7 Ways the Feds Can Make a Comcast-Time Warner Merger Less Terrible

Photo: Matt Rourke/AP

This week, the Washington Post endorsed Comcast’s takeover of Time Warner Cable, the largest taking over the second-largest.  The Post said the deal was OK, but regulators should keep a “watchful eye” on it and be prepared to act “if big industry players begin to violate basic principles of market fairness.”  

That’s like telling someone it’s OK to step on a rattlesnake but to be careful not to get bitten. It’s also a little late. Those principles are long dead, killed in large part by a compliant Congress and weak regulators. If the deal must go through, the FCC should impose the seven rules I outline below. But first, some background on Comcast’s special place in what is looking increasingly like our new Gilded Age.

Art Brodsky

Art Brodsky is a veteran journalist and advocate in Internet and telecommunications issues. He is now a communications consultant.

What the Comcast-TWC Merger Means for You

In this deal, every antitrust expert says that the way law is now interpreted, Comcast can buy Time Warner because the two don’t compete with each other, so there is no loss of choice for consumers.  Think about that for a minute.  The way the cable industry is structured, each company operates in its own franchise area.  The industry is structured not to compete.  So under the Comcast-Time Warner logic, Comcast could buy up every other cable company in the country and not be bothered a bit by that old-hat concept of antitrust.

What that formula ignores, of course, is the collateral damage to consumers.  Every once in a while, cable (or satellite) companies and broadcasters get into these spats, called “retransmission consent” negotiations, in which they can’t agree on who should pay how much for programming.  More and more, they end up with consumers getting the short end of the stick when a cable system is all of a sudden missing, say, the network carrying the Super Bowl.

It’s one thing if even one cable system with 22 million customers gets into a fight with a network, another if a cable system with 30 million or so and the nation’s largest markets (added by the TWC acquisition) suddenly black out most of the country.

Think that competition from the Internet will cut into this domination?  Not when you realize Comcast is the largest broadband provider, and TWC is No. 2.

Comcast can, without impunity, force a would-be competitor like Netflix to pony up dough to connect directly to its network, rather than use a third party data carrier like Cogent.

Comcast can cut a deal with Verizon so that, except in areas offering Verizon’s FiOS fiber service, Comcast will sell Verizon’s wireless service and Verizon will sell Comcast’s cable-based wired broadband. How special.

In the most recent case, Cogent went to the Federal Communications Commission (FCC) and cried, in essence, “extortion” when Comcast said that Netflix, which supplies lots of Net traffic, had to connect directly with the cable giant and cut out Cogent.  

The new FCC chairman, Tom Wheeler, basically said, “tough.”  So, realizing the law wasn’t coming to the rescue, Netflix folded, once again proving the old adage that freedom for the wolves has often meant the death of the sheep.  I don’t know about you, but I’d miss lamb once all the sheep are slaughtered as the would-be shepherds look the other way.

All the learned D.C. chatterers talk about the deal being approved with conditions.  That’s a great theory, but the practical applications are limited.  Comcast spent millions litigating the word “now” from its takeover of NBC and millions more to favor its own Golf Channel over the independent Tennis Channel in placement on program tiers. But let’s consider some plausible conditions.

7 Conditions the FCC Could and Should Impose

(Justified by the Law of Spiderman, i.e. “With great power comes great responsibility”)

1.  The combined Comcast has to stop pushing state laws that restrict competition from municipal systems or commercial overbuilders, has to work for their repeal and will not contest any competition.  TWC is the most obvious culprit, having fought its battle against municipalities in North Carolina.  TWC, Comcast and others work also through the American Legislative Exchange Council (ALEC), the shadowy group pushing anti-consumer legislation.
2.  Comcast-TWC has to establish a fund of, say, $1 billion, to aid local governments in building their own systems.
3.  The combined entity must agree to a stringent Net Neutrality policy.  Off the table are the weak-tea rules negotiated by Verizon and Google, and put in place by the late and unlamented Julius Genachowski during his term at the FCC.  This time, former FCC Commissioner Michael Copps, the embodiment of the public interest, gets to write the rules.
4.  No data caps.  It’s been proven time and time again that caps have nothing to do with traffic management and everything to do with stifling competition.
5.  If there are to be these ridiculous “retrans” disputes, the channels stay on the systems until the issue is resolved.
6.  The company shall not require direct connection to its network.  Netflix gets its money back.
7.  Independent programmers get the same treatment as those owned by Comcast and TWC pre-merger.

Wheeler talks a good game about the need for “competition,” but so far hasn’t shown any inkling to foster it.  Competition works when there are equal forces at work and when consumers have choice.  Neither is in play here.

If Wheeler, subject of a glowing profile in the Washington Post, really means what he says about competition, now’s the chance to prove it.

If his fellow Commissioners, Democrats Mignon Clyburn and Jessica Rosenworcel want to be more than followers, they must insist on consumer protections.  And if Republicans Mike O’Rielly and Agit Pai really believe in competition, then let’s see them create some.

There is no better example of the existence of our Second Gilded Age than Comcast.  Government has made it possible for the company to exert economic power unheard of a generation ago.  If this deal is to go through, Comcast should be required to pay dearly for the privilege of exerting market domination.

Editor: Emily Dreyfuss

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