Hiltzik Takes on the FCC on the Comcast-NBC Deal

John Dunbar has a must-read piece in the current issue of Columbia Journalism Review on why the Comcast-NBC Merger is a bad deal. Go read it.

And then go read Michael Hiltzik of the Los Angeles Times, who wrote an excellent column in the Los Angeles Times yesterday eviscerating the logic of the FCC approving Comcast’s acquisition of NBC Universal and writing that it “underscores the derelict condition of government regulation in our age.”

Does it ever.

Barack Obama came into office two years ago promising to “change course and take a new tack” with “vigorous antitrust enforcement.” Well, not so much. Those words were spoken by his newly ensconced antitrust chief Christine A. Varney, whose previous gig was corporate lobbyist for tech and oil and gas corporations.

Obama’s Federal Communications Commission chairman, Julius Genachowski, a one-time Barry Diller exec, is set to approve the Comcast-NBC deal with a few light conditions. Hiltzik puts it this way:

Genachowski wants to impose several conditions on the deal to ensure that the resulting entertainment behemoth can’t use its dominating power to shut down competition, jack up rates for customers, and generally undermine the public interest.

The likely result of those conditions? Comcast will be as free as it wishes to shut down competition, jack up rates for customers and generally undermine the public interest.

One of the many problems here: Having a distribution company control a significant amount of the content it will carry. And Comcast isn’t just any distribution company. It’s by far the biggest cable provider in the country—a monopoly in many places. Hiltzik:

The Comcast-NBC deal will create novel opportunities to undermine competition and diversity in the cable and Internet industries. Comcast’s self-interest as the owner of major broadcast and cable channels will give it an incentive to keep new, independent channels off its cable grid. Its leverage as owner of the NBC networks will allow it to shoulder other channels out of prime spots on other cable systems.

Comcast will have an incentive to hamper the growth of non-cable video distribution services, such as the Internet-based instant-viewing option offered by Netflix or the rental service of Amazon.com, whether by denying them NBC programs or interfering with their transmission to Comcast Internet subscribers.

Comcast, to the extent it does have competitors (like, say DirecTV), could be able to use its control of must-have cable networks to force competitors to raise their prices. The American Cable Association, comprised of small Comcast competitors, opposes the deal for just that reason, and commissioned a study by a Northwestern professor that found that consumer prices would soar.

Dunbar reports this for us:

Consumer advocates say the deal is bad because it will make it harder for new competitors to challenge cable and satellite television providers. Mark Cooper, research director at the Consumer Federation of America, told Congress in February that the cable industry is a “cartel” that will be “strengthened and extended to the Internet” if the merger is approved…

Just as important as its distribution breadth, Comcast would be a heavyweight programmer, influencing what shows would be made available to online competitors. Merger opponents say it could not only withhold its programming, but also urge independent programmers to refuse to do business with Internet upstarts. Comcast paid more than $7 billion in 2009 for programming, a substantial sum that content providers would hate to jeopardize for fear of drawing Comcast’s ire by selling programs to places Comcast doesn’t like.

Yesterday, Hiltzik shows the conflicts are playing out already:

Surprise: Comcast already is jacking up its fee to carry the Netflix video stream “as a tool to impede competition,” according to a complaint filed with the FCC by Level 3, the company Netflix hired to deliver its digital bits to customers. Level 3 says it shouldn’t pay anything extra to deliver the Netflix service to Comcast’s subscribers. Comcast says its dispute with Level 3 is a plain-vanilla disagreement over Internet traffic, not an effort to stifle a rival.

There’s a larger problem here, too, though—one that Hiltzik gets at in an aside about how the deal is “concentrating economic power in fewer hands.” That doesn’t ever seem to be a consideration for antitrust officials. Why isn’t it?

Further Reading:

A Scalpel We Can Believe In. Obama’s antitrust regime and the proposed Comcast/NBC merger

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum. Tags: , , , ,