Comcast and Time Warner Cable are doing their best to reassure customers that their ginormous $45.2 billion deal won't harm consumers. In fact, it will be good for consumers, the cable giants claim.
"Significantly, it will not reduce competition in any relevant market because our companies do not overlap or compete with each other," Comcast chief executive Brian Roberts said. "In fact, we do not operate in any of the same ZIP codes."
True — and beside the point.
The larger question that regulators must consider is what will happen after Comcast swallows Time Warner whole, giving it far more power to dictate to content providers what gets to drive on its digital superhighway — and how fast. There is a threat here not only to consumers but to innovation.
The Department of Justice and the Federal Communications Commission must not allow this deal to be consummated without guarantees that protect consumers. If regulators cannot extract guarantees that protect consumers and ensure that Comcast's big digital pipes remain wide open even to competitors, they should not approve the deal.
"I don't know if the deal is too big to fail to be approved, but it is definitely too big to sail through either the Department of Justice or the FCC without serious, serious examination," former FCC Chairman Reed Hundt told Reuters. He's right.
This deal deserves tough scrutiny because it would give Comcast far more power over content providers such as CBS, Disney and Netflix. The new, bigger Comcast would operate in 43 of the 50 biggest metropolitan areas in the nation and have about 30 percent of pay television subscribers. That would give Comcast more power in negotiations with media companies over what TV channels are carried and how much those companies have to pay for carriage.
The merger also may threaten net neutrality, the principle that traffic on the Internet should be treated equally. Comcast and Time Warner likely would be committed to net neutrality through 2018 because of Comcast's previous deal to buy NBC Universal. But what about after that? It's a question regulators must answer even as they continue to put in place new rules that would discourage Internet service providers from charging companies for use of an "express lane" for movies, music and other content.
A beefier Comcast also might be tempted to favor its own content, given that it now owns NBC Universal. That's another concern for regulators.
In a recent commentary for Forbes magazine, Warren Grimes, a professor at Southwestern Law School who is expert in antitrust and communications issues, laid out several things that regulators could demand. We believe these ideas have merit:
Comcast and Time Warner should eliminate forced bundling and allow a la carte purchasing and smaller bundles; they could agree not to discriminate in Internet pricing and to sell access to the Net without a cable TV bundle; and they should divest all of their programming assets.
"Comcast comes into this proposed merger with unclean hands," Grimes wrote. "It is a primary actor in maintaining a grossly anti-competitive system of forced bundling and tiering restrictions, something that is no longer tolerated in Canada, where consumers pay an average of $30 a month less for pay TV subscriptions."
Federal regulators need to take a close look at this deal. If they're not satisfied that consumers can be protected, they should say no.
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