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The Capitol Forum’s Insightful Review of the Comcast-Time Warner Merger Deal: A Tough Sell

be mineWall Street is increasingly pessimistic about Comcast and Time Warner Cable pulling off their merger deal as regulators stop the clock to take a closer look at the transaction.

The Capitol Forum, an in-depth news and analysis service dedicated to informing policymakers, investors, and industry stakeholders on how policy affects market competition, specializes in examining marketplace mergers and their potential impact on American consumers and the general economy. The group has shared a copy of their assessment — “Comcast/Time Warner Cable: A Closer Look at FCC, DOJ Decision Processes; Merits and Politics May Drive Merger Challenge, Especially as Wheeler Unlikely to Embrace Title II Regulation for Net Neutrality” — with Stop the Cap! and we’re sharing a summary of the report with our readers.

The two most important government agencies reviewing the merger proposal are the Federal Communications Commission and the Department of Justice. The FCC is responsible for overseeing telecommunications in the United States and is also tasked with reviewing telecom industry mergers to verify if they are in the public interest. The Department of Justice becomes involved in big mergers as well, concerned with compliance with antitrust and other laws.

In many instances, the two agencies work separately and independently to review merger proposals, but not so with Comcast and Time Warner Cable.

Sources tell Capitol Forum there is a high level of coordination and information sharing between DOJ and the FCC, potentially positioning the two agencies in a stronger legal position if they jointly challenge the merger. Readers may recall AT&T’s attempt to buy T-Mobile was thwarted in 2011 when the FCC followed the DOJ’s lead in jointly challenging the merger on competition and antitrust grounds. With a united front against the deal in Washington, AT&T quickly capitulated.

comcast cartoonDespite a blizzard of Comcast talking points claiming the cable industry is fiercely competitive, Capitol Forum’s report indicates the DOJ staff level believes the cable industry suffers dearly from a lack of competition already, and allowing further marketplace concentration would exacerbate an already difficult problem.

Capitol Forum reports the DOJ’s staff is inclined to “take an aggressive posture with regards to [antitrust] enforcement.”

The DOJ would certainly not be walking the beltway plank to its political doom if it ultimately decides to oppose the merger.

Few on Capitol Hill are likely to fiercely advocate for a cable company generally despised by their constituents. The Capitol Forum report notes that Comcast faces powerful opposition and its political support is overstated. Comcast’s lobbying efforts and ties to President Obama and several high level Democrats have also been widely exposed in the media, which makes it more difficult for D.C.’s powerful to be seen carrying Comcast’s water.

In fact, the report indicates a regulatory challenge against Comcast and Time Warner Cable would face considerably less political opposition than what the FCC faces if it reclassifies broadband as a “telecommunications service,” protecting Net Neutrality and exposing the industry to stronger regulatory oversight.

The report suggests FCC Chairman Thomas Wheeler, who seems intent on opposing reclassification of broadband under Title II, may appease his critics by taking a stronger stance on the Comcast/Time Warner deal instead.

Wheeler has already expressed concern about the state of competitiveness of American broadband. He considers providers capable of delivering at least 25Mbps part of broadband’s key market, which in many communities means a monopoly for the local cable operator.

Understanding “The Public Interest” and the Implications of a Combined Comcast/Time Warner Cable on Competition

comcastbuy_400_241The FCC will review the transaction pursuant to Sections 214 and 310(d) of the Communications Act of 1934, in order to ensure that “public interest, convenience, and necessity will be served thereby.”

The merger proposal must also demonstrate it does not violate antitrust laws.

It is here that merger opponents have a wealth of arguments to use against Comcast and Time Warner Cable.

Despite Comcast’s insistence the deal would have no competitive implications, the Capitol Forum reports the merger’s potential anticompetitive effects are “widely recognized and evidence from the investigation could provide DOJ and FCC with a solid foundation to challenge the merger.”

Although the two cable companies don’t directly compete with each other (itself a warning sign of an already noncompetitive marketplace), the report finds “a wide array of anti-competitive effects and several antitrust theories” that would implicate the cable company in a Clayton Act violation.

Comcast is betting heavily on its surface argument that by the very fact customers will not see any change in the number of competitors delivering service to their area, the merger should easily clear any antitrust hurdles. That argument makes it more difficult for the DOJ to fall back on the usual market concentration precedents that would prevent such a colossal merger deal. To argue excessive horizontal integration — the enlarging of Comcast’s territory — the DOJ would first have to prove Comcast’s size in comparison with other cable companies is a reason for the courts to shoot down the deal. Or it could bypass Comcast’s favorite argument and move to the issue of vertical integration — one company’s ability to control not just the pipes that deliver content, but also the content itself.

octopusHere the examples of potential abuse are plentiful:

  • Comcast would enjoy increased power to force cable programmers to favor Comcast in cable programming pricing and policies while allowing it to demand restrictions on competitive online video competitors or restrict access to popular cable programming;
  • Comcast could impose data caps and usage-based pricing to deter online viewing while exempting its own content by delivering it over a Wi-Fi enabled gateway, game console or set top box, claiming all are unrelated to Comcast’s broadband Internet service or network;
  • Force consumers to use Comcast set top boxes that would not support competing providers’ online video;
  • Use interconnection agreements as a clever way to bypass the paid prioritization Net Neutrality debate. Netflix and other content producers would be forced to compensate Comcast for reliable access to its broadband customers;
  • Noting AT&T has declared U-verse can not effectively succeed in the cable television business without combining its customer base with DirecTV to qualify for better volume discounts, there is clear evidence that a super-sized Comcast could command discounts new entrants like Google Fiber could never hope to get, putting them at a distinct price disadvantage.

The FCC’s scrutiny of Comcast’s merger deal has already uncovered evidence previously unavailable because of non-disclosure agreements which show Comcast’s heavy hand already at work.

The report notes Michael Mooney, a senior vice president and group general counsel at Level 3, told the Capitol Forum the dispute earlier this year between Netflix and Comcast could have been resolved in about five minutes had Comcast added a port to relieve congestion at an interconnection point. The cost? Just $5,000. Had Comcast been willing to spend the money, millions of Comcast customers would have never experienced problems using Netflix.

Whether Comcast is ultimately deemed too large to permit another consolidating merger or whether it is given conditional approval to absorb Time Warner Cable remains a close call, according to the Capitol Forum, despite the fact consumers have urged regulators for something slightly more concrete – a single sentence, total denial of its application.

http://www.phillipdampier.com/video/Capitol Forum The Consumer Welfare Test.mp4

The Capitol Forum broadly explores how the “consumer welfare standard” has become a part of the antitrust review process over the last 30 years. Sometimes, a strict antitrust test is not sufficient to protect “the public interest” of consumers, and allows the dominant player(s) to harm competition. In the digital economy, corporate mergers that empower companies to restrict innovation can prove far more damaging than classic monopoly abuse. (15:52)

Cable Lobby Forgot to Mention It’s the Sole Backer of Sock Puppet Group ‘Onward Internet’

onward-internetWith millions at stake charging content producers extra for guaranteed fast lanes on the Internet, some lobbyists will go to almost any length to throw up roadblocks in opposition to Net Neutrality.

The sudden appearance of Onward Internet, a group that erects enormous “Internet suggestion boxes” at busy intersections in New York and San Francisco is a case in point.

At least a half-dozen 20-somethings, some dressed for a science fiction convention, staff the displays while encouraging people to write and toss in their own ideas about what they expect from the Internet over the next decade.

A higher bill and usage caps, unsurprisingly, were not among the suggestions. But it is doubtful the mysterious people behind Onward Internet are interested in hearing that.

Advocacy group ProPublica spent weeks trying to find who was paying for the youthful exuberance, giant black boxes, and hopelessly optimistic YouTube videos telling viewers the Internet was made to move data, and how amazing it was your Internet Service Providers valiantly kept up with the demand, helped connect industries and even topple dictatorships. Well, not corporate dictatorships in this country anyway.

With that kind of “feel good” message, ProPublica undoubtedly smelled industry money, especially after seeing lines like, “The Internet is a wild, free thing; unbounded by limits, unfettered by rules, it’s everyone’s responsibility to ensure that the Internet continues to advance.” But it took a leak from a worker hired to file permits and buy space in San Francisco for the street displays to finally blow the whistle.

Onward Internet = the National Cable and Telecommunications Association, America’s largest cable industry lobbyist.

This appears to be a repurposed dumpster.

This appears to be a repurposed dumpster.

You couldn’t find a bigger critic of Net Neutrality if you tried.

The NCTA played coy with ProPublica when the group first confronted the cable lobby with the evidence.

“What led you to the conclusion that this is an NCTA effort,” asked NCTA spokesman Brian Dietz.

Busted, Dietz followed up with a statement suggesting the NCTA needed to keep its involvement top-secret because it might ‘bias’ the feedback they received:

“We’ve kept NCTA’s brand off Onward Internet because we want to collect unbiased feedback directly from individuals about what they want for the future of the Internet and how it can become even better than it is today,” Dietz told ProPublica. “The cable industry is proud of our role as a leading Internet provider in the U.S. but we feel it’s important to hear directly from consumers about how they envision the future so we can work hard on delivering it.”

“We had always intended to put the NCTA brand on it but we wanted to collect as much unbiased feedback as we could for a few weeks before putting our name on it,” Dietz later told VentureBeat.

The NCTA is hoping unwitting consumers submit comments they can use to oppose Net Neutrality and Title 2 reclassification of broadband as a “telecommunications service.”

Because if that happens, the Money Party may end before it even begins.

The NCTA’s astroturf effort is nothing new. A panoply of well-funded, telecom-industry backed sock puppet groups muddy the waters on these issues everyday, from Broadband for America to various think tanks and bought and paid for researchers.

http://www.phillipdampier.com/video/Onward Internet Decide the future of the Internet 10-8-14.mp4

Onward Internet is hoping you will share comments they can use to prove you oppose Net Neutrality. The NCTA is a strong opponent of Net Neutrality, which allows LOLCATS, movies, and dictatorship toppling to occur without paying even MORE money to the cable company for a fast lane that should have been fast in the first place, considering how much we are spending on it. Now Big Cable also want usage caps and allowances. The revolution has been capped. (1:22)

Verizon Wireless Cancels Its LTE 4G “Network Optimization” (Speed Throttling) Plan Before It Launches

throttleVerizon Wireless, facing scrutiny from FCC chairman Thomas Wheeler, today announced it has canceled plans to introduce a new “network optimization” policy that would have significantly throttled down speeds for heavy users still on grandfathered, unlimited use data plans.

Stop the Cap! received a statement from Verizon Wireless this afternoon announcing a sudden change of heart:

Verizon is committed to providing its customers with an unparalleled mobile network experience.  At a time of ever-increasing mobile broadband data usage, we not only take pride in the way we manage our network resources, but also take seriously our responsibility to deliver exceptional mobile service to every customer.  We’ve greatly valued the ongoing dialogue over the past several months concerning network optimization and we’ve decided not to move forward with the planned implementation of network optimization for 4G LTE customers on unlimited plans.  Exceptional network service will always be our priority and we remain committed to working closely with industry stakeholders to manage broadband issues so that American consumers get the world-class mobile service they expect and value.

Chairman Wheeler questioned Verizon’s strategy almost immediately after the company announced its “network optimization” strategy in July.

Wheeler

Wheeler

“‘Reasonable network management’ concerns the technical management of your network; it is not a loophole designed to enhance your revenue streams,” Wheeler wrote in a July 30 letter to Verizon Wireless CEO Dan Mead. “It is disturbing to me that Verizon Wireless would base its ‘network management’ on distinctions among its customers’ data plans, rather than on network architecture or technology.”

Wheeler reminded Mead the FCC defined network management practices to be reasonable “if it is appropriate and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.”

Wheeler told Mead Verizon’s plans didn’t qualify.

“I know of no past FCC statement that would treat as ‘reasonable network management’ a decision to slow traffic to a user who has paid, after all, for ‘unlimited” service,'” Wheeler wrote.

everybody does itWheeler also questioned how Verizon could justify its planned speed throttling under the conditions it agreed to after winning the 700MHz “C Block.” That spectrum was accompanied by a special FCC mandate – open platform rules which prohibits Verizon Wireless from denying, limiting, or restricting the ability of end users to download and use applications of their choosing on the C Block networks. A speed throttle would make using some applications impossible.

In August, Wheeler hammered home his opposition to Verizon’s plans at a news conference.

“My concern in this instance–and it’s not just with Verizon, by the way, we’ve written to all the carriers–is that [network management] is moving from a technology and engineering issue to a business issue, such as choosing between different subscribers based on your economic relationship with them.”

Wheeler has expressed irritation that Verizon’s justification for congestion management only applied to its unlimited customers, while those paying on a per-gigabyte basis could use (and spend) as much as they like.

Verizon responded that other providers — notably AT&T — already have a similar network management policy in place, throttling speeds of grandfathered unlimited customers who consume more than 3GB of wireless traffic on its 3G network or 5GB on its 4G network a month.

“‘All the kids do it’ was never something that worked with me when I was growing up and didn’t work with my kids,” Wheeler responded, noting Verizon was trying to reframe the issue instead of justifying the need for speed throttles for some customers, while giving others unlimited access as long as they pay.

Netflix Aggravates Canada’s Identity Crisis: Protection of Canadian Culture or Big Telecom Company Profits?

netflix caThe arrival of Netflix north of the American border has sparked a potential video revolution in Canada that some fear could renew “an erosion” of Canadian culture and self-identity as the streaming video service floods the country with American-made television and movies. But anxiety also prevails on the upper floors of some of Canada’s biggest telecom companies, worried their business models are about to be challenged like never before.

Two weeks ago, the country saw a remarkable Canadian Radio-television and Telecommunications Commission (CRTC) hearing featuring a Netflix executive obviously not used to being grilled by the often-curt regulators. When it was all over, Netflix refused to comply with a CRTC order for information about Netflix’s Canadian customers.

Earlier today, the CRTC’s secretary general, John Traversy, declared that because of the lack of cooperation from Netflix, all of their testimony “will be removed from the public record of this proceeding on October 2, 2014.” That includes their oral arguments.

“As a result, the hearing panel will reach its conclusions based on the remaining evidence on the record. There are a variety of perspectives on the impact of Internet broadcasting in Canada, and the panel will rely on those that are on the public record to make its findings,” Mr. Traversy wrote in a nod to Canada’s own telecom companies.

Not since late 1990’s Heritage Minister Sheila Copps, who defended Canadian content with her support of a law that restricted foreign magazines from infiltrating across the border, had a government official seemed willing to take matters beyond the government’s own policy.

CRTC chairman Jean-Pierre Blais threw down the gauntlet when Netflix hesitated about releasing its Canadian subscriber and Canadian content statistics to the regulator. Mr. Blais wanted to know exactly how many Canadians are Netflix subscribers and how much of what they are watching on the service originates in Canada.

With hearings underway in Ottawa, bigger questions are being raised about the CRTC’s authority in the digital age. Doug Dirks from CBC Radio’s The Homestretch talks with Michael Geist at the University of Ottawa. Sept. 19, 2014 (8:40) You must remain on this page to hear the clip, or you can download the clip and listen later.

Netflix has operated below regulatory radar since it first launched service in Canada four years ago. The CRTC left the American company with an impression it had the right to regulate Netflix, but chose not to at this time. The CRTC of 2010 was knee-deep in media consolidation issues and did not want to spend a lot of time on an American service that most Canadians watched by using proxy servers and virtual private networks to bypass geographic content restrictions. But now that an estimated 30% of English-speaking Canada subscribes to Netflix, it is threatening to turn the country’s cozy and well-consolidated media industry on its head.

Ask most of the corporate players involved and they will declare this is a fight about Canada’s identity. After all, broadcasters have been compelled for years to live under content laws that require a certain percentage of television and radio content to originate inside Canada. Without such regulations, enforced by the CRTC among others, Canada would be overwhelmed by all-things-Americans. Some believe that without protection, Canadian viewers will only watch and listen to American television and music at the cost of Canadian productions and artists.

http://www.phillipdampier.com/video/BNN Netflix vs the CRTC 9-22-14.flv

Kevin O’Leary, Chairman, O’Leary Financial Group is furious with regulators for butting into Netflix’s online video business and threatening its presence in Canada is an effort to protect incumbent business models. From BNN-Canada. (8:45)

A viewer watches Netflix global public policy director Corie Wright testify before the Canadian Radio-television and Telecommunications Commission (CRTC) in Ottawa (Image: Sean Kilpatrick, The Canadian Press)

A viewer watches Netflix’s Corie Wright testify before the CRTC. (Image: Sean Kilpatrick, The Canadian Press)

But behind the culture war is a question of money – billions of dollars in fact. Giant media companies like Rogers, Shaw, and Bell feel threatened by the presence of Netflix, which can take away viewers and change a media landscape that has not faced the kind of wholesale deregulation that has taken place in the United States since the Reagan Administration.

Before Netflix, the big Canadian networks didn’t object too strongly to the content regulations. After all, CRTC rules helped establish the Canadian Media Fund which partly pays for domestic TV and movie productions. Canada’s telephone and satellite companies also have to contribute, and they collectively added $266 million to the pot in 2013, mostly collected from their customers in the form of higher bills. Netflix doesn’t receive money from the fund and has indicated it doesn’t need or want the government’s help to create Canadian content.

“It is not in the interest of consumers to have new media subsidize old media or to have new entrants subsidize incumbents,” added Netflix’s Corie Wright. “Netflix believes that regulatory intervention online is unnecessary and could have consequences that are inconsistent with the interests of consumers,” Wright said, adding viewers should have the ability “to vote with their dollars and eyeballs to shape the media marketplace.”

That is not exactly what the CRTC wanted to hear, and Wright was off the Christmas card list for good when she directly rebuffed Mr. Blais’ requests for Netflix’s data on its Canadian customers. Wright implied the data would somehow make its way out of the CRTC’s offices and end up in the hands of the Canadian-owned broadcast and cable competitors that know many at the CRTC on a first name basis.

Does Netflix pose a threat to Canadian culture? Matt Galloway spoke with John Doyle, the Globe & Mail’s television critic, on the Sept. 22nd edition of CBC Radio’s Metro Morning show. Sept. 22, 2014 (8:31) You must remain on this page to hear the clip, or you can download the clip and listen later.

Mr. Blais, obviously not used to requests being questioned, repeated demands for Netflix’s subscriber data to be turned over by the following Monday and if Netflix did not comply, he would revoke Netflix’s current exemption from Canadian content rules and bring down the hammer of regulation on the streaming service.

Blais

Blais

The deadline came and went and last week Netflix defiantly refused to comply with the CRTC’s order. A Netflix official said that while the company has responded to a number of CRTC requests, it was not “in a position to produce the confidential and competitively sensitive information, but added it was always prepared to work constructively with the commission.”

Now things are very much up in the air. Many Canadians question why the CRTC believes it has the right to regulate Internet content when it operates largely as a broadcast regulator. Public opinion seems to be swayed against the CRTC and towards Netflix. Canadian producers and writers are concerned their jobs are at risk, Canadian media conglomerates fear their comfortable and predictable future is threatened if consumers decide to spend more time with Netflix and less time with them. All of this debate occurring within the context of a discussion about forcing pay television companies to offer slimmed down basic cable packages and implement a-la-carte — pay only for the channels you want — is enough to give media executives heartburn.

To underscore the point much of this debate involves money, American TV network executives also turned up at the CRTC arguing for regulations that would compensate American TV stations for providing “free” programming on Canadian airwaves, cable, and satellite — retransmission consent across the border.

Netflix does not seem too worried it is in trouble in either Ottawa or in the halls of CRTC headquarters at Les Terrasses de la Chaudière in Gatineau, Québec, just across the Ottawa River. Prime Minister Stephen Harper and Heritage Minister Shelly Glover have made it clear they have zero interest in taxing or regulating Netflix. Even if they were, the Canada-U.S. free trade agreement may make regulating Netflix a practical impossibility, especially if the U.S. decides to retaliate.

http://www.phillipdampier.com/video/Canadian Press CRTC vs Netflix 9-19-14.mp4

Dwayne Winseck, Carleton School of Journalism and Communication, defended the role the CRTC is mandated to play by Canada’s telecommunications laws. (1:41)

Comcast Denies It Threatens Customers With Suspension for Using Anonymous Tor Web Browser

torComcast has strongly denied reports it threatened customers with service termination for using the Tor anonymous web browser, designed to obscure a web user’s identity or location.

Over the weekend, Deep.Dot.Web reported that Comcast agents were contacting customers using the Tor web browser and warned them their Internet access was in peril if they continued using the anonymous browsing software, claiming it was against Comcast’s acceptable use policy.

Allegedly, Comcast representatives “Jeremy” and “Kelly” claimed Tor was “an illegal service” and demanded the customers reveal the web sites they were attempting to reach using the browser.

The representative identified as “Kelly” claimed:

“Users who try to use anonymity, or cover themselves up on the Internet, are usually doing things that aren’t so-to-speak legal. We have the right to terminate, fine, or suspend your account at anytime due to you violating the rules. Do you have any other questions? Thank you for contacting Comcast, have a great day.”

The Tor browser was designed to protect the identity of its privacy-minded users from nosy government agencies and law enforcement elements, but has also been used to hide illegal activities ranging from child pornography and drug dealing to murder-for-hire and espionage-related activities. But the majority of the estimated four million Tor users rely on the browser primarily to help them overcome Internet censorship blocks or geographic restrictions on online video content.

Tor directs each user’s Internet traffic through a free, worldwide, volunteer network of more than five thousand relays to hide a user’s location and usage from anyone conducting network surveillance or traffic analysis. Technically, users who volunteer to run a relay may be in violation of Comcast’s acceptable use policy, which states (in part):

[Customers may not] use or run dedicated, stand-alone equipment or servers from the Premises that provide network content or any other services to anyone outside of your Premises local area network (“PremisesLAN”), also commonly referred to as public services or servers. Examples of prohibited equipment and servers include, but are not limited to, email, web hosting, file sharing, and proxy services and servers.

xfinitylogoBut whether the messages reported by Deep.Dot.Web were simply the result of an overeager support employee or actual company policy is now in dispute.

Comcast emphatically denied the customer contacts reported by Deep.Dot.Web ever took place and claimed Comcast has no restrictions on customers using the Tor browser.

“The anecdotal chat room evidence provided is not consistent with our agents’ messages and is not accurate,” said Comcast’s Charlie Douglas. “Per our own internal review, we have found no evidence that these conversations took place, nor do we employ a Security Assurance team member named Kelly. Comcast doesn’t monitor users’ browser software or web surfing, and has no program addressing the Tor browser. Customers are free to use their XFINITY Internet service to visit any website or use it however they wish.”

A company blog post this morning broadened the company’s denials:

Comcast is not asking customers to stop using Tor, or any other browser for that matter. We have no policy against Tor, or any other browser or software. Customers are free to use their Xfinity Internet service to visit any website, use any app, and so forth.

Here are the facts:

  • Comcast doesn’t monitor our customer’s browser software, web surfing or online history.
  • The anecdotal chat room evidence described in these reports is not accurate.
  • We respect customer privacy and security and only investigate and disclose certain information about a customer’s account with a valid court order or other appropriate legal process, just like other ISPs. More information about these policies can be found in our Transparency Report here.
  • We do not terminate customers for violating the Copyright Alert System (aka “six strikes”), which is a non-punitive, educational and voluntary copyright program. Read more here.

Internet Slowdown Day is Here: Tell the FCC to Classify ISPs as Common Carriers

Phillip "It's common sense" Dampier

Phillip “It’s common sense” Dampier

The concept is so simple one might think there was nothing controversial about the common sense idea of requiring Internet Service Providers to handle Internet traffic equally.

But that would throw a wrench into the money-making plans of some of America’s top cable and phone companies looking for new ways to collect more money and bigger profits from selling Internet access.

Wireless phone companies have already got the Money Party started, throttling certain traffic while exempting partnered apps and websites from counting against your monthly usage allowance. Americans pay some of the highest prices in the world for broadband service, but it is never enough for some executives who believe the increasing necessity of having Internet access means companies can charge even more for access. With few competitive alternatives, where are you going to go?

With most Americans confronted with just two Internet providers to choose from, the stage is set for mischief. The normal rules of competition simply don’t apply, allowing companies to raise prices while limiting innovation to finding new ways to improve revenue without improving the service. That has worked well for stockholders and executives that green-light these schemes, but for all the money Americans pay for service, broadband in the United States is still way behind other nations.

A few years ago, the CEO of AT&T decided that collecting money from customers to provide Internet access wasn’t enough. The company now wanted compensation from websites that generate the traffic ISPs handle for their customers. In other words, they wanted to be paid twice for doing their job.

If you listen to some of America’s largest cable and phone companies talk, you would think that traffic from Netflix and other high-volume websites was sucking them dry. But in fact their prices and profits are up and their costs are down… way down. But that doesn’t stop them from contemplating usage-based billing and reducing investment in upgrades to keep up with demand. Netflix learned that lesson when Comcast refused to upgrade some of its connections which left Netflix streaming video constantly buffering for Comcast customers. Those problems magically disappeared as soon as money changed hands in a deal that leaves Netflix dependent on paying Comcast protection money to make sure customers can actually enjoy the service they already paid to receive.

internetslowdownhero-100413741-large

Former FCC chairman Kevin Martin believed competition would keep ISPs honest, but since he left at the end of the Bush Administration, competition has barely emerged for most of us. Julius Genachowski, the FCC chairman under President Obama’s first term gave some strong speeches about protecting Net Neutrality but caved to provider demands the moment he met with them behind closed doors. Today, FCC chairman Tom Wheeler presides over an agency that has repeatedly had its regulatory hat handed to them by the D.C. Court of Appeals, which has ruled time and time again that the current regulatory foundation on which Internet-related policies are enforced is completely unsound.

We can thank former FCC chairman Michael Powell for that. His decision to classify broadband as an “information service” during the first term of the Bush Administration carries almost no legacy of court-upheld authority the FCC can rely on to enforce its regulations. Powell’s innovation was warmly received by America’s biggest cable companies who quickly realized the FCC had regulatory authority over the broadband business in name-only. Powell’s reward? A cushy job as head of America’s biggest cable lobby – the National Cable and Telecommunications Association (NCTA).

Don't allow Comcast and others to slow down your favorite cat videos.

Don’t allow Comcast and others to slow down your favorite cat videos.

Wheeler used to hold that position himself, and his trip through D.C.’s revolving door connecting regulators with the regulated makes it unsurprising that Wheeler’s own Net Neutrality proposal is not far from what Big Telecom companies want themselves — permission to create paid “fast lanes” on highways that currently lack enough capacity to protect other traffic from suffering the speed consequences of prioritized traffic.

It reminds me of those highway projects where cars dutifully change lanes well in advance of lane closures while other cars blow past only to merge at the last possible minute, saving them time while slowing cars behind them to a crawl as they wait to move ahead.

Make no mistake – paid fast lanes will compromise unpaid traffic, reducing the quality of your Internet experience.

The best solution to this problem would be for providers to devote more revenue to regular network upgrades that benefit everyone, not create new ways to ration the Internet for some while letting others pay to avoid speed bumps and congestion issues that are easy and inexpensive to solve. But if your provider was already delivering that kind of capacity, there would be no market for Internet fast lanes, would there? Without Net Neutrality, providers have a financial incentive not to upgrade their networks and have little fear unhappy customers will switch to the other competitor likely trying the same thing.

Net Neutrality cannot just be a policy, however. A strong regulatory foundation must exist to allow the FCC to enforce Internet-related policies without having them overturned by the courts. That means one thing: reclassifying broadband as a telecommunications service subject to common carrier regulations.

Net Neutrality opponents like to claim that would saddle Internet providers with decades old telephone regulations that have nothing to do with today’s broadband marketplace. But in fact that regulatory framework was originally established precisely for the reasons we need it again today — a non-competitive, largely unregulated marketplace is exploiting its market power to abuse customers and artificially interfere with traffic just to invent new ways to make more money.

People forget that in the 1920s, AT&T not only monopolized telephone service in most areas (and had a history of refusing to connect calls made from competing telephone companies to its own subscribers even as it hiked rates to pay for “improvements”), it was also attempting to force its for-profit vision on the newly emerging world of radio: “toll-broadcasting.” AT&T insisted that radio stations charge a fee to anyone who wanted access to the airwaves, and imposed the toll system on its own stations, starting with WBAY-AM (later WEAF) in New York on July 25, 1922.

Westinghouse, GE, RCA, and AT&T maintained such strong control over broadcasting and telecommunications in the 1920s, the Federal Trade Commission eventually filed a formal complaint with Congress declaring the four had “combined and conspired for the purpose of, and with the effect of, restraining competition and creating a monopoly in the manufacture, purchase and sale in interstate commerce of radio devices…and in domestic and transoceanic communication and broadcasting.”

It took the Justice Department to finally force a resolution to protect competition and the free exchange of ideas on the airwaves with a 1930 antitrust lawsuit against the four companies. In 1934, Congress passed the Communications Act establishing the FCC as the national regulator in charge of protecting some of the values that monopolies tend to trample.

The thing about history is that those who ignore it are bound to repeat it. Whether we are dealing with railroad robber barons, a Bell System monopoly, or barely competitive cable and phone companies, if the conditions are right to exploit customers on behalf of shareholders looking for bigger returns, companies will follow through. In the first two cases, with little chance that natural competition would bring a solution in a reasonable amount of time, regulators stepped in to restore some balance in the marketplace and protect consumers from runaway abuses. That has to happen again.

  • First, reclassify broadband as a common carrier under Title 2;
  • Second, enact strong Net Neutrality protections under that authority.

And don’t you believe that old chestnut that sensible regulatory policies will impede investment in telecommunications. Other nations that have much better broadband than we enjoy (at lower prices) already have reasonable regulatory protections in place that promote and protect competition instead of protecting incumbent market power and impeding would-be competitors. Investment in upgrades continues to pour in, further widening the gap between the kind of service we receive and what customers in other countries get for a lot less money.

The deadline for FCC comments on Net Neutrality is Sept. 15. Sending one directly is simple, effective, and will take less than five minutes.

  1. Visit fcc.gov/comments
  2. Click on the proceeding 14-28 (usually in the top three)
  3. Complete the form and type your comments in the big box. Tell the FCC you want broadband reclassified as a common carrier under Title II as a telecommunications service and that you want strong Net Neutrality policies enacted that forbid paid fast lanes and provider interference in your Internet experience.
  4. Submit the form and you are finished.
http://www.phillipdampier.com/video/Democracy Now Internet Slowdown 9-10-14.mp4

If your favorite website seems to load slowly today, take a closer look: You might be experiencing the Battle for the Net’s “Internet Slowdown,” a global day of action. The Internet won’t actually be slowing down, but many sites are placing on their homepages animated “Loading” graphics , which organizers call “the proverbial ‘spinning wheel of death,’ to symbolize what the Internet might soon look like.

Large Internet service providers, or ISPs, like Comcast, Time Warner, AT&T and Verizon, are trying to change the rules that govern the Internet. Some of the biggest companies on the Internet — Netflix, Mozilla, Kickstarter, Etsy and WordPress — are joining today’s Internet Slowdown to draw attention to Net Neutrality, the principle that service providers shouldn’t be allowed to speed up, or slow down, loading times on certain websites, such as their competitors.

This comes as 27 online advocacy groups sent a letter to Federal Communications Commission Chairman Tom Wheeler Tuesday, calling on him to take part in town hall-style public hearings on Net Neutrality before ruling on the issue as early as this year. Democracy Now’s Amy Goodman talks with Tim Karr from the group Free Press, one of the main organizers of the Internet Slowdown global day of action. (7:15)

NY Post: Imposing Conditions on Comcast-Time Warner Cable Merger Would Be Useless

comcast cartoonIf regulators believe they can turn Comcast and Time Warner Cable’s mega-merger into a consumer-friendly deal in the public interest, they are ignoring history.

No matter what conditions regulators place on Comcast to approve its merger with Time Warner Cable, they will be toothless, television industry insiders told the New York Post.

Insiders suggest the Federal Communications Commission has been largely impotent enforcing conditions it required in earlier merger deals, including those Comcast promised to fulfill in its earlier merger with NBC Universal.

Among Comcast’s broken promises cited by The Post:

  • Comcast failed to live up to its promise to market its low-cost broadband service, Sen. Al Franken (D-Minn.), an outspoken critic of the NBCU deal, told the FCC earlier this year;
  • Comcast paid a fine for not marketing A standalone $50 broadband service widely enough;
  • The giant cable provider’s hollow commitment to Net Neutrality didn’t stop it from excluding certain XFINITY video content from its data caps;
  • They discriminate against non-Comcast owned cable channels, especially those that compete with network Comcast owns or controls. Examples include The Tennis Channel and Bloomberg TV.

Industry insiders claim the larger Comcast gets, the more the company spends on clever lawyering and lobbying to keep itself out of legal hot water with Congress and regulators. That has begun to worry programmers like Discovery Communications, who filed objections to the merger deal.

Discovery officials warned the FCC Comcast’s takeover of Time Warner Cable would deliver an NSA-like treasure trove of viewer data to the nation’s biggest cable company. Comcast already monitors its customers’ viewing habits with tracking software installed inside set-top boxes that monitors what customers are watching at any given time. Comcast has refused to share that data with outsiders, and uses it primarily to pitch potential advertisers.

Comcast’s size already gives the company unprecedented power over cable programming rates during negotiations. Making the company even larger worries Discovery, which expressed concern that:

  • Comcast’s use of its bigger muscle to impose prices, terms and conditions that are overly favorable (for instance, preventing programmers from selling over-the-top rights or refusing to give competitors to its own services wide distribution);
  • The possibility that the cable giant could impose broader “most favored nation” clauses in agreements;
  • That Comcast could exercise control over national and local ad sales markets to the detriment of programers who also compete there.

Comcast Inserting Unwanted Ads On Its Customer-Hosted Wi-Fi Network

xfinity wifi peppy

(image: Ryan Singel)

Comcast has begun presenting intrusive advertising messages to users connected to any of its 3.5 million Wi-Fi hotspots nationwide, most hosted by customers paying more than $8 a month in leasing and electricity costs to provide a home for the company’s wireless gateways.

A Comcast spokesman confirmed to Ars Technica that Comcast began its ad insertions several months ago, ostensibly to alert users they are connected to an official Comcast Wi-Fi hotspot. But users report the company’s advertising messages go well beyond that, appearing about every seven minutes on every web page a customer visits. Some promote Comcast products and services, others invite customers to download the cable company’s apps. For now, they only appear on Comcast’s guest Wi-Fi network.

“We think it’s a courtesy, and it helps address some concerns that people might not be absolutely sure they’re on a hotspot from Comcast,” Comcast spokesman Charlie Douglas told Ars.

The most common ad seems to be a small banner dubbed “XFINITY Wi-Fi Peppy,” which can be closed by a user or eventually disappears on its own.

Although the ads are generally not exceptionally intrusive, often scooting across the bottom of web pages before disappearing, they are controversial because Comcast is injecting the advertising code into a third party’s website without permission.

Comcast is relying on JavaScript to insert its advertising and that has security experts concerned.

Seth Schoen, the senior staff technologist for the Electronic Frontier Foundation, told Ars the interaction of Comcast’s JavaScript with websites could “create” security vulnerabilities in websites.

“Their code, or the interaction of code with other things, could potentially create new security vulnerabilities in sites that didn’t have them,” Schoen said in a telephone interview.

Dan Kaminsky added that Comcast’s JavaScript injection has the potential to break “all sorts of stuff, in that you no longer know as a website developer precisely what code is running in browsers out there. You didn’t send it, but your customers received it.”

Although Comcast is now using its ad insertion technology only to promote its own products and services, nothing legally precludes Comcast from selling ads it could insert on any web page it wishes. Current law doesn’t give the Federal Communications Commission authority to stop the practice. Only strong Net Neutrality protections made possible by a redefinition of broadband as a communications service would grant the FCC regulatory authority to forbid Internet providers from interfering with the integrity of third-party websites.

 

FCC Chairman Complains About State of U.S. Broadband But Offers Few Meaningful Solutions

FCC chairman Thomas Wheeler doesn’t like what he sees when looks at the state of American broadband.

At a speech today given to the 1776 community in Washington, Wheeler complained about the lack of broadband competition in the United States.

“The underpinning of broadband policy today is that competition is the most effective tool for driving innovation, investment, and consumer and economic benefits,” Wheeler said. “Unfortunately, the reality we face today is that as bandwidth increases, competitive choice decreases.”

faster speed fewer competitors

“The lighter the blue, the fewer the options,” Wheeler said, gesturing towards his chart. “You get the point. The bar on the left reflects the availability of wired broadband using the FCC’s current broadband definition of 4Mbps. But let’s be clear, this is ‘yesterday’s broadband.’ Four megabits per second isn’t adequate when a single HD video delivered to home or classroom requires 5Mbps of capacity. This is why we have proposed updating the broadband speed required for universal service support to 10Mbps.”

But Wheeler added that even 10Mbps was insufficient as households increasingly add more connected devices — often six or more — to a single broadband connection.  When used concurrently, especially for online video, it is easy to consume all available bandwidth at lower broadband speeds.

Wheeler

Wheeler

Wheeler’s new informal benchmark is 25Mbps — “table stakes” in 21st century communications. About 80 percent of Americans can get 25Mbps today or better, but typically only from one provider. Wheeler wants even faster speeds than that, stating it is unacceptable that more than 40% of the country cannot get 100Mbps service. Wheeler seemed to fear that phone companies have largely given up on competing for faster broadband connections, handing a de facto monopoly to cable operators the government has left deregulated.

“It was the absence of competition that historically forced the imposition of strict government regulation in telecommunications,” Wheeler explained. “One of the consequences of such a regulated monopoly was the thwarting of the kind of innovation that competition stimulates. Today, we are buffeted by constant innovation precisely because of the policy decisions to promote competition made by the FCC and Justice Department since the 1970s and 1980s.”

Wheeler said competition between phone and cable companies used to keep broadband speeds and capacity rising.

“In order to meet the competitive threat of satellite services, cable TV companies upgraded their facilities,” Wheeler said. “When the Internet went mainstream, they found themselves in the enviable position of having greater network capacity than telephone companies. Confronted by such competition, the telcos upgraded to DSL, and in some places deployed all fiber, or fiber-and-copper networks. Cable companies further responded to this competition by improving their own broadband performance. All this investment was a very good thing. The simple lesson of history is that competition drives deployment and network innovation. That was true yesterday and it will be true tomorrow. Our challenge is to keep that competition alive and growing.”

But Wheeler admits the current state of broadband in the United States no longer reflects the fierce competition of a decade or more ago.

“Today, cable companies provide the overwhelming percentage of high-speed broadband connections in America,” Wheeler noted. “Industry observers believe cable’s advantage over DSL technologies will continue for the foreseeable future. The question with which we as Americans must wrestle is whether broadband will continue to be responsive to competitive forces in order to produce the advances that consumers and our economy increasingly demand. Looking across the broadband landscape, we can only conclude that, while competition has driven broadband deployment, it has not yet done so a way that necessarily provides competitive choices for most Americans.”

Wheeler recognized what most broadband customers have dealt with for years — a broadband duopoly for most Americans.

antimonopoly“Take a look at the chart again,” Wheeler said. “At the low end of throughput, 4Mbps and 10Mbps, the majority of Americans have a choice of only two providers. That is what economists call a “duopoly”, a marketplace that is typically characterized by less than vibrant competition. But even two “competitors” overstates the case. Counting the number of choices the consumer has on the day before their Internet service is installed does not measure their competitive alternatives the day after. Once consumers choose a broadband provider, they face high switching costs that include early termination fees, and equipment rental fees. And, if those disincentives to competition weren’t enough, the media is full of stories of consumers’ struggles to get ISPs to allow them to drop service.”

Wheeler emphasized that true competition would allow customers to change providers monthly, if a vibrant marketplace forced competitors to outdo one another. That market does not exist in American broadband today.

“At 25Mbps, there is simply no competitive choice for most Americans,” Wheeler added. “Stop and let that sink in…three-quarters of American homes have no competitive choice for the essential infrastructure for 21st century economics and democracy. Included in that is almost 20 percent who have no service at all. Things only get worse as you move to 50Mbps where 82 percent of consumers lack a choice. It’s important to understand the technical limitations of the twisted-pair copper plant on which telephone companies have relied for DSL connections. Traditional DSL is just not keeping up, and new DSL technologies, while helpful, are limited to short distances. Increasing copper’s capacity may help in clustered business parks and downtown buildings, but the signal’s rapid degradation over distance may limit the improvement’s practical applicability to change the overall competitive landscape.”

Wheeler finds little chance wireless providers will deliver any meaningful competition to wired broadband because of pricing levels and miserly data caps. Such statements are in direct conflict with a traditional industry talking point.

In a remarkable admission, Wheeler added that the only hope of competing with cable operators comes from a technology phone companies have become reluctant to deploy.

“In the end, at this moment, only fiber gives the local cable company a competitive run for its money,” Wheeler said. “Once fiber is in place, its beauty is that throughput increases are largely a matter of upgrading the electronics at both ends, something that costs much less than laying new connections.”

Wheeler also continued to recognize the urban-rural divide in broadband service and availability, but said little about how he planned to address it.

Wheeler’s answer to the broadband dilemma fell firmly in the camp of promoting competition and avoiding regulation, a policy that has been in place during the last two administrations with little success and more industry consolidation. Most of Wheeler’s specific commitments to protect and enhance competition apply to the wireless marketplace, not fixed wired broadband:

1. comcast highwayWhere competition exists, the Commission will protect it. Our effort opposing shrinking the number of nationwide wireless providers from four to three is an example. As applied to fixed networks, the Commission’s Order on tech transition experiments similarly starts with the belief that changes in network technology should not be a license to limit competition.

In short, don’t expect anymore efforts to combine T-Mobile and Sprint into a single entity. Wheeler only mentioned “nationwide wireless providers” which suggests it remains open season to acquire the dwindling number of smaller, regional carriers. Wheeler offers no meaningful benchmarks to protect consumers or prevent further consolidation in the cable and telephone business.

2. Where greater competition can exist, we will encourage it. Again, a good example comes from wireless broadband. The “reserve” spectrum in the Broadcast Incentive Auction will provide opportunities for wireless providers to gain access to important low-band spectrum that could enhance their ability to compete. Similarly, the entire Open Internet proceeding is about ensuring that the Internet remains free from barriers erected by last-mile providers. Third, where meaningful competition is not available, the Commission will work to create it. For instance, our efforts to expand the amount of unlicensed spectrum creates alternative competitive pathways. And we understand the petitions from two communities asking us to pre-empt state laws against citizen-driven broadband expansion to be in the same category, which is why we are looking at that question so closely.

Again, the specifics Wheeler offered pertain almost entirely to the wireless business. Spectrum auctions are designed to attract new competition, but the biggest buyers will almost certainly be the four current national carriers, particularly AT&T and Verizon Wireless. Although low-band spectrum will help Sprint and T-Mobile deliver better indoor service, it is unlikely to drive new market share for either. Wheeler offered no specifics on the issues of Net Neutrality or municipal broadband beyond acknowledging they are issues.

3. Incentivizing competition is a job for governments at every level. We must build on and expand the creative thinking that has gone into facilitating advanced broadband builds around the country. For example, Google Fiber’s “City Checklist” highlights the importance of timely and accurate information about and access to infrastructure, such as poles and conduit. Working together, we can implement policies at the federal, state, and local level that serve consumers by facilitating construction and encouraging competition in the broadband marketplace.

competitionMost of the policies Wheeler seeks to influence exist on the state and local level, where he has considerably less influence. Based on the overwhelming interest shown by cities clamoring to attract Google Fiber, the problems of access to utility poles and conduit are likely overstated. The bigger issue is the lack of interest by new providers to enter entrenched monopoly/duopoly markets where they face crushing capital investment costs and catcalls from incumbent providers demanding they be forced to serve every possible customer, not selectively choose individual neighborhoods to serve. Both incumbent cable and phone companies originally entered communities free from significant competition, often guaranteed a monopoly, making the burden of wired universal service more acceptable to investors. When new entrants are anticipated to capture only 14-40 percent competitive market share at best, it is much harder to convince lenders to support infrastructure and construction expenses. That is why new providers seek primarily to serve areas where there is demonstrated demand for the service.

4. Where competition cannot be expected to exist, we must shoulder the responsibility of promoting the deployment of broadband. One thing we already know is the fact that something works in New York City doesn’t mean it works in rural South Dakota. We cannot allow rural America to be behind the broadband curve. Our universal service efforts are focused on bringing better broadband to rural America by whomever steps up to the challenge – not the highest speeds all at once, but steadily to prevent the creation of a new digital divide.

Again, Wheeler offers few specifics. Current efforts by the FCC include the Connect America Fund, which is nearly entirely devoted to subsidizing rural telephone companies to build traditional DSL service into high-cost areas. Cable is rarely a competitor in these markets, but Wireless ISPs often are, and they are usually privately funded and consider government subsidized DSL expansion an unwelcome and unfair intrusion in their business.

“Since my first day as Chairman of the FCC my mantra has been consistent and concise: ‘Competition, Competition, Competition,'” said Wheeler. “As we have seen today, there is an inverse relationship between competition and the kind of broadband performance that consumers are increasingly demanding. This is not tolerable.”

Under Wheeler’s leadership, Comcast has filed a petition to assume control of Time Warner Cable, AT&T is seeking permission to buy DirecTV, Frontier Communications is acquiring the wired facilities of AT&T in Connecticut, and wireless consolidation continues. A forthcoming test of Wheeler’s willingness to back his rhetoric with action is whether he will support or reject these industry consolidating mergers and acquisitions. Wheeler’s FCC has also said little to nothing about the consumer-unfriendly practice of usage caps and usage-based billing — both growing among wired networks even as they upgrade to much-faster speeds and raise prices.

Stop the Cap!’s Letter to N.Y. Public Service Commission on Comcast/TWC Merger Deal

psctest

August 6, 2014

Hon. Kathleen H. Burgess
Secretary, Public Service Commission
Three Empire State Plaza
Albany, NY 12223-1350

Dear Ms. Burgess,

The country is watching New York to learn if our state regulators believe a merger between two unpopular cable operators is in the best interest of New York residents.

For the first time in a long time, the Public Service Commission has been empowered to provide much needed oversight over two companies that have enjoyed both deregulation and a near-monopoly across the region, particularly for High Speed Internet service at speeds above 10Mbps.

New Yorkers, like the rest of the country, consistently rank both Comcast and Time Warner Cable as some of the worst companies around.[1] The PSC has the power to facilitate franchise transfers that would effectively combine the two into one giant monolithic cable company dominating the northeastern U.S., or it can reject the proposed assignment of franchises to Comcast, letting both companies know “in the public interest” means something in New York State.

Section 222 of the New York Public Service law[2] provides the PSC with the authority to reject the application for a transfer of a franchise, any transfer of control of a franchise or certificate of confirmation, or of facilities constituting a significant part of any cable television system unless, and I paraphrase, the transfer is in the public interest.

The Commission is on record partly articulating its standard for determining the public interest. In 2013, the Commission stated several principles it considered in the matter of the acquisition of Central Hudson Gas and Electric by Fortis, Inc., to determine if the transaction would provide customers positive net benefits.[3] The Petitioners in that case were held to a standard requiring them to demonstrate the expected intrinsic benefits of the transaction exceeded its detriments and risks.

However, there are considerable differences between energy utilities and the largely deregulated marketplace for multichannel video distributors and broadband providers. While legacy telephone regulations still provide for significant oversight of this vital service, cable operators have won the right to set their own rates, service policies, and broad service areas.

Although many of us believe broadband has become an essential utility service, federal regulators do not, especially after telephone and cable companies have successfully lobbied on the federal level to weaken or eliminate regulation and oversight of television and broadband service with arguments they do business in a fiercely competitive marketplace.[4]

Regulators cannot compel cable operators to provide service in communities where they have chosen not to seek a franchise agreement, and broadband expansion programs in rural, unserved areas have largely only been successful when communities elect to construct their own broadband networks or federal funds (tax dollars and subsidies funded by ratepayers) defray the expense of last-mile networks.  While it is enticing to seek a voluntary agreement from the applicant to expand its rural service area, the public interest benefit to the relatively small number of New Yorkers getting broadband for the first time must be weighed against the interests of millions of existing subscribers in New York who are likely to see further rate increases, usage-limited broadband service, and worse service from Comcast.

New Yorkers will remain captive in most areas to choosing between one telephone and one cable company for packages of phone, television, and Internet access.[5] Promises of competition have never materialized for vast numbers of state residents, particularly those upstate who have been left behind after Verizon ceased its FiOS fiber to the home expansion project.

Unless Comcast was compelled to wire the entire state, any proposal seeking a voluntary agreement to expand Comcast’s service area in New York is likely to be insufficient to solve the pervasive problem of rural broadband availability. It would also saddle millions of New Yorkers with a company unwelcomed by consumers, with no alternative choice.

As you will see in our filing, Comcast has often promised improvements it planned to offer anyway, but held back to offer as a “concession” to regulators.

The result of past deals is one monopolistic cable operator is replaced by another, and as the American Consumer Satisfaction Index reported, bigger is not better for consumers.[6]

The nation’s two largest cable operators, Comcast and Time Warner Cable, now seek further “value creation” for their already very profitable businesses by merging.[7]

News reports indicate further consolidation is likely in the telecommunications marketplace, largely in response to this merger proposal. Soon after Comcast made its announcement, AT&T announced its desire to acquire DirecTV,[8] and Charter Communications’ efforts to bolster its size are likely to be realized acquiring Time Warner Cable customers cast off as part of the Comcast-Time Warner Cable transaction.[9]

How does this benefit New Yorkers? In our attached statement, we go far beyond the testimony offered by Comcast’s representative at the public information meeting we attended in Buffalo. It is vital for any merger review to include a careful analysis of exactly what Comcast is proposing to offer New York. But it is even more important to consider the costs of these improvements. As you will see, many of the promised upgrades come at a steep price – set top box platforms that require a $99 installation fee, the prospect faster broadband speeds will be tempered by broadband usage limits and usage penalties largely unfamiliar to New Yorkers, and other technology upgrades that are accompanied by subscriber inconvenience and added costs.

Comcast’s promised commitments for customers must also be carefully weighed against what it promised shareholders. While Comcast claims it will spend millions to upgrade acquired Time Warner Cable systems (many already being upgraded by Time Warner Cable itself), the merger announcement includes unprecedented bonus and golden parachute packages for the outgoing executives at Time Warner Cable, including a $78 million bonus for Time Warner Cable CEO Rob Marcus, announced less than 60 days after taking the helm.[10] Comcast’s biggest investment of all will be on behalf of its shareholders, who will benefit from an estimated $17 billion share repurchase plan.[11]

The PSC should be aware that previous efforts to mitigate the bad behavior of cable companies have nearly always failed to protect consumers.

Professor John E. Kwoka, Jr., in his study, “Does Merger Control Work? A Retrospective on U.S. Enforcement Actions and Merger Outcomes,[12]” found past attempts at behavioral remedies spectacularly failed to protect against rapacious rate increases after  mergers are approved.[13]

In short, it is our contention that this merger proposal offers few, if any benefits to New York residents and is not in the public interest even if modestly modified by regulators.

The implications of this transaction are enormous and will directly impact the lives of most New Yorkers, particularly for broadband, now deemed by the industry (and consumers) its most important product.[14]

We have attached a more detailed analysis of our objections to this proposal and we urge the New York Public Service Commission to recognize this transaction does not come close to meeting the public interest test and must therefore be rejected.

 

Yours very truly,

 

Phillip M. Dampier

[1]http://arstechnica.com/business/2014/05/comcast-time-warner-cable-still-have-the-angriest-customers-survey-finds/
[2]http://codes.lp.findlaw.com/nycode/PBS/11/222
[3]http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={A55ECCE9-C3B2-4076-A934-4F65AA7E79D1}
[4]http://www.mi-natoa.org/pdfs/The_Ten_Disappointments_of_Cable.pdf
[5]http://www.newyorker.com/news/daily-comment/we-need-real-competition-not-a-cable-internet-monopoly
[6]http://www.theacsi.org/component/content/article/30-commentary-category/179-acsi-quarterly-commentaries-q1-2008
[7]http://corporate.comcast.com/images/Transaction-Fact-Sheet-2-13-14.pdf
[8]http://www.usatoday.com/story/money/business/2014/05/13/att-directv-deal-analysis/9044491/
[9]http://www.reuters.com/article/2014/04/28/us-charter-communi-comcast-idUSBREA3R0N620140428
[10]http://money.cnn.com/2014/03/21/news/companies/time-warner-cable-golden-parachute/
[11]http://www.cleveland.com/business/index.ssf/2014/02/comcast_agrees_to_purchase_of.html
[12]John E. Kwoka, Jr., “Does Merger Control Work? A Retrospective on U.S. Enforcement Actions and
Merger Outcomes,” 78 Antitrust L.J 619 (2013)
[13]7 John E. Kwoka, Jr. and Diana L. Moss, “Behavioral Merger Remedies: Evaluation and Implications for
Antitrust Enforcement,” at 22, available at
http://antitrustinstitute.org/sites/default/files/AAI_wp_behavioral%20remedies_final.pdf
[14]http://online.wsj.com/news/articles/SB10001424052702303657404576359671078105148

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