Here’s What Netflix, Dish & Others Said To The FCC About The Comcast/TWC Merger

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Here’s What Netflix, Dish & Others Said To The FCC About The Comcast/TWC Merger

Image courtesy of Sterling Davis

The period for leaving a comment about the Comcast/TWC merger with the FCC closed on Monday. Roughly a zillion members of the public — individuals, nonprofits, state and federal politicians, telecom companies, tech trade groups, and consumer advocates — have weighed in, including several big names in pay TV who are staunchly against the deal.

As Comcast is happy to point out, many comments in support of the merger have been filed. As the New York Times predicted back in February, many of those are from municipal and state-level politicians in areas where Comcast has invested heavily in the community, or from small non-profit organizations that Comcast has given grants to.

However, there also plenty of responses not so much in favor. Spot-checking comments from private individuals reveals three big trends: consumers are worried about high prices, poor service, and losing independent niche programming that they love. Many also express fears about a post-merger company’s outsized influence on net neutrality (or, specifically, its absence).

Competitors, meanwhile, are concerned about being squeezed out of the market altogether. Small cable systems feel they won’t be able to afford Comcast/TWC content or to negotiate with contractors and advertising companies that Comcast owns. Internet video providers are concerned about paid peering, connection speeds, and data caps. And consumer advocates are worried about all of the above making the already-dismal state of cable and broadband competition even worse.

Here’s what some of them are saying.

CenturyLink

  • We are in big trouble if this merger goes through as-is. Pretty please put strong conditions on it to let us keep competing?

CenturyLink offers DSL and fiber service in several markets where Comcast also operates, making them one of the few direct competitors challenging Comcast for subscribers in many cities.

In their comments, the company explains that the size and influence of a post-merger Comcast would have an adverse effect on their ability to keep doing business effectively. For starters, Comcast would be able to pay less for content than other, smaller providers would have to, CenturyLink says, because Comcast would own not only the NBCUniversal family of networks, but also any programming assets TWC currently has in-house, like regional sports networks.

If the FCC doesn’t reject the merger outright, CenturyLink writes, then they need to impose a whole array of strict merger conditions. Among them: Comcast should divest its advertising representation firms, should be subject to a mandatory peering non-discrimination agreement, and should for at least seven years be required to disclose the terms of its contracts with content companies to other TV providers. CenturyLink also asks that Comcast be held to all terms of the NBCU merger agreement for seven more years.

“CenturyLink’s ability to offer competitive video choices to new customers and in new markets – and to offer a viable product to consumers in its existing markets – depends fundamentally on the existence of a fair (if not level) competitive playing field. This transaction threatens to tilt the playing field decisively against small providers such as CenturyLink in a number of significant ways, and thus to limit or prevent competitive facilities-based entry, much to the detriment of consumers.”

Common Cause / Consumers Union

  • Everything about this is terrible for competition, and consumers need a marketplace with competition in it so they don’t get screwed over.

Consumers Union (the advocacy arm of our parent company, Consumer Reports) and Common Cause (the organization where former FCC commissioner Michael Copps now works) jointly filed a petition to deny the merger.

In their petition, the two advocacy groups stress how the merger will make already-sparse competition even worse for consumers. That, in turn, will lead to negative outcomes for subscribers. Prices will go up and customer service will go down, because consumers won’t have alternatives.

The organizations also say that the more control Comcast has over the market, the more they can control what programming gets to air, by price-squeezing out smaller, independent content companies, and the more they can try to squeeze out new online competition, like Netflix.

“Comcast and TWC claim unconvincingly that they already face abundant and growing competition, and that they will continue to. Consumers rightly do not see it that way. Widespread consumer complaints of high prices, poor service, and no choices are unmistakable hallmarks of an absence of meaningful competition. Comcast and TWC already dominate television and broadband service in most key parts of the country, and this merger would only expand and strengthen and solidify that dominance.”

COMPTEL

COMPTEL is a communications trade industry group representing nearly 200 phone, wireless, fiber, broadband, and cable organizations (including Cogent, Sprint, and WOW) both large and small.

Because the organization represents so many companies up and down the telecom supply chain, the COMPTEL petition touches on the threats a merged Comcast/TWC would pose to every aspect of competition. They mention consumer-facing issues but mostly focus on business-to-business challenges or ways in which Comcast’s growth could harm competitors. The organizations represented by COMPTEL rely on purchasing wholesale broadband services from Comcast and TWC, as well as on licensing Comcast-owned programming.

The story is the same as the frequent refrain heard elsewhere: the bigger Comcast gets, the more they can exert pricing and contract leverage on third parties that makes it impossible for smaller providers to compete.

“The harms that could result from such an aggregation of control are far more substantial than those threatened by the Comcast/NBCU transaction. The combined company would have even greater incentive and greater ability to raise prices for its popular video programming, greater incentive and ability to hinder the development of rival online video offerings and third-party devices, and greater incentive and ability to inhibit potential competition from online video distributors that compete with its cable television business. Compounding these harms are those that may result from the substantial increase in the number of customers over whose access to the Internet and Internet content Comcast will exercise bottleneck control.”

Dish Network

Dish, as a satellite TV company, does compete directly with Comcast for video subscribers. And Dish also has to pay fees to Comcast for every single NBCU network every single Dish subscriber gets.

But Dish has also been experimenting: they’ve begun expanding into over-the-top pay TV service. That means that subscribers can pay Dish to live-stream their cable TV networks over another company’s internet connection. And in many cases, that other company is Comcast or TWC.

Dish’s service is still new, and growing. If Comcast gets to merge with TWC now, the argument goes, that service and other new technologies and innovations like it will never get off the ground because Comcast will be able to squeeze them out from the start.

“High-speed broadband connections are the lifeblood of these new online services, and these connections will only become more important with each passing year. The services provided by DISH and other OTT video providers optimally require a household to have actual and consistent download speeds of at least 25 Megabits per second (“Mbps”). If approved, the combined Comcast/TWC would control 50 percent of the broadband pipes in the United States that have speeds of at least 25 Mbps. Most households will have no alternative to the combined company’s high-speed broadband pipe. … This chokehold over the broadband pipe would stifle future video competition and innovation, all to the detriment of consumers.”

Free Press

The FCC’s role in approving or denying the merger is meant to focus on whether or not allowing the two companies to become one is in the public interest, and that’s where Free Press focuses their comment.

Free Press spends much of their petition reviewing the technicalities of internet access. They explain at length why neither wired DSL connections nor wireless satellite/LTE connections are actually relevant broadband competition, and point out that post-merger, Comcast would not only have more than 50% of the truly high-speed broadband market but also that for more than half of those households, there is literally no other option. They also directly challenge Comcast’s assertion that the two companies don’t compete with each other because they don’t overlap geographically, explaining that the market for internet services (like Netflix) is a national one, and giving Comcast more of the national market share is indeed a relevant problem.

Unlike many of the comments from telecom competitors, Free Press doesn’t throw in the towel and ask for merger conditions to remedy these likely harms. Instead, they say outright that there are no conditions that could actually make this merger not terrible in the long run.

“This transaction truly represents the prospect of replacing Ma Bell with Father Cable. This merger would confer on Comcast substantial additional gatekeeper power, to an extent not seen since the time of the nationwide Bell System monopoly. Comcast would control one of two conduits for the transmission of media and communications into the homes of six out of every ten Americans, and for three out of every 10 it would be the only option for advanced broadband. [Comcast and TWC] would like the Commission to ignore the likely consequences of one company possessing this level of control over our nation’s essential communications infrastructure. The Commission simply cannot do that.”

Netflix

Netflix has been very open with their public, repeated, and vocal criticism of Comcast all year, and at a meaty 256 pages their formal petition to deny the merger is no exception.

Netflix is an “edge provider” that relies on other companies to provide the internet access that makes their business work. Comcast has, Netflix says, already interfered with that on multiple fronts. One is peering and interconnection, where Comcast infamously allowed Netflix traffic to bottleneck — degrading subscribers’ experiences — until Netflix agreed to pay up.

The other major aspect is consumer-facing, with data caps and streaming restrictions. Comcast’s “data thresholds” will apply nationwide in a few years, company executives have said, and post-merger that would include all current TWC subscribers. There’s only so much streaming video you can cram into that threshold, especially as ultra high-def 4K video becomes more common. Netflix users can soar into the limits easily — but Comcast’s own on-demand offerings don’t count as data use. That discourages consumers from using services like Netflix, lest they get charged out the wazoo.

“The ability of providers like Netflix to innovate, grow, and offer consumers new and exciting ways to enjoy online content depends on their ability to access high-speed broadband capable of distributing rich media and interactive content. … [Comcast and TWC] claim that the Transaction would be a net positive for edge providers, but the cold, hard economic facts and Comcast’s past behavior prove otherwise. … Post-transaction, the combined entity’s unparalleled number of subscribers … would give it significantly greater and unrivaled power to harm edge providers, and the consumers of those edge providers. … While this threat remains, the proposed merger cannot be justified.”

Public Knowledge / Open Technology Institute

Public Knowledge and the Open Technology Institute, like Common Cause and Consumers Union, jointly filed their petition to deny the merger.

Letting Comcast and TWC merge, the organizations explain, would basically hand them gatekeeper control over the entire next generation of internet, programming, and video services. Competition for cable is suddenly available, thanks to over-the-top services from companies like Netflix and Dish, but if Comcast gets to control half the internet connections in the country, they can stifle innovation and competition wherever they find it.

The real danger, Public Knowledge and OTI say, is that a post-merger Comcast will be able to exert control at every level of the chain: over the cable wires, over the content they own, over the providers of other content, and over the internet tubes themselves. Giving them such a high percentage of the nationwide market share would increase their ability and incentive to clamp down on every potential competitor and supplier.

“Some of the largest technology companies — for example, Apple, Intel, and Amazon — have been trying to launch online video services that more directly compete with cable for some time. Thus far, they’ve hit insurmountable obstacles. No matter how much money, technology, and talent a company has, it can’t sell a video product if programmers won’t sell to them, and programmers won’t sell to them if their current largest customers won’t let them. Large cable companies are using their power over content, over the broadband pipe, and over the viewer’s TV screen to make sure that any new services that viewers start using are ones they control.”

RCN

  • Competing around Comcast is already nearly impossible, and the merger could knock out the only competitors Comcast will ever have.

RCN is a small cable TV and internet service provider, operating in small pockets around Chicago, parts of New York City, parts of metro Boston, parts of Pennsylvania, and metro Washington DC. They are already squeezed out by Comcast or by TWC in most of those areas.

The theme of RCN’s petition is that the merger “poses substantial risk” that Comcast will be able to use its power up and down the chain to harm competition. They highlight four key areas: the sheer market share a post-merger Comcast would have in television, the scope and scale of influence Comcast would have over the broadband internet market, the control Comcast and TWC have over the spot advertising market, and the way that Comcast can use exclusive contracts to lock RCN and other providers out of working with installation, construction, and collections contractors in various regions.

RCN also points out that if the current competition is allowed to fail, which is more likely if Comcast and TWC get to merge, starting a new competitor is basically impossible. If that happens, the market — and consumers — are up the metaphorical creek.

“With its monopsony power in programming acquisition unchecked, the combined company would have a natural incentive to … engage in predatory conduct. … Once competition has been eliminated or neutralized, the combined company is then free to raise prices without fear of losing subscribers to competitors. The continued existence of smaller providers is the only thing that forces dominant providers such as Comcast and TWC to charge below-monopoly prices, and this is in the public interest. Because cable and broadband delivery involve huge sunk costs, if other small providers are driven out of the market, others cannot and will not enter to replace them.”