[Ed. Note: New York’s DPS and PSC in this instance are synonymous.]

Stop the Cap! agrees with the DPS staff’s conclusion that the petitioners (Comcast and Time Warner Cable) have failed to meet their burden of demonstrating that the transaction is in the public interest for New York residents.

However, we are concerned that the proposed mitigation strategies suggested by DPS staff are insufficient to remedy this. We also challenge some of the assigned values placed on Comcast’s “benefits” to produce a net positive for New Yorkers because the DPS staff is relying on incomplete information in assigning values and not accounting for additional costs that will be incurred by Comcast customers.

First, the Commission must be aware that previous attempts to impose behavioral remedies on these types of mergers to generate net positive benefits have traditionally failed to protect consumers after the merger deals are approved. Professor John E. Kwoka, Jr., in his study, “Does Merger Control Work? A Retrospective on U.S. Enforcement Actions and Merger Outcomes,” [2] found numerous examples of mitigation strategies and conditional approvals that ultimately failed to protect ratepayers from the effects of a concentrated marketplace. Few businesses in New York are as concentrated as this state’s cable companies.[3]

Second, the DPS staff’s proposal that Comcast provide at least $303.5 million in incremental benefits to New York residents over the next ten years to realize our state’s share of benefits from the proposed transaction ignores Comcast’s ability to recapture those benefits through relentless rate increases, well in excess of the cost of providing the service.

The DPS staff has also elected to rely on the Federal Communications Commission to mandate conditions to mitigate potential risks of vertical market power. That is unwise and effectively forfeits the authority given to the Commission by the New York State legislature to protect the public interest of New York residents. The FCC does not have that responsibility.

Specific Objections and Concerns Regarding DPS Staff Recommendations to Create Public Benefits

1. Investment

The staff has recommended that the combined entity must demonstrate a commitment to make new investments or invest beyond Time Warner’s current capital investment budgets.

The problem with this formula is that ordinary planned investments as part of creating new revenue-generating opportunities can be claimed as “extra investments” for the benefit of New Yorkers, despite the fact those investments would have been made with or without an agreement compelling the investment. It also ignores the impact New York cable subscribers care about the most – their rising monthly bill.

Comcast blames those rate increases partly on the cost of increased investment. In Portland, Ore. Comcast spokeswoman Theressa Dulaney blamed annual rate hikes partly on precisely the type of investments the DPS staff declares would be a net benefit to New Yorkers.

“We continue making investments in our network and next-generation technology to make enhancements customers want and value, including faster Internet speeds, more multiplatform video and better customer service,” Dulaney said in a written statement.[4]

Comcast has asserted it will increase capital spending to improve service for Time Warner Cable customers, but continues to ignore the fact Time Warner Cable’s own upgrade program meets or surpasses Comcast’s own menu of services often at a lower cost. New Yorkers will not benefit if Comcast’s investments yield only incrementally better technology, but at a significantly higher cost and a worse customer service experience. The Commission should at a minimum establish Time Warner Cable’s Maxx service and pricing as a benchmark when comparing the products and services of the two companies and demand Comcast do better.

2. Cable television “enhancements”

The DPS staff is correct to express skepticism about the relative benefits of Comcast’s expanded TV offerings, but then proceeds to declare the expanded programming an “incremental benefit for New York customers.”

While the DPS staff seems willing to grant Comcast credit for service improvements, it seems to lack a willingness to “deduct points” when Comcast’s improvements come at a significantly higher price and does not consider the implications of Comcast’s current market testing of broadband usage control measures like data caps/thresholds will have on Time Warner Cable customers.

The DPS staff must take care not to assign a dollar amount of an incremental benefit in Comcast’s column, but not be willing to deduct or transfer those dollars back to the column representing New York residents faced with higher prices, service restrictions, or dramatically worse customer service.

For example, Comcast’s touted television enhancements promise what Americans have said they absolutely do not want – a bigger cable TV package and a growing cable television bill. According to the Washington Post, in 2012 U.S. cable subscribers got a record average of 189 channels in prepackaged bundles but watched only 17 of those channels.[5] And the appetite to view more channels, even when offered vastly more television content, hasn’t changed much in years. In five years, cable companies added 60 more channels for the typical subscriber, but viewers haven’t increased their consumption of new content. They have consistently watched an average of 17 channels.

But their cable television bill has dramatically increased. In Oregon, Comcast cable customers paid $41.55 a month for Comcast’s “Digital Starter” package in 2004. In 2013, the price increased to $70.49.[6]

A-la-carte cable television is definitely not on the menu, despite consumer interest in paying only for the channels one wishes to receive.

As we noted in our previous filing[7], there are a range of other costs the DPS staff is not counting in its calculations:

• A transition to all-digital cable television imposes added consumer costs from required set top boxes or ancillary digital boxes that can manage Comcast’s encrypted television lineup. These costs start at $25 a year in additional outlet fees per connected television, or $75 if an average household’s three television sets are connected to cable;
• Comcast’s much-heralded X1 set top platform, a hallmark of its filing with New York regulators, includes an upgrade fee of up to $99 for the equipment – more than the cost of an entire month of cable television service;
• Comcast’s current market trials of “usage thresholds” which place an allowance on how much a subscriber can use the Internet before overlimit fees are charged applies to XFINITY on-demand video when a tablet, phone, or home computer is used to watch. Although Comcast’s online viewing options may be more plentiful, customers in these market trial areas have discovered a double-edged sword when online viewing erodes away their monthly Internet usage allowance.

Unfortunately, none of these additional costs or limits that could or are likely to be incurred by New York subscribers are accounted for in the DPS staff recommendations.

3. Enhanced Wi-Fi Hotspot Deployment

DPS staff seems unaware the vast majority of Comcast’s Wi-Fi hotspot deployments come from Comcast residential customers sharing their Comcast-supplied network device with other Comcast customers. Comcast charges $8-9 a month to lease its wireless gateway that provisions an extra Wi-Fi signal available to guest users. But customers carry almost all of the costs –indefinite lease charges, installation, ongoing power use, and any potential security lapses.[8]

4. DPS Staff Wrongly Offers Consumer Benefit Credits to Comcast for Improving Customer Service

We strongly disagree with the DPS staff proposal to credit an overall consumer value of $50 million in return for Comcast’s commitment to improve its perennially terrible customer service rating.

Comcast’s well-documented poor customer service record alone should be sufficient to demonstrate this merger in not in the public interest of New York. Crediting $50 million in consumer value if Comcast agrees to adhere to a customer service standard any company should meet as a normal cost of doing business is unacceptable.

Under the new Public Service Law, it is Comcast alone that must demonstrate its proposal is in the public interest. The DPS staff has determined it has not met that burden. This is an unfortunate example of DPS staff showing a willingness to tolerate Comcast’s current unacceptable customer service performance and transfer a portion of the consumer benefit credit New Yorkers should enjoy as a result of the merger just to cajole Comcast to meet minimal customer service standards sometime in the future.

Comcast should arrive in New York demonstrating a solid record of customer service before being granted approval of this transaction. It is not in the public interest to subject (even if temporarily) New York residents to an even worse customer service experience than they currently receive from Time Warner Cable. We are concerned about the appearance that DPS staff is offering mitigation strategies to Comcast to help it squeeze past a public interest test it has currently failed in their view.

The DPS staff has also provided no details about its proposed public benefit program. Since customers are the ones that will suffer as a result of bad customer service, any funds captured by New York from Comcast should be rebated in full to New York customers, not for any other purpose.

Comcast executives have made two public statements that should also be weighed carefully in any recommendations to the Public Service Commission:

• Comcast executive vice president David Cohen has predicted usage allowances will be imposed on all Comcast customers within five years.[9]
• “We’re certainly not promising that customer bills are going to go down or even increase less rapidly.”[10] Comcast executive vice president David Cohen

[1] http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={0A5EAC88-6AB7-4F79-862C-B6C6B6D2E4ED}

[2] 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

[3] John E. Kwoka, Jr., “Does Merger Control Work? A Retrospective on U.S. Enforcement Actions and Merger Outcomes,” 78 Antitrust L.J 619 (2013)

[4] http://www.oregonlive.com/silicon-forest/index.ssf/2013/08/comcast_cable_tv_rates_going_u.html

[5] http://www.washingtonpost.com/blogs/the-switch/wp/2014/05/07/cables-forced-bundles-are-getting-fatter-but-no-one-is-watching-more-channels/

[6] http://www.oregonlive.com/silicon-forest/index.ssf/2013/08/comcast_cable_tv_rates_going_u.html

[7] http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={C6D8225D-7E82-4756-A715-AF9CC6CB76A5}

[8] https://arstechnica.com/information-technology/2014/06/comcast-raises-your-electric-bill-by-turning-router-into-a-public-hotspot/

[9]https://techcrunch.com/2014/05/14/comcast-wants-to-put-data-caps-on-all-customers-within-5-years/

[10] https://arstechnica.com/tech-policy/2014/02/comcast-no-promise-that-prices-will-go-down-or-even-increase-less-rapidly/

Stop the Cap! completed and today filed a formal submission with the Federal Communications Commission opposing the merger of Time Warner Cable and Comcast.

We joined tens of thousands of filers — mostly consumers — strongly opposed to the merger on the grounds it is not in the public interest.

Earlier today, Consumers Union filed its petition with more than 20,000 signatures of ordinary Americans across the United States who want nothing to do with Comcast.

Back here in New York, Comcast this afternoon filed a response with the Public Service Commission regarding our (and other) submissions opposed to the merger. We will be analyzing and rebutting their response straight away. Comcast went all-out name-dropping people and groups (many with direct, usually undisclosed financial ties to Comcast) to sell New York regulators the theory ‘the groups and people who matter’ are in favor of their merger while those opposed are mostly out-of-state rabble or unsubstantial individuals of few words.

“Given these many concrete benefits, and the lack of any harm to competition or consumers, it should come as no surprise that the overwhelming majority of the substantive comments (approximately 110 out of a total of about 140 substantive comments) filed in this proceeding support Commission approval of the transaction,” writes Comcast.

Comcast did not share their subjective standard of what constitutes “substantive” but a quick review of the groups cited in Comcast’s response show some substantive was involved – a check from Comcast either recently or in the past. Our view is that it doesn’t take more than a sentence to express extreme displeasure about Comcast taking over Time Warner Cable, and those views should matter just as much as a virtual Hallmark card from a group or politician that used a Comcast-provided “template” with a detachable check at the bottom.

Our favorite was Comcast’s highly defensive ‘hey New York PSC, it’s none of your business that Comcast is testing usage caps and you cannot use it against us’:

The Writers Guild of America, West, Inc. (“WGAW”), Zephyr Teachout and Tim Wu, and Stop the Cap! argue that Comcast will extend data caps and usage-based pricing to New York to impose restraints on online content and drive up consumer costs.

This broadband-related claim is irrelevant to this proceeding and beyond the Commission’s jurisdiction. Indeed, the FCC expressly approved of usage-based billing in its 2010 Open Internet Order and is again examining the issue in the pending Open Internet rulemaking.

In other words, whether data caps are appropriate is a matter of federal regulatory concern, not one that relates to this proceeding or that is even transaction specific (since nothing precludes TWC from adopting caps at any time, as it has in the past).

So regardless of whether data caps are in the public interest or not, New York should not be allowed to weigh in because former FCC chairman Julius Genachowski said usage based billing could be an innovative way to bill for broadband.

In reality, New York can decide for itself what is in the best interests of its residents, and Time Warner Cable determined what was best after a two-week firestorm in 2009 that taught them compulsory usage caps were a really bad idea. But Comcast isn’t terribly interested in the views of the unsubstantive masses — which is comparable to their attitude toward customers, so no change there. It’s just a free preview weekend of what we all have in store if Comcast takes over.

If this is the best Sprint’s Marcelo Claure can do, Softbank needs to keep shopping for another CEO.

Claure’s decision to deep-six the appallingly stupid Framily Plan was a no-brainer. Sprint’s own customer service agents barely understood the multi-level marketing scheme it actually was, and I never saw much value in alienating friends and family by cajoling them to use the atrociously bad Sprint network. Neither did Sprint employees who loudly cheered its upcoming demise.

Even Claure trashed Sprint’s network performance and upgrade program as glacier-slow and highly disruptive to customers who find nearby cell sites here today, gone tomorrow, and maybe back again someday when network upgrades have been finished. Unlike AT&T or Verizon where a cell tower outage might cut a few bars of signal strength, when a Sprint cell tower drops, it’s roaming time. It is not uncommon for residents along Lake Ontario’s shorelines in the United States to find their phones preferring to roam on Canadian networks (especially Rogers) to avoid Sprint.

Claure’s commitment to cut prices while cruelly excluding your current customer base from getting any of those savings is a sure-fire way to accelerate their departure… mostly to T-Mobile. John Legere is waiting with open arms.

Sprint doesn’t need to just cut prices, it needs to butcher them, and fast. Sprint’s loyal customers have been promised a lot since the company unveiled its Network Vision upgrade plan during the French Revolution of 1789. The Bastille might still be standing today had Sprint slapped a working 4G LTE antenna on top of it. But alas, let them suffer with Sprint 3G, declared Dan Hesse, on a network so bad that throttled customers in heavy-use prison actually saw their speeds rise. Some customers in western New York simply turn Sprint 3G data off to save the battery.

When Sprint 4G LTE finally did arrive in western New York (illogically first in rural communities like the stiflingly-dull town of Dansville), many barely noticed because Sprint’s backhaul connection between the cell tower and Sprint’s data network often stayed the same — congested and slow.

Although T-Mobile’s coverage is not that different from Sprint, its network upgrades are.

T-Mobile CEO John Legere has confidently pushed Sprint around over its newest plan, but if it does start to eat into T-Mobile’s business, Legere will no doubt respond with some new plans of his own. For current Sprint customers, T-Mobile is definitely the upgrade Sprint has promised for at least five years, and should be considered at contract renewal time. But current Verizon and AT&T customers paying Cadillac pricing should not be expected to switch to Sprint after recalling dropped calls in a store, home or in an emergency on Sprint’s less robust network. They are very unlikely to change carriers no matter what shade of lipstick Sprint applies to its plans.

Claure has the right idea — slash prices and actually deliver on promises of a better network going forward, but those commitments deserve to apply to both existing and new customers. So far Claure has managed to inflict only superficial wounds. The price cuts must go much deeper to attract business from customers of the larger carriers willing to compromise for the right price and upgrades have to be real and delivered immediately.

Sprint still doesn’t understand it cannot charge Honda Accord prices on a Chevy Spark network. Until they do, T-Mobile is likely to continue taking them to school.

 

News that Assemblyman Joe Morelle cut and pasted the majority of his letter to New York regulators directly from a Comcast press release and executive testimony before Congress has begun to create some problems for the assemblyman and his office.

The story has been picked up by a Rochester television station, two New York newspapers and the National Journal (so far). We have now learned that Assemblyman Morelle also cashed a $1,000 campaign contribution check from Comcast earlier this year.

In response to our story, the assemblyman’s office today issued a litany of excuses about why it now fronts for Comcast, none of them particularly convincing. In fact, the damage control effort may actually be making the problems for Mr. Morelle and Comcast worse:

WROC-TV:

Sean Hart, said Comcast approached the assemblyman for his support. “They provided a draft letter of support for our consideration. We made several edits of the letter. This is common practice for any organization asking for an elected official’s support to provide a sample letter.”

Comcast is not an “organization.” It is a multi-billion dollar telecommunications and entertainment conglomerate. We are grateful to have confirmation that Comcast is sending out “templates” to elected officials with talking points already prepared and ready to go. The only issue is whether an elected official will steer clear of promoting giant corporate merger deals they don’t understand (and Mr. Morelle clearly does not have a clue.)

Did Mr. Morelle consult with his own constituents before deciding to tote water for Comcast? Not that we are aware of. Even the Public Service Commission’s own staff recognizes the overwhelming majority of New Yorkers communicating with them on this issue (nearly 3,000 and counting), are vehemently opposed to the deal. Many have past personal experiences dealing with Comcast, and they don’t have the benefit of a $1,000 check from the cable company to give them warm feelings of goodwill.

Although it may be common practice for a company to do this kind of advocacy work, it is not common for most elected officials to barely rewrite the company’s own press releases and executive testimony. Out of thousands of elected officials in New York, only a dozen or so have weighed in with the PSC on this issue.

Our favorite attempt at damage control came from Mr. Hart’s comments to The Journal News:

“It is common practice for an organization seeking support to provide a sample letter with suggested language,” Hart wrote. “I am certain if you were to review letters of support for any number of projects/causes submitted by elected officials, at every level of government, you would find that many opt to extract language from a sample letter provided to them.”

Hart rejected the suggestion that Morelle plagiarized the Comcast and Time Warner executives’ testimony, as suggested by Stop the Cap. The letter to the Public Service Commission was signed by Morelle and printed on official Assembly letterhead.

“I realize I probably do not need to point this out to a journalist, but the definition of plagiarism is ‘an act or instance of using or closely imitating the language and thoughts of another author without authorization and the representation of that author’s work as one’s own,'” Hart wrote. “Morelle has authorization from Comcast to use the language included in his letter to the NYSPSC.”

He continued: “It is one thing to disagree with the Majority Leader’s opinion. It is another to make outlandish claims that lack merit.”

We have reviewed over 8,000 comments filed with regulators on the state and national level since 2008. We have rarely encountered a cut and paste job as obvious as Mr. Morelle’s letter. When you review as many filings as we do, when talking points are quoted word for word, it stands out because we have heard them from Comcast again and again.

Mr. Hart does not help Mr. Morelle’s cause defending the fact he had Comcast’s permission to cut and paste their press releases in comments sent on the Majority Leader’s letterhead and signed by him personally. Comcast could and should have co-signed it. The fact that it happened at all should ring alarm bells for any voter, particularly those who don’t appreciate an elected official inviting America’s most-hated cable company into New York State.

As for the matter of plagiarism, perhaps we missed the part where Mr. Morelle made sure to credit the source for his testimonial. Oh wait, we didn’t. It wasn’t in there. Would Mr. Hart’s excuses fly by your college professor after being caught cutting and pasting someone else’s words in a paper you ostensibly wrote without any attribution?

Maybe we were wrong, so we decided to run Mr. Morelle’s letter through an online plagiarism checker to see what it thought.

Uh oh: Grammarly not only fired off a warning, but a full-scale “!” plagiarism alert, even after we discounted our own (and others) coverage of the story, which also quotes from his letter.

If Mr. Hart wants to attack us for exposing the sordid affair, we’re fine with that. We’re tough and can take it. He’ll find few (unpaid) defenders of Comcast to stand with the assemblyman.

Frankly, the only “outlandish claims that lack merit” are Comcast’s promises for New York. If Mr. Morelle is that comfortable extending his own credibility to vouch for Comcast, we’ll still be around to remind his constituents the promised dreams of better days inevitably devolved into a consumer nightmare, just as it has in Comcast’s primary service areas. Voters should know Comcast has Joe Morelle’s full and unwavering support.

The best damage control? Rescind the letter. All will be forgiven. Mr. Morelle won’t be the first (or last) elected official suffering collateral damage from Comcast.

New York State Assembly Leader Joe Morelle (D-Rochester) plagiarized large sections of a Comcast press release and the Congressional testimony of Comcast’s executive vice president David Cohen in a letter sent to the New York Public Service Commission endorsing the cable company’s bid to merge with Time Warner Cable.

Morelle evidently ignored or was unaware of his constituents’ overwhelming opposition to the merger deal and seemed unfazed about Comcast’s long record of dreadful customer service, constant rate increases, and the company’s plan to reimplement usage limits on consumer broadband accounts. Morelle simply cut and pasted Comcast’s own words in his letter about the merger, as we illustrate below:

 

N.Y. State Assembly Leader Joe Morelle: “The combination of Comcast and Time Warner Cable will create a world-class communications, media and technology company to help meet the increasing consumer demand for advanced digital services on multiple devices in homes, workplaces and on-the-go.”

David Cohen, executive vice-president, Comcast: “The combination of Comcast and TWC will create a world-class communications, media, and technology company to help meet the insatiable consumer demand for advanced digital services on multiple devices in homes, workplaces, and on-the-go.”

 

Joe Morelle: “Comcast has a proven record of investing in new technologies, facilities and customer support to provide the best in broadband Internet access, video and digital voice services.”

David Cohen: “Comcast has a proven record of investing in new technologies, facilities, and customer support to provide the best in broadband Internet access, video, and digital voice services.”

 

Joe Morelle: “Similarly, TWC has made significant strides in offering a diverse array of video, broadband, and voice services to its customers.”

David Cohen: “Similarly, TWC has made significant strides in offering a diverse array of video, broadband, and voice services to its customers.”

 

Joe Morelle: “Combining the two companies’ complementary strengths will accelerate the deployment of next-generation broadband Internet, video and voice services across the new company’s footprint.”

David Cohen: “Combining the two companies’ complementary strengths will accelerate the deployment of next-generation broadband Internet, video, and voice services across the new company’s footprint.”

 

Joe Morelle: “Residential customers will benefit from technological innovations including a superior video experience, higher broadband speeds and the fastest in-home Wi-Fi, while also generating significant cost savings and other efficiencies.”

Comcast Press Release: “Through this merger, more American consumers will benefit from technological innovations, including a superior video experience, higher broadband speeds, and the fastest in-home Wi-Fi. The transaction also will generate significant cost savings and other efficiencies.”

 

Joe Morelle: “In just two-and-a-half years, over 350,000 families, representing approximately 1.4 million low-income consumers, have been connected to the Internet thanks to this program. This proposed merger would extend this vital program to many more low-income households in New York by providing access to it in certain areas of the state currently only served by Time Warner.

David Cohen: “In just two and a half years, over 300,000 families, representing some 1.2 million low-income consumers, have been connected to the transformative power of the Internet thanks to this program. The transaction will extend this vital program to millions more Americans in the areas currently served by TWC.”