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The New York Times needs to stop using the silo view to assess Comcast, Time Warner

The New York Times’ editorial board today opined on the proposed merger between Comcast and Time Warner.  In the piece, the editorial board argued that the combination could mean that in the future Comcast could keep competitors from accessing its NBC content and that there would be an inordinate amount of control over the consumer’s broadband access to content.  Here was my response:

“The Editorial Board is focusing on a lot of “what ifs” that if the feared scenarios were carried out by Comcast, the result would be a devaluing of their network and the content that they own. Comcast wants its NBC content shown on as many platforms as possible. The more eyeballs for its content means certainty in advertising and license fees generated by viewers.

Also, the Board is still stuck in the 1990s view of regulation. You can’t use the silo view of how to view Comcast or Time Warner. Google and Apple are developing a business model that connects consumers end-to-end to content. Google is also exploring providing broadband in a number of cities. A Comcast-Time Warner combination is merely good planning as the companies try to prepare themselves for a future where companies that have been erroneously described as tech companies are showing their through colors as media companies.

The notion of information portal is being taken to another level by all of these companies and it’s time for the FCC and the U.S. Department of Justice to recognize this.”

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What conditions from Comcast-NBC Universal would regulate Comcast-Time Warner

During a conference call today between Comcast, Time Warner Cable, and analysts from the investment industry, David L. Cohen, executive vice-president for Comcast, reiterated that conditions from the Comcast-NBC Universal merger would govern the transaction and that net neutrality principles would be adhered to.  Let’s take a look at those conditions from the merger back in January 2010.  The following is taken from the Federal Communications Commission’s order in In the Matter of Comcast Corporation, General Electric Company, and NBC Universal, Inc., MB Docket No. 10-56.

Ensuring Reasonable Access to Comcast-NBCU Programming for Multichannel Distribution.  Building on successful requirements adopted in prior, similar transactions, we make available to rival multichannel video programming distributors (“MVPDs”) an improved commercial arbitration process for resolving disputes about prices, terms, and conditions for licensing Comcast-NBCU’s video programming.  We believe that this remedy, designed to prevent harms from integrating content and distribution market power, will be even more effective and less costly than previous procedures.  We apply the arbitration and standstill remedies to all Comcast-NBCU affiliated programming.” 

I don’t see where this condition would be violated by a merger between Comcast and Time Warner.  Time Warner has been receiving access to Comcast-NBCU programming as a stand alone video distributor and as part of a merged Comcast-Time Warner, access to Comcast-NBCU programming should continue.  It would make no business sense for Comcast to allow access to some of its customers, say in Atlanta, while restricting access to its customers in New York.

Protecting the Development of Online CompetitionRecognizing the danger this transaction could present to the development of innovative online video distribution, we adopt conditions designed to guarantee bona fide online distributors the ability to obtain Comcast-NBCU programming in appropriate circumstances.  These conditions respond directly to the concerns voiced by commenters—including consumer advocates, online video distributors (“OVDs”) and MVPDs—while respecting the legitimate business interests of the Applicants.  Among other things, the Commission:

    • Requires Comcast-NBCU to provide to all MVPDs, at fair market value and non-discriminatory prices, terms, and conditions, any affiliated content that Comcast makes available online to its own subscribers or to other MVPD subscribers.
    • Requires Comcast-NBCU to offer its video programming to any requesting OVD on the same terms and conditions that would be available to an MVPD.
    • Obligates Comcast-NBCU to make comparable programming available on economically comparable prices, terms, and conditions to an OVD that has entered into an arrangement to distribute programming from one or more of Comcast-NBCU’s peers.
    • Restricts Comcast-NBCU’s ability to enter into agreements to hamper online distribution of its own video programming or programming of other providers.
    • Requires the continued offering of standalone broadband Internet access services at reasonable prices and of sufficient bandwidth so that customers can access online video services without the need to purchase a cable television subscription from Comcast.
    • Prevents Comcast from disadvantaging rival online video distribution through its broadband Internet access services and/or set-top boxes.
    • Addresses threats to Hulu, an emerging OVD to which NBCU provides programming, that arise from the transaction.”

Unless Comcast expects to exit New York City and any other of Time Warner’s service territories after the merger, online distributors of content such as Hulu and Netflix will still be able to connect with their subscribers.  Given wireless broadband providers such as AT&T and Verizon will still be available for consumers to choose from, Hulu, Netflix, and other edge providers will still be able to transmit their entertainment and other content.

Access to Comcast’s Distribution SystemsIn light of the significant additional programming Comcast will control—programming that may compete with third-party programming Comcast carries on its MVPD service—we require that Comcast not discriminate in video programming distribution on the basis of affiliation or non-affiliation with Comcast-NBCU.  Moreover, we require that, if Comcast “neighborhoods” its news (including business news) channels, it must include all unaffiliated news (or business news) channels in that neighborhood.  We also adopt as a condition of the transaction Comcast’s voluntary commitment to provide 10 new independent channels within eight years on its digital tier.”

I don’t see Comcast not distributing programming to itself.  This will probably be the easiest of conditions the company will be able to meet.


The real issue facing Comcast and Time Warner Cable will involve anti-trust and while this transaction does not involve the elimination of a competitor, I expect Free Press and the U.S. Department of Justice to ask Comcast why they simply don’t follow the examples of AT&T and Verizon and build competing systems in Time Warner Cable’s territories.  That would be the other avenue to protecting competition while providing consumers with additional choice.  Comcast could still hold on to its economies of scale argument; that it needs to be bigger in order to negotiate more reasonable costs for acquiring programming.

The only issue would be how expensive would a truly competitive approach be and would the benefits outweigh the cost of that approach to expansion.

 

 

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Comcast, Time Warner may be a matter of scale

Comcast announced this morning that it will purchase Time Warner Cable in an all equity deal estimated at $45.2 billion.  Time Warner Cable shareholders will own approximately 23% of Comcast common stock valued at an estimated $158.82 a share.

On Bloomberg Television’s “In the Loop”, former CNN head Jonathan Klein described the transaction as one about increasing scale given Comcast’s ownership of significant television and movie content.  Comcast’s statement on the merger confirms this observation:

“This transaction will create a leading technology and innovation company, differentiated by its ability to deliver ground-breaking products on a superior network while leveraging a national platform to create operating efficiencies and economies of scale.”

Comcast also seems prepared to offer a “sweetner” to the Federal Communications Commission and the U.S. Department of Justice in order to pass regulatory scrutiny.  Again, according to Comcast executive vice president David L. Cohen:

“In order to reduce competitive concerns, Comcast is prepared to divest systems serving approximately 3 million managed subscribers. As such, Comcast will, through the acquisition and management of Time Warner Cable systems, net approximately 8 million managed subscribers in this transaction. This will bring Comcast’s managed subscriber total to approximately 30 million. Following the transaction, Comcast’s share of managed subscribers will remain below 30 percent of the total number of MVPD subscribers in the U.S. and will be essentially equivalent to Comcast Cable’s subscriber share after its completion of both the 2002 AT&T Broadband transaction and the 2006 Adelphia transaction.”

This is not a horizontal merger, said Mr. Cohen.  In addition, there would be no impact on other video distributors or edge providers including AT&T, Verizon, and NetFlix.  Agreements and conditions in place from Comcast’s acquisition of NBC-Universal will govern the transaction and net neutrality principles would be adhered to, Mr. Cohen added.

During an investor conference call this morning, Comcast chief executive officer Brian Roberts argued that that the transaction is pro consumer, pro competitive and will benefit the public interest.  Since the companies do not overlap or compete, there is no impact on competition, says Mr. Roberts.

Regarding scale, Mr. Roberts argued that benefits of scale and innovation will be brought to Time Warner’s cable customers given Comcast’s superior video and high-speed internet platform.

 

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Fortunately the FCC did not apply The Big Bang Theory to Time Warner and CBS

Well, if you’re a “Person of Interest” who enjoys watching “The NFL Today” with “Two Broke Girls” in Los Angeles, New York City, or Phoenix, then Tuesday morning’s settlement over re-transmission fees that Time Warner Cable will pay to CBS brought a smile to your face.

According to The New York Times, “Time Warner Cable pressed throughout the month-long impasse after it removed CBS’s stations from its systems for some form of government intervention, from either the Federal Communications Commission or Congress, but none materialized.

While the acting F.C.C. chairwoman, Mignon L. Clyburn, said on Aug. 9 that she was distressed at the standoff and was ‘ready to consider appropriate action if this dispute continues,’ it continued for another three weeks without her intervening. Several media analysts said early in the dispute that the commission’s options were limited because the right of a station owner to seek re-transmission compensation was granted in a law passed by Congress in 1992.

Monday evening, Ms. Clyburn issued a statement saying: ‘I am pleased CBS and Time Warner Cable have resolved their retransmission consent negotiations, which for too long have deprived millions of consumers of access to CBS programming. At the end of the day, media companies should accept shared responsibility for putting their audience’s interests above other interests and do all they can to avoid these kinds of disputes in the future.’ ”

I was caught off guard by Chairman Clyburn’s statement about a consideration of appropriate action should the negotiations continued to wallow. In my opinion the FCC’s rules did not give Ms. Clyburn much room to maneuver in. Section 76.64 of the FCC’s rules requires the consent of a local commercial broadcaster be given to the cable operator before the station is carried on a cable operator’s system. That requirement puts any appropriate action on the part of the FCC in a very narrow box, maybe limiting them to exercise their expertise in mediation and that’s about it.

The FCC’s must carry rules (See Section 76.56) would not have been available to the FCC for use since CBS yanked permission for Time Warner to carry the broadcaster’s signal in the first place. There was never much their for Ms. Clyburn to drag the parties down to The Portals to negotiate anyway.

Oh well, at least Time Warner subscribers will get some NFL and college football and the U.S. Open tennis this weekend.

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Verizon, CBS strike deal

Posted August 22nd, 2013 in Broadband, cable company, cable television and tagged , , , by Alton Drew

It seems like Verizon and CBS have come to terms on CBS’ programming being distributed via Verizon’s FiOS network, according to a post by the good people over at The Hillicon Valley. Here are comments I left on The Hillicon Valley website.

CBS can do what it wants with its intellectual property. The FCC or any other agency should not tell them to who they can license their intellectual property. This is not a network or infrastructure issue that falls under the FCC’s net neutrality rules.

It does go to how other participants in the video distribution market will see the value of Time Warner Cable’s network, but maintaining or improving the value of its network is Time Warner’s problem, not the government and not the consumer.