needs of American democracy must be challenged. The FCC’s ruling on this matter can be that challenge, Commissioner Wheeler. No noteworthy public interest will be damaged by refusal to allow the merger. Can the same be safely said of allowing further concentration?”

Blog note: The argument I filed with the FCC is sound but likely meaningless to the Commission. What counts is volume of public contribution. The Commission needs to feel like it is being watched by more than lobbyists. Contact the FCC with your own objection. Even a couple of sentences. Something like this would be good: “My mom said ‘Comcast acts like the FCC is a feckless hurdle for corporate interests like Comcast even though the Commission is really a mere handmaiden to corporate power.’ That’s not true! Is it?”

Blog update:

Comcast reported strong second quarter earnings. The company reported a revenue increase of 3.5 percent and cash flow growth of 7 percent. Fierce Cable notes that these stats beat the prediction of $5.7 billion. I wonder if that customer retention program can take the credit since it has taken so much flack recently . . .

In the words of one Comcast service representative: “The customer is calling in to tell you what’s wrong, and you’re looking for ways to sell them service.” Looks like punishing your workers and forcing yourself on customers (especially when “senile”!) is a viable business model.