Trade Group: Merger Will Harm Consumers, Competition If Approved Without Conditions
PITTSBURGH, June 21, 2010 – The American Cable Association filed comments today with the Federal Communications Commission that thoroughly detailed and quantified many of the most significant anti-competitive and consumer harms associated with the proposed joint venture between Comcast Corp. and NBC Universal if approved without conditions.
“Millions of consumers served by ACA members will see their cable rates rise sharply and will suffer through long and costly disputes over access to cable and broadcast programming if Comcast and NBCU Universal are permitted to merge free of any meaningful and enforceable conditions,” American Cable Association President and CEO Matthew M. Polka said.
Announced last December, the $30 billion merger is an unprecedented marriage of key programming and cable assets, providing Comcast-NBCU with the incentive and ability to use its control of “must have” content – including 10 NBC TV stations, 9 Comcast regional sports networks (RSNs) and about 20 Comcast-NBCU national cable networks – to fatten their profits by manipulating and overcharging ACA members and others in the pay-TV distribution market.
The best available evidence suggests that by simply combining the key programming assets of NBCU and Comcast, the Comcast-NBCU joint venture will be able to extract higher programming fees by 20% and possibly much more from all pay-TV providers operating in 60 large and mid-sized TV markets across the country that include 40% of the U.S. TV households. These fee increases will be substantially passed through to subscribers in the form of higher subscription prices.
Moreover, ACA’s work concludes that Comcast-NBCU could double its retransmission consent take from rival pay-TV providers in the 6 TV markets that both contain an NBC O&O and where Comcast has a significant presence as the incumbent cable provider.
With respect to NBCU’s national cable networks, ACA projects that the joint venture will be able to increase the programming fees for those channels by approximately 18-20% for large, national pay-TV providers who compete against Comcast, such as DirecTV, DISH Network, Verizon’s FiOS and AT&T’s U-Verse.
For cable overbuilders who compete against Comcast throughout their entire service area, the projected fee increases would be even greater. ACA has identified 40 members who are Comcast rivals in all of some of their service areas, including WOW! and Broadstripe. RCN and SureWest are others.
Neither Comcast’s proposed voluntary conditions nor dispute resolution by arbitration – a requirement imposed by the FCC in previous transactions with vertical competitive harms – is an adequate remedy, particularly for smaller and medium-sized operators.
Comcast’s suggestion that the FCC program access rules, even when extended to retransmission consent negotiations, are adequate to ensure fair dealings are unpersuasive because these regulations place no restriction on quantity discounts; provide no automatic right to continued carriage of programming during the pendency of a complaint; cannot address arbitrary internal transfer pricing; and may not apply to online distribution of programming. Moreover, binding arbitration has proven not to be a cost-effective option for smaller and medium-sized pay-TV providers.
In its filing, ACA focused its attention on spotlighting the merger-specific harms of the transaction, and quantifying its impact on its members and their customers. ACA did not propose specific remedies in its filing that would address these harms.
“We are confident that the FCC will recognize that the harms that we have raised are significant and in need of remedy, and at the appropriate time, we will enter into discussions with the FCC on the conditions needed to address these problems,” Polka said.
Cable operator and ACA member Wave Broadband competes head-to-head with Comcast in the San Francisco market, and directly negotiates with both Comcast and NBCU for its programming.
“The Comcast-NBCU merger would reduce competition in the programming market, noticeably increasing the price of cable and satellite TV service for tens of millions of consumers in major TV markets across the country, like the greater San Francisco region,” said Wave’s Chief Operating Officer Steve Friedman, also ACA’s Chairman. “Our lawmakers and regulators should act to protect consumers through meaningful conditions that will restrict Comcast-NBCU’s ability to exercise its increased market power.”
Friedman added, “The deal’s impact on Bay Area consumers would be considerable because the triple marriage of the local NBC affiliate, two RSNs, and the vast stable of cable networks would allow Comcast-NBCU to increase its leverage in our area’s programming market. Comcast-NBCU will easily have enough market dominance to drive up programming costs for my small cable company and the subscribers we serve.”