Comcast/NBCU: Boon or bust for consumers


Senators attending the Judiciary Committee hearing on the proposed Comcast/NBCU merger found that it would be absolutely fabulous for consumers. Or that it would be disastrous for consumers. It all depended on who was testifying at the time. One attendee at the meeting was in an interesting position: Al Franken is now a senator, but for a long time his paycheck came from NBC.

Franken said he owes a lot to NBC in terms of his career. At the same time, he said there is a problem when the company that owns the programs and the pipes through which they reach the consumer. He brought up the fin-syn issue, and said that one of the hearing witnesses – NBC’s Jeff Zucker – testified when it was a hot issue that the networks would continue to buy the material of independent production houses. Instead, they buy from themselves and force the independents they use to sell a stake in the program to the network. As such, he did not have much faith in any self-imposed conditions on the merger.

Comcast’s Brian Roberts and Zucker both pointed out that the merger would simply make the merged entity a better competitor in the media space. And as a better competitor, it would be able to better serve consumers. Further, they feel that the merger would inspire the loyal competition to compete even harder, further benefitting consumers.

Competitor Colleen Abdoulah of WOW! Internet, Cable, and Phone had a lot of concerns competing with the merged entity, not to mention with cable in general already. Things like bundling, forcing other services to accept weak channels co-owned with must-have channels. She was also concerned with the lack of transparency in program pricing and lack of an effective forum for redressing grievances, one that was swift and cost a reasonable amount to pursue.

Watchdogs Mark Cooper and Andrew Schwartzman both called for long careful review that ultimately turns down the merger. The said it would give the merged entity too much market power, both in terms of control of programming and pricing power. It threatened to eliminate the internet as a platform that could effectively compete with cable. It also damages competition by turning natural competitors NBC Television and Comcast into allies. Schwartzman called it “The most important media merger since Lucy met Desi.”

Franken was particularly worked up by Roberts’ contention that it would abide by FCC program access rules even after his company’s attorneys were making the case that the FCC was constitutionally precluded from enforcing them. He asked how Minnesota citizens were supposed to trust that they would stick their self-imposed conditions.

Testimony summaries:

* Brian L. Roberts, Chairman and CEO, Comcast Corporation: This is the next step in Comcast’s journey. Combines two great American communications companies that protects localism and accelerates a digital future. Will be a creative company that stimulates demand, and will stimulate other to compete harder. Made voluntary commitments to protect consumers and competitors. Will accept retransmission, independent producers – will add two independent cable channels to Comcast lineups annually. Since there is no horizontal integration, there will be no massive closures or staff reductions. Existing rules will prevent Comcast from abusing competitors. Will follow program access rules, will accept them as a condition even if they are overturned by the courts. Promise to be reliable stewards for the national treasures of NBC and NBC News.

* Jeff Zucker, President and CEO, NBC Universal: Deal will help NBC thrive and benefit consumers. The deal is critical to realizing these benefits. Media marketplace is a donnybrook, a free-for-all. This deal will not change the dynamics of competition, but will help NBCU to compete. NBCU will gain investment — $4.5B for entertainment, $1B for news. Comcast will pay productive role in retransmission model going forward; and innovation, into new platforms, delivering to consumers when and where they want it. Days of three networks with 90% of all viewing are long gone. Praises GE’s excellent stewardship of NBCU.

* Colleen Abdoulah, President and CEO, WOW! Internet, Cable, and Phone: Representing the American Cable Association. Focus is not on price point, but on superserving customers. Prospect of vertically-integrated Comcast/NBCU competitor is daunting. Video content is key to the business. Not all content is created equal. Content providers however offer bundles tying low-interest channels with must-have channels. Costs MVPDs channels, bandwidth. Tried to offer TVeverywhere channels to subscribers, and have been denied by Comcast and its other partners. We’re not here to whine or ask for special privileges; we believe in competition. We want a thorough and thoughtful review to make sure competitors can continue to compete fairly. Terms and conditions on access should be the same as Comcast itself enjoys. Want a meaningful structure in place to resolve disputes.

* Mark Cooper, Ph.D., Director of Research, Consumer Federation of America: This is unique merger in the history of media mergers. Combines largest cable with largest internet distribution platform. Puts company in control of over 50% of the distribution space, leading to less choice and higher prices. Huge horizontal problems. Broadcast and cable are huge rivals, in constant negotiation and competition – this would eliminate a big portion of this competition. Would restrict competition for viewers. Many of the markets will eliminate competition between NBCU TV stations and Comcast regional sports channels. Merger will dramatically increase Comcast’s incentive and ability to raise prices, force bundles and engage in other noncompetitive behaviors. Would inspire other companies to muscle up as well and further diminish competiton. TVeverywhere is a blatant market reduction scheme. Congress has tried to bring competition into this space, but policy mistakes have enabled cable to extend domination anyway. This is the first chance to preserve internet as competitor. Long, rigorous review should lead to the rejection of this merger.

* Andrew J. Schwartzman, President and CEO, Media Access Project: “Most important media merger since Lucy met Desi.” Recognizes that Mr. Roberts is looking for business advantages, not undermining democracy; however, this merger would do the latter. Comcast raising prices will cause prices to go up for all cable customers. Comcast will be able to discriminate in favor of its own programming. Program carriage litigation is available, but it’s expensive to pursue and difficult to prevail. Comcast is supposedly bound by program access rules, which it challenges. Comcast can overcharge itself for its program to justify overcharging competitors. Internet offers the possibility of competition, but this merger threatens to kill off such competition. Prospect of consumers moving from cable to internet is troubling to cable – Comcast will be able to cut internet competitors off from programming while building its own presence.