Trade Group Says Block Deal If Conditions Won’t Address Vertical and Horizontal Harms
PITTSBURGH, May 9, 2014 – ACA President and CEO Matthew M. Polka told a House panel Thursday that Comcast Corp.’s merger with Time Warner Cable and parallel transactions with Charter Communications will, in their totality, result in significant competitive harm to independent cable operators and their customers and should be blocked if conditions won’t adequately address the severe anti-consumer impact.
“The Comcast-TWC transaction is a ‘big deal’ that threatens consumers and competition, likely resulting in higher prices for consumers,” Polka said. “There is more than sufficient evidence already to demonstrate that the proposed transaction will result in significant anticompetitive harms in many ways.”
ACA’s top executive gave his testimony on the $45 billion merger before the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law. Polka’s full written testimony is available (here).
Polka told policymakers that the Comcast-TWC transaction is not a simple deal and it can be fully understood only by unpacking it into three separate mergers that will each cause irreparable harm to multichannel video programming distributor (MVPD) competition, leading to less choice and higher prices for consumers.
First, Comcast would take control of Time Warner Cable’s 16 regional sports networks (RSNs) — including competitively significant, must-have channels in New York and Los Angeles — and combine them with Comcast’s 10 NBC O&O broadcast stations, 13 RSNs, and many popular national cable networks. By merging this programming, Comcast can sell all these channels in a bundle, giving it additional leverage over MVPDs in all regions where TWC’s RSNs are carried. The impact will be acutely felt by MVPDs based in markets like New York or Los Angeles, where Time Warner Cable today owns or controls an RSN and Comcast owns the local NBC TV station.
Second, by acquiring about 8 million subscribers from Time Warner Cable and Charter, Comcast will have new incentives to disadvantage all MVPDs that compete with the TWC and Charter systems it is acquiring by either withholding Comcast-controlled programming from them permanently or temporarily during negotiation impasses, or simply by forcing them to pay higher prices for this programming.
Moreover, because many of these same MVPDs obtain their programming through the National Cable Television Cooperative (NCTC), which serves as the buying group for more than 900 small and medium sized MVPDs, Comcast will have an incentive to raise the prices that it charges to the NCTC, and these price increase will harm all MVPDs that obtain their programming through the buying group. NCTC negotiates for access to Comcast’s large number of popular national cable networks, including USA Network, CNBC, Golf Channel, Syfy, Bravo, E!, and MSNBC, and its NBC O&O stations.
Third, with about 30% of all MVPD subscribers nationally, Comcast would have massive bargaining power over the video programming industry and would serve as a “must have” distribution outlet for programmers. In the short run, Comcast will gain additional competitive advantages over its MVPD competitors by obtaining larger volume discounts than its rivals will obtain, thereby weakening the competitive position of these rivals or perhaps driving them out of business entirely, Polka said.
Polka noted that the third component of the current transaction – the horizontal combination of Comcast’s distribution assets with the distribution assets of TWC and Charter – did not arise in the Comcast-NBCU transaction and raises significant and troubling new issues.
In terms of remedies, Polka noted that some conditions applied to the Comcast-NBCU transaction in 2011 were inadequate, such as arbitration to resolve program access disputes.
“Arbitration remains too expensive for small and medium-sized MVPDs to utilize on their own, and the manner in which bargaining agents appointed by individual MVPDs could potentially avail themselves of the arbitration conditions was poorly articulated and incompletely described,” Polka said.
Polka stressed that the decisions of the Department of Justice and the Federal Communications Commission on this deal will have big consequences.
“If the FCC and DOJ ignore or treat lightly the potential harms or provide inadequate relief, the likelihood of more big content and distribution mergers will surely increase, all riding on the precedent of this deal. As a result, consumer hopes for lower prices, greater choice, and more competition will be dashed,” Polka said.
About the American Cable Association
Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for nearly 7 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA’s members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit https://acaconnects.org/