And Then There Were Five, Part 1

I've been trying to finish this post for over a week, but I keep finding new information that forces me to revise it. Maybe I can make some progress by breaking it into two parts. Let's start by moving the chart on media ownership from it's prior location in my piece about Stuart Hall to here.

You'll notice the chart is slightly out of date. In 2011, Comcast moved to the top of the leftmost pyramid when the Obama administration, in spite of public pressure, gave its approval to Comcast's purchase of NBC-Universal from General Electric. As of 2013, GE is no longer involved with either Comcast or NBC-Universal.

On February 13, Comcast, the nation's largest cable TV and broadband provider, announced its intention to buy Time Warner, the second largest cable company, for $45.2 billion. This will reduce the number of conglomerates that control over 90% of the country's supply of news and entertainment from six to five.

If the deal is approved, Comcast stands to control 38% of the cable TV market. However, Comcast is promising to divest itself of three million subscribers in order to bring their share below 30%. Even so, it will have a near monopoly in 19 of the largest 20 metropolitan areas. More than half of cable users are “triple play” customers, purchasing television, telephone and internet service as a bundle. The new Comcast would control 40% of the internet market with 32 million customers, compared to 16 million for AT&T and 9 million for Verizon.

The new company is expected to generate $1.5 billion in cost savings through “efficiencies,” that is, largely through layoffs. (“All of our operators are busy right now . . .“) The FCC reports that, in the last two decades, cable TV rates have increased at four times the rate of inflation (6% per year vs. 1.5%). Both Comcast and Time-Warner are regularly voted by consumers as among the most hated corporations in America due to their high fees and poor customer service. It seems likely that both of those problems will get worse under the new Comcast.

Opposition to the merger, at least as portrayed by the corporate media, has focused on the potential for cable and broadband rate increases. But Comcast and Time Warner already have monopolies in almost all the areas they service. This has allowed Comcast to argue that the merger will not reduce competition, since the two companies “do not currently compete to serve customers in any zip code in America.” But this is just a smokescreen. The real incentive for this merger is the unprecedented market power it would give the new Comcast over both the price and content of television programs.

• Since Comcast already owns the NBC family of channels, as well as cable networks like Bravo and USA, they don't have to pay them for content. It benefits them to keep competitors off the cable lineup.
• A bigger Comcast will give them more leverage to negotiate lower rates for networks they don't own. Other cable networks may have to merge in order to negotiate successfully with them, which could lead to further undesirable consolidation among existing networks.
• A more subtle form of discrimination against competitors or disfavored networks is to give them poorer channel locations. The most desirable locations are low numbers and locations proximate to other channels that appeal to the same audience. It is also desirable for networks to be bundled for pricing purposes with other more popular networks. Comcast has already been accused these types of discrimination, i.e., their dispute with Bloomberg News.
• The combination of Comcast's market power and its desire to promote its own product poses a formidable challenge to future startup networks, thus discouraging innovation. 
• More importantly, Comcast will be free to exclude or make life difficult for any networks whose programming they find objectionable. Both Al Gore's now-defunct Current TV and al Jazeera America have had difficulty finding appropriate cable niches. Liberals should be grateful that MSNBC was already grandfathered into the cable TV lineup before it switched to more progressive programming.

One of the biggest threats to the future of the cable TV giants is so-called “cord cutters”—people who have dropped their cable TV service and are purchasing films and TV from online streaming services like Hulu and Netflix. But the new Comcast's dominance over broadband access will help to defeat that strategy, by allowing them to raise their internet only service to only a few dollars per month less than their internet-plus-TV package.

There is little reason to expect any serious opposition to the merger from either the FCC or the Justice Department, as indicated by their assent to Comcast's purchase of NBC Universal, and more recently, the Justice Department's approval of American Airlines' purchase of US Airways. Last year, Comcast was the seventh-largest lobbyist in the country, spending an estimated $18.8 million. Of the 97 Congresspeople who signed a letter endorsing the NBC purchase, 91 of them received contributions from Comcast during the previous election cycle. Comcast CEO Brian Roberts, who received $30 million in salary and other compensation in 2012, is a golfing partner of President Obama. Last year, Roberts entertained Obama and Attorney General Eric Holder at his Martha's Vineyard estate. Comcast's chief lobbyist David L. Cohen is a major Democratic Party fund-raiser.

Economist Paul Krugman asks the question: When and why did we stop worrying about monopoly power? The when, he says, was during the Reagan era. The reasons given for allowing concentration included encouraging innovation and competing in the international marketplace. But oligopolies can discourage innovation by tacitly agreeing not to compete with one another, and Americans can't purchase cable services from foreign companies. In the last few decades, the argument that near-monopolies charge higher prices and provide poorer service has proven to be no match for the power of lobbying and campaign contributions in a political system that can best be characterized as legalized bribery.

John Nichols reminds us that the original purpose of the freedom of the press clause in the First Amendment was to have a diversity of viewpoints in order to encourage dissent and debate.  It's hard to see how this merger serves the public interest.

Part 2 will discuss the implications of the Comcast-Time Warner merger for the internet.

You may also be interested in reading:

Stuart Hall (1932-2014)

Who Care What THEY Think?

The Job Killers, Part 1