Is Change Here to Stay?
Of course I was thrilled this past April when the Federal Communications Commission indicated it was leaning against approval of the proposed Comcast-Time Warner Cable merger. Reading their tarot cards, the companies promptly dropped their anti-competitive proposal. This was a real public interest victory, made possible by widespread grassroots opposition and an FCC that was listening to the people. (And it followed closely on the heels of the FCC’s hard-won and vastly-improved net neutrality rules for an Open Internet.)
But if anyone has lapsed into a comfortable mindset that this signaled an end, or even a slowdown in industry mergers, a barrage of consolidation proposals flooding the FCC and the Department of Justice since April proves that “consolidation mania” is alive and well—and actually accelerating. What we are witnessing is a game of steady monopolization of broadband markets across the land and a tit-for-tat consolidation in cable and broadcast for control over programming. Wall Street is profiting from all the jousting for position, the media follows it as a spectator sport among industry behemoths, and the public interest—things like consumer prices, a truly Open Internet, diversity of content, and real competition—well, it just plain hemorrhages.
What technology makes possible, the greed of the market-makers dooms to mediocrity. The potential for a golden age of communications for consumers and citizens is fast becoming the gate-keeping province of giant telecommunications and media companies seeking to capture control of both the technology and the marketplace. The consolidation and homogenization that wreaked such horrible damage on radio, television, and cable is taking the broadband Internet down the very same path. The “open, power-at-the-edges Internet” that might have been is instead becoming the “closed, power-at-the-center Internet” that the inventors of broadband technology never wanted or expected. To permit this to happen is a travesty for consumers and an outright repudiation of the technology’s original promise.
Just so we all understand, it is not the inevitable workings of the “invisible hand” that is at fault here; it is government policies, too often written by the entrenched interests themselves, that create our present communications environment—an environment that dramatically distorts what might have been. The rules of any country’s marketplace result from political decisions, not natural laws. Those rules can favor either deep-pocketed special interests or the public interest. In a democracy, we the people are supposed to determine what interest prevails.
Let’s briefly look at just two of the merger transactions currently being discussed.
Charter-Time Warner Cable
Estimates for the full value of Charter’s expansion, including $10.4 billion to also buy Bright House Networks, run to $65 billion and more. But the costs go far beyond dollars. Post-merger, New Charter alongside Comcast would approach a national broadband duopoly, further strangling hopes for consumer-friendly, reasonably-priced, and ubiquitously-deployed twenty-first century communications. This deal would create a giant gatekeeper with the power to dictate prices to both consumers and content providers, in the process squelching independent content and diversity on the cable dial.
Rules regarding something called “retransmission consent” are relevant here. These rules were originally passed and implemented to ensure that consumers would have cable access to local broadcast stations, community news, and network programming and to keep small broadcast stations financially viable. They have now morphed into a titanic revenue battle between program distributors and content producers, each trying to game the rules to their financial advantage, the public be damned. It’s what’s behind all those blackouts that deny consumers access to post-season sports. And it is what’s spurring consolidation mania generally and this deal specifically. The bigger one side gets, the more bargaining leverage it has. So when the FCC approves a merger for one side, the other side rushes in, wailing and moaning, to demand equal special-interest treatment. The result? Deals get approved, prices go up, and consumers are gouged. The FCC has more power to implement good retransmission rules than it has been willing to exercise, largely because the big guys lobby Congress to scare off the Commission from doing so. The current FCC is talking about revisiting these rules, but it faces a really tough battle if it’s going to do something that benefits consumers. We need to help them do the right thing.
Most Americans now understand that they are paying too much for broadband that is too slow. The “New Charter” merger translates into consumers paying more for broadband that is more often monopolistic than it is competitive. New Charter and Comcast between them would bestride the broadband universe. It strikes me that if a company is serious about competition, it would go into markets presently controlled by others and invest in overbuilding infrastructure there, rather than divvying up markets between them in order to acquire market control. If they have all this money to spend, why not build their own competitive broadband? The FCC ought to be encouraging this type of competition. We’ll see.
Altice, a Dutch-based company with a reputation for aggressive expansion and not-so-great consumer service, wants to gobble up Cablevision, one of the country’s Top 5 cable providers. Cablevision is involved in both the distribution of broadband and the production of news content. The New York Times recently carried a story quoting media analyst SNL Kagan stating that Comcast, the New Charter, and Altice-Cablevision together would control 81.2% of the cable broadband universe in the U.S. Altice, it is clear, has even more expansionary ideas in mind for the U.S. market—if it can get this first big deal approved.
The Altice-Cablevision transaction also raises foreign ownership questions. FCC restrictions on foreign ownership have been relaxed in recent years. We should discuss and debate the merits of foreign-owned communications infrastructure on national security grounds. But we should also realize that such ownership is a blow to local community programming, moving control not just from a community to the domestic communications powerhouses, but now one step further to overseas management.
For more details on these two transactions, see the new filing presented to the FCC by Common Cause, Public Knowledge, Consumers Union, and Open MIC and another by Free Press.
We could discuss many other transactions, some recently approved, others in the pipeline. For example, Verizon-AOL recently won approval from the Department of Justice and the Federal Trade Commission. Oddly, the FCC (which could have conducted a more thorough public interest review) didn’t push for jurisdiction because no license transfers were involved. But communications issues of the first magnitude were involved in this deal. Just one of many considerations: it further opens the way for Verizon to move into video. Here’s another issue: with Verizon now owning the Huffington Post, will Huffington feel as free to talk about Verizon’s opposition to net neutrality as it has in the past? This merger, involving so much breadth, should also have been examined on privacy grounds.
The FCC (and Congress, too) needs to range beyond specific transactions and consider the state of the industry as a whole. How drastically our media ecosystem has been changed, centralized, and consolidated by policy decisions over the past 20 years! While regulatory focus must, of course, hone in on the specific aspects of each of these deals, the backdrop is an industry transformed in ways that are directly contrary to the public interest, the common good. We should not ignore the forest for the trees. Our communications statutes put the public interest, consumer well-being, and competition first. These have not thrived for the major part of a generation. The present FCC has done a far better job than its predecessor commissions in many areas. But the larger issues of consolidation, gate-keeping, and consumer-bashing are still with us. The net neutrality rules approved by the Wheeler Commission are admirable and much to be applauded. But there are many other issues requiring resolution before we can claim a truly Open Internet. Similarly, while push-back on the Comcast-TWC merger was splendid, we have seen that the consolidators are back at the FCC as you read this, seeking approval of evermore transactions.
So another time of testing confronts the Commission. We found during both the net neutrality and Comcast-TWC proceedings that citizen input matters. It is, after all, the American people whose interests need always to come first. Let the FCC know what you think!