Copps

A Statement from FCC Commissioner Michael Copps: The Lone Dissenter in Today’s 4-1 Decision Approving the Merger of Comcast and NBC-Universal:

Comcast’s acquisition of NBC Universal is a transaction like no other that has come before this Commission—ever. It reaches into virtually every corner of our media and digital landscapes and will affect every citizen in the land. It is new media as well as old; it is news and information as well as sports and entertainment; it is distribution as well as content. And it confers too much power in one company’s hands.

For any transaction that comes before this Commission, our statutory obligation is to weigh the promised benefits against the potential harms so as to determine whether the public interest is being served. There are many potential harms attending this transaction—even the majority recognizes them. But all the majority’s efforts—diligent though they were—to ameliorate these harms cannot mask the truth that this Comcast-NBCU joint venture grievously fails the public interest. I searched in vain for the benefits. I could find little more than such touted gains as “the elimination of double marginalization.” Pardon me, but a deal of this size should be expected to yield more than the limited benefits cited. I understand that economies and efficiencies could accrue to the combined Comcast-NBCU venture, but look a little further into the decision and you will find that any such savings will not necessarily be passed on to consumers. When they tell you that at the outset, don’t look for lower cable or Internet access bills. As companies combine and consolidate, consumers have seen their cable bills out-strip the Consumer Price Index by orders of magnitude.

Many of the new commitments that have been added aim no higher than maintaining the status quo. The status quo is not serving the public interest.

It is also claimed that the duration of the commitments made by Comcast-NBCU are longer than any that have been attached to previously-approved mergers. That may be true—but it is also true that power is patient and that big businesses can bide their time when they have to in order to reap the fullest harvest.

While approval of this transaction was from its announcement the steepest of climbs for me, given my long-standing opposition to the outrageous media consolidation this country has experienced over the past few decades, I did meet with stakeholders on all sides to make sure I understood their perspectives on the matter. And I worked to develop ideas to minimize the harms and to advance at least some positive public interest benefits. I know my colleagues worked assiduously on this proceeding, too.

Commissioner Clyburn, for example, worked successfully to achieve commitments from Comcast-NBCU to improve diversity, expand broadband deployment in unserved areas and increase broadband adoption by low-income households. The Chairman and his team, led by John Flynn, and many, many other members of the FCC team put more effort into this transaction than I have seen put into any transaction during my nearly ten years here at the Commission. I also salute the unprecedented cooperation between the agency and the Department of Justice.

Comcast's Online Toll Plaza

But at the end of the day, the public interest requires more—much more—than it is receiving. The Comcast-NBCU joint venture opens the door to the cable-ization of the open Internet. The potential for walled gardens, toll booths, content prioritization, access fees to reach end users, and a stake in the heart of independent content production is now very real.

As for the future of America’s news and journalism, I see nothing in this deal to address the fundamental damage that has been inflicted by years of outrageous consolidation and newsroom cuts. Investigative journalism is not even a shell of its former self. All of this means it’s more difficult for citizens to hold the powerful accountable. It means thousands of stories go unwritten. It means we never hear about untold instances of business corruption, political graft and other chicanery; it also means we don’t hear enough about all the good things taking place in our country every day.

The slight tip of the hat that the applicants have made toward some very limited support of local media projects does not even begin to address the core of the problem. Given that this merger will make the joint venture a steward of the public’s airwaves as a broadcast licensee, I asked for a major commitment of its resources to beef up the news operation at NBC. That request was not taken seriously. Increasing the quantity of news by adding hours of programming is no substitute for improving the quality of news by devoting the necessary resources. Make no mistake: what is at stake here is the infrastructure for our national conversation—the very lifeblood of American democracy.

We should be moving in precisely the opposite direction of what this Commission approves today.

There are many other facets of the joint venture that trouble me. I worry, for example, about the future of our public broadcast stations. Comcast-NBCU has committed to carry the signals of any of those stations that agree to relinquish the spectrum they are presently using. Will public television no longer be available to over-the-air viewers? And, what happens when the duration of this commitment has run its course? Might the public station be dropped to make room for yet more infotainment programming? In too many communities, the public television station is the last locally owned and operated media outlet left. Public television is miles ahead of everyone else in making productive, public interest use of the digital multi-cast spectrum licensed to it.

Why in the world would we gamble with its future?

While the item before the Commission improves measurably on the program access, program carriage and online video provisions originally offered by the applicants, I believe loopholes remain that will allow Comcast-NBCU to unduly pressure both distributors, especially small cable companies, and content producers who sit across the table from the newly-consolidated company during high-stakes business negotiations for programming and carriage. Even when negotiations are successful between the companies, consumers can still expect to see high prices get passed along to them, as Comcast-NBCU remains free to bundle less popular programming with must-have marquee programming. Given the market power that Comcast-NBCU will have at the close of this deal over both programming content and the means of distribution, consumers should be rightfully worried.

In sum, this is simply too much, too big, too powerful, too lacking in benefits for American consumers and citizens. I have respect for the business acumen of the applicants, and have no doubts that they will strive to make Comcast-NBCU a financial success. But simply blessing business deals is not the FCC’s statutorily-mandated job.  Our job is to determine whether the record here demonstrates that this new media giant will serve the public interest. While I welcome the improvements made to the original terms, at the end of the day this transaction is a huge boost for media industry (and digital industry) consolidation. It puts new media on a road traditional media should never have taken. It further erodes diversity, localism and competition—the three essential pillars of the public interest standard mandated by law. I would be true to neither the statute nor to everything I have fought for here at the Commission over the past decade if I did not dissent from what I consider to be a damaging and potentially dangerous deal.

Does today's decision assure the birth of Comzilla, ready to destroy anything or anyone in its path, or is it the next colossal big media deal flop worthy of AOL-Time Warner?

The wedding of Comcast and NBC-Universal was given the blessings of two federal agencies today that all but seals the multi-billion dollar deal.

In a 4-1 decision, the Federal Communications Commission approved the merger.  It’s chairman, Julius Genachowski, claimed it would ultimately be good for consumers as the company promised to add at least 1,000 hours of news and information programming and a new ultra-budget “lifeline” broadband tier priced at $9.95 per month for low-income families.

The lone dissenter, Democratic commissioner Michael Copps, rejected notions that a combined company the size of Comcast, which controls more than a quarter of all cable subscribers, and NBC-Universal, a major media company, would deliver anything to consumers.

“It’s too big. It’s too powerful. It’s too lacking in benefits for American consumers,” Copps said after the FCC vote to approve the merger. “And it continues us down a road of consolidation we’ve been on for a couple of decades now.  And the most threatening part about it is that this is not just traditional media, but it’s new media, too. It touches just about every aspect of our media environment.”

National Public Radio’s ‘All Things Considered’ gave measured coverage to today’s Comcast-NBC merger developments, and how it will impact consumers. (3 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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Indeed the combined Comcast-NBC will own or control one of every seven television channels and networks seen by Americans.  Copps worries that kind of media concentration is sure to reduce diversity in programming and on-air voices.

Even worse, some analysts predict the merger could trigger a new wave of media consolidation as other players try to maintain their positions in the media marketplace.  Second-place Time Warner Cable could begin looking for merger opportunities with smaller cable companies, such as Cox, for example.

Just about an hour after the FCC gave approval, the Justice Department and five states’ Attorney General announced a tentative settlement that could resolve concerns that the transaction was anti-competitive.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/WNYW New York Comcast FCC Approval 1-18-11.flv[/flv]

WNYW-TV in New York reported on today’s merger decision and explained how Comcast customers, and online video fans, could be impacted.  (3 minutes)

The Terms & Conditions

Two different federal agencies insisted on Comcast’s agreement to several terms and conditions before agreeing to the deal.  Many of them presented no problem for Comcast, who had voluntarily agreed to several of them early on in negotiations.  But the Justice Department delivered one of the strongest conditions, and a first for online video protection — it insisted the new combined entity of Comcast-NBC bow out of its voting rights in Hulu, the online video service.

√ No Playing Favorites: Comcast has to agree that if it carries its own news and business channels, it has to include competitors on the same tier.

Since Comcast-NBC has ownership interests in so many news, sports, and weather channels, making space for the competition was considered crucial by federal regulators.  The cable company can’t bury its competitors in Channel Siberia, or stick them on “digital tiers” that are priced higher than standard cable service.  Who wins?  Bloomberg News, rarely found even by cable viewers who go looking, and the very low-rated Fox Business Channel, which can’t attract 30,000 viewers on a good day.  Both will find prominent positions on Comcast Cable going forward, even if nobody watches.

√ Cheap Internet Access for Qualified Families: Comcast has agreed to provide a “lifeline” broadband service, but only for families pre-qualified by federal eligibility for free school lunches.

No word on what speeds these customers will receive, and Comcast estimates the program will barely make a dent in its bottom line.  It is expected to reach only around 400,000 homes nationwide, and only as long as those subscribers remain eligible under federal guidelines.  No free lunch for broadband.

√ Standalone Internet Service Must Be Provided: Comcast must sell at least a 6Mbps broadband plan without cable or telephone service for $49.99 a month for three years.

Since Comcast already routinely sells standalone broadband service to customers at around this price, this was hardly a concession.  Comcast can still pile on extra fees, such as their overpriced cable modem rental, and any other charges that could be mandated by federal, state, or local government in the future.  They can also keep their usage caps.

√ Comcast must agree to the FCC’s Homeopathic Net Neutrality Rules:  Comcast has to agree to the FCC’s heavily-watered down definition of Net Neutrality… the ones Comcast itself suggested.

Since the FCC largely caved-in to Big Telecom’s lobbying against Net Neutrality, Comcast’s agreement to adhere to what the FCC calls Net Neutrality won’t present any problems, because those terms were similar to what Comcast had asked for all along.  Their “digital phone” service is exempted, which means Comcast can “manage” competing Voice Over IP services at its pleasure.

√ Evidence That PBS Has A Lobbyist, Too — Special Favors for Public Broadcasting: Public television stations win carriage protection from Comcast “for several years.”

In an effort to free spectrum, PBS stations could be pressured to give back some channels or reduce their transmitter power to free up UHF frequencies for more wireless broadband.  Should this happen, Comcast has agreed to keep those stations on their cable systems as if nothing changed at all.  It assures stations that even if their broadcast coverage areas are reduced, their cable carriage will stay the same.

√ Binding Arbitration Comes to Buyers of Comcast-owned Networks:  If a cable system or other provider runs into trouble getting an agreement with Comcast, the FCC offers help.

To protect other cable systems, telco-TV, and satellite companies from uncompetitive pricing or access blockades to Comcast-controlled networks, the cable company agrees to come to the table and submit to binding arbitration over carriage disputes.  Unfortunately for Comcast subscribers, the cable giant can’t force broadcasters or other cable networks to the same table to settle their own carriage wars.

√ Online Access to Programming Comes to Existing Players, Unless Something Big Changes: Everyone loves the status-quo, and this agreement assures it.

The Department of Justice provisions protecting access to online video programming were carefully crafted by lawyers with one eye on Washington and the other on Wall Street.  It effectively provides “stability” in the marketplace and avoids the kinds of competitive surprises Wall Street hates.  Effectively, the agreement grants access to Comcast-owned programming to ventures that existed prior to the agreement reached today.  Existing players have the government’s assurance carriage contracts are secure.  Those with a pre-existing relationship to Comcast can also purchase the entire bouquet of Comcast-controlled programming (no a-la-carte) at prices similar to those charged to other cable and satellite customers.

But brand new players that threaten to turn existing business models on their heads?  Forget it.  The agreement says nothing that would require access to Comcast programming for upstart services like ivi, or even Google TV for that matter.  The only potential, real-world competitive scenario comes if an existing player (say Time Warner Cable, Verizon FiOS, or AT&T U-verse) decided to start a national virtual online cable company open to any American, anywhere.  What are the chances of that happening?  How many of you can choose Time Warner -or- Comcast? Verizon FiOS -or- AT&T U-verse?  Would AT&T risk its U-verse revenue selling Time Warner Cable customers the same channel lineup, knowing it can’t also easily bundle broadband and phone packages with it?

√ No Voting Rights for Hulu: Comcast agrees to limit its role in one of the biggest potential reasons some consumers are prepared to cut cable’s cord.

The Justice Department’s requirement that Comcast effectively butt-out of the day to day decisions affecting Hulu may protect consumers, but Hulu’s partners don’t want to devalue their programming by giving it away for free forever, either.  Nothing prohibits the birds-of-a-feather-partners in Hulu to put the service under a full ad load or behind a pay wall, reducing its value and interest to consumers.  Or, the whole project could be terminated at the behest of News Corp. and Disney.

Phillip Dampier: The real answer to this question is "both."

Whatever consumer protections the FCC and Justice have included, they won’t last forever.  Virtually all expire within three to seven years, at which point Comcast might be humbled by the culmination of a bad business decision the likes of AOL-Time Warner, or become Comzilla, ready to trample its competition (and consumers) into the dirt.

Was This a Commission Cave-In or a Foregone Conclusion?

Although Commissioner Copps calls today’s decision a “dangerous” deal, some ex-regulators suggest the package presented to federal regulators was effectively a foregone conclusion.

Bruce Gottlieb was formerly Chief Counsel of the Federal Communications Commission, and offered his take on today’s developments for The Atlantic:

How mergers at the FCC will play out is notoriously hard to predict, but the ultimate result is not. The historical truth is that, in virtually every instance, the commission will approve any major proposed transaction. The only time in recent memory that the commission declined to do so was the proposed merger of the two leading satellite-TV providers (Echostar and DirecTV) — and that marriage was running into problems with other agencies long before the FCC put the final nail in the coffin.

(Yes, then-Chairman Reed Hundt also famously ended rumors of an AT&T and Southwestern Bell merger in 1997 by preemptively declaring it “unthinkable.” But those companies simply had to wait until 2005, when a different FCC chairman let it go through.)

The real action at the FCC involves what “conditions” the agency will put on a merger. These are supposed to be narrowly tailored to address specific harms raised by the merger at issue. But, regardless of who is in charge at the agency, it’s all relative.

Often, the conditions applied to a particular merger have more to do with what the chairman and commissioners at the time want to achieve on an industrywide basis. It’s just easier to get these things done when you have the extraordinary leverage of controlling the timing of a multibillion-dollar transaction that the parties are desperate to consummate.

[…]  The FCC’s rules, as described in the press release announcing the merger, appear to be aimed at ensuring that “over the top” providers have fair access to programming (which the NBCU part of Comcast-NBCU will provide), as well as to consumers (which the Comcast part of Comcast-NBCU will provide).

This is, by far, the strongest statement yet from the commission about the importance of over the top video competition. But the business and regulatory stakes in this fight are only going to increase over time. Indeed, the two Republican commissioners (Robert McDowell and Meredith Attwell Baker) issued separate statements saying they have concerns over whether the FCC should be writing rules to encourage over the top video. So this is likely to be the first skirmish in what will surely be a long and bloody war.

In the weeks ahead, the lawyers will be able to parse the specific provisions to see where the loopholes are and how it will all play out in practice. The details surely matter. But years from now, the specifics of what was decided in this merger may mean a lot less than the fact that the FCC is now deeply involved in the multifront war to decide who will win online video.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/PBS Newshour Comcast Merger Announced 12-3-09.mp4[/flv]

More than a year ago, PBS’ ‘The Newshour’ explored the reasons why Comcast and NBC-Universal would want to join forces.  Now, after millions of dollars of Comcast subscribers’ money has been spent lobbying for approval, will consumers ultimately pay an even higher price later on?  (12/3/2009 — 11 minutes)

Unless you own Sprint’s premiere smartphones — the Evo 4G and the Epic, get out your wallet — Sprint is increasing the price on its unlimited data plan by $10, effective later this month.

Evo and Epic owners already pay the $10 “premium data” fee that will be extended to all smartphone customers Jan. 30 (customers on existing contracts will not be affected).

The reason for the price increase?  Heavy usage on its wireless network, which partly includes Virgin Mobile (ending its unlimited service Feb. 14) and Clearwire, which heavily throttles speeds of customers deemed to be “using too much.”

Chief executive Dan Hesse says Sprint will retain its unlimited service plans, which the company calls the best value in the wireless industry.  But the pricing change will present minor challenges as Sprint markets themselves as the least costly.

Sprint's marketing focuses on its unlimited use offers, some of which are about to get more expensive.

Sprint’s “Everything Data” plan, which also includes unlimited cell-to-cell calls will now cost $79.99 per month.  Comparable plans from T-Mobile are priced at $99.99 for that company’s 4G network and $119.98 on Verizon Wireless’ slower, but more ubiquitous 3G network.

“Sprint has been the price leader in the market,” said Jennifer Fritzsche, a Wells Fargo & Co. analyst in Chicago who has an “outperform” rating on the stock. “Sprint may be more confident in the pricing power it has with customers.”

The Wall Street Journal also shares positive views of the price increase from Wall Street:

Wall Street applauded the move, with many seeing it as a sign of pricing power returning to the wireless industry. “It is more likely that Sprint believes that consumers value unlimited and that they can get away with higher pricing,” said Jonathan Chaplin, an analyst at Credit Suisse.

The price hike also suggests that Sprint has seen stronger smartphone growth over the past three months, he added, noting that the carrier likely wouldn’t have made the change if it were still concerned about stabilizing its base on contract customers.

But some other analysts are less impressed with Sprint, especially because of challenges the company faces with its Clearwire partnership.

Patrick Comack from Zachary Investment Research has downgraded Sprint stock, particularly because of technology issues Clearwire faces.

Comack told CNBC Clearwire is stuck with defective spectrum for much of its wireless broadband service.

“It can’t penetrate walls,” Comack said, noting most Clearwire customers are trying to use wireless broadband in the 2GHz range, which presents plenty of problems from obstacles between the tower and the customer.

Comack also believes Sprint’s network simply cannot compete with Verizon Wireless, which he suspects could pick up a number of Sprint customers once it fully activates its 4G network nationwide.

Verizon Wireless network delivers significantly better coverage than Sprint, which focuses on urban and suburban markets, and the major highways that connect them.

[flv]http://www.phillipdampier.com/video/CNBC Sprint 1-12-11.flv[/flv]

CNBC: Debating Sprint and Clearwire, with Todd Rethemeier, Hudson Square Research and Patrick Comack Zachary Investment Research.  (6 minutes)

(Thanks to Stop the Cap! reader PreventCAPS for sharing the news.)

Vlaamse Radio-en Televisieomroep, Belgium’s largest Dutch-language network, turns the table on Mobistar, one of Belgium’s mobile phone companies that frustrates customers with long hold times, endless call transfers, call agents that don’t listen, and when all else fails — hangs up on you in mid-sentence. VRT’s elaborate prank will satisfy any customer who has been less than satisfied with a mobile company’s customer service.  [Subtitled — 10 minutes]

(Thanks to Chris Mitchell at Community Broadband Networks who found the video.)

Some of America’s largest media companies are starting to get nervous over reported stipulations Comcast and NBC-Universal must meet in order to win FCC approval of their merger deal.

The Wall Street Journal reports ‘all-lobbyists-on-deck’ as companies fear collateral damage to their own nascent online video businesses.

At issue is the FCC-proposed condition that would require Comcast to offer NBC programming to any online video service that has reached a similar deal for content from at least one of NBC’s competitors, such as Walt Disney Co. or News Corp.

That could create a highly competitive online video marketplace, with open access to video programming — content many companies want to tightly control.

Last week, lobbyists from Disney, News Corp., and Time Warner pelted the FCC with filings fearing Comcast-NBC deal stipulations could also impact their businesses, potentially risking exclusivity deals with firms like Netflix or Apple.  At the worst, such rules could permit the development of virtual ‘online cable systems,’ delivering hundreds of hours of programming daily — more than enough to potentially invite customers to turn away from traditional cable-TV or satellite packages.

Perish the thought, suggest some Wall Street analysts who are prepared to downgrade companies that cannot maximize revenue from a controlled online video marketplace.

The three companies, among others, have suggested language that limits any stipulations exclusively to the Comcast-NBC deal, or changing the terms to impact their own operations less.

Public interest groups continue to press their views that the proposed deal delivers nothing to consumers but higher bills and fewer programming choices.

Consumers Union, publisher of Consumer Reports, joined with more than two dozen public interest groups urging a more careful review of the deal:

“We believe that a merger of this size and scope will have a devastating effect on the media marketplace,” a letter to President Barack Obama and Congress says. “It will result in less competition, higher consumer costs and fewer content choices. It also will give one company unprecedented control over innovative new media that offer news, information, entertainment and cultural programming through emerging technologies.”

Joel Kelsey, policy analyst for Consumers Union, said this proposed merger could have major consequences for consumers: “This merger would combine a major television network and film studio with the nation’s largest cable company and residential broadband provider, which could be a recipe for disaster. This merged giant has great potential to lead to higher cable and broadband rates for consumers, less competition in online video, and less diversity among the programming choices for viewers. There are no clear benefits to consumers from this merger.”

Comcast has agreed to several stipulations that are supposed to protect consumers.  Among them, a three-year requirement Comcast provide standalone Internet service to consumers for $49.95 a month.  But the deal says nothing about Comcast’s Internet Overcharging scheme — an arbitrary usage cap on their broadband service.

Comcast would also agree to adhere to Net Neutrality rules (as defined by the FCC) for up to seven years.  Since those rules are closely aligned to what Comcast volunteered to follow earlier, there was little reservation agreeing to them going forward.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Comcast Deal May Hang on Showing Rivals Online Video 12-23-10.flv[/flv]

Bloomberg News’ Todd Shields explains the proposed conditions the FCC seeks to impose on the Comcast-NBC merger deal.  (12/23/2010 — 4 minutes)