Antitrust experts slam Comcast merger plan, warn of threats to Netflix and Amazon Prime

7 Comments

A letter signed by more than three dozen law and economics professors and submitted to the FCC on Monday makes a withering case against the proposed merger of cable giants Comcast and Time Warner Cable, claiming the deal would harm consumers and violate the antimonopoly provisions of the federal Clayton Act.

According to the 16-page submission, the merger will reduce competition by providing Comcast with over 40 percent of the market for broadband internet services, and make it easier for the incumbents to hobble “over-the-top” challengers like Netflix by congesting their internet traffic.

The document, signed by antitrust experts from across the country including Columbia’s Tim Wu and Stanford’s Mark Lemley, comes as the FCC decides whether or not to approve the $45 billion merger, which was announced in February. A decision is expected in 2015.

Comcast has played down antitrust concerns by noting that the merger will not result in it removing broadband competitors from the market, and by pointing to internet alternatives like satellite and DSL technology. The antitrust experts, however, pick apart this argument by stating that the proposed high-speed alternatives are not yet viable, and that Comcast’s proposed 40 percent footprint is an illegal monopoly:

“And we point out that the parties ‘no overlap, no problem’ argument, if accepted, would lead to the conclusion that the antitrust laws would permit one party to own the dominant cable provider in every local market in the United States.”

The letter also explains in detail how the increased power of the merged companies would allow Comcast to hurt competitors, in part by dominating the “first screen” that consumers will see when they use the company’s Xfinity streaming and DVR service. It adds that Comcast could also, in a similar anticompetitive move, demand higher fees from the likes of Netflix, which spend heavily on content but don’t have “last mile” distribution capacity — meaning Netflix and others would be forced to pay tolls, as they are doing now, to ensure that Comcast doesn’t interfere with their streams to consumers.

Here’s how the antitrust authorities put it, referring specifically to Netflix, Hulu and Amazon Prime (“OVD’s” in telecom parlance):

Due to their high, fixed content acquisition costs, OVDs require nation-wide access to consumers via broadband providers such as Comcast and Time Warner. The incentive to act anti-competitively against unaffiliated OVDs, which existed pre-merger, will be greater based on the increased market power that the combined firm would have against incipient threats.

Meanwhile, the letter also flags Comcast’s dismal customer service record as another impediment to approving the merger, and adds that absorbing its biggest competitor is unlikely to help that.

“The American Customer Satisfaction Index ranked Comcast and Time Warner last in a list of forty-three industries – which makes them the worst of the worst companies in terms of customer satisfaction.”

Finally, the antitrust experts claim that the federal government’s own precedents provide the legal justification for the FCC not to approve the merger. In particular, they point to the Justice Department’s objection in 2000 to AT&T’s proposed acquisition of MediaOne, which likewise would have resulted in a single company consolidating 40 percent of the U.S. broadband market. That deal, ironically, also related to many of the same assets controlled by Time Warner Cable and Comcast today.

The letter, which you can read below, is addressed to the FCC but also calls on the Justice Department to stop the merger. It cites the FCC’s ability to stop mergers that are not “in the public interest,” and also points to Section 7 of the Clayton Act, which forbids mergers that “may be substantially to lessen competition, or to tend to create a monopoly.”

Profs Re Comcast Merger

[protected-iframe id=”ef0183f95695521b7e23d449181f2f2d-14960843-34118173″ info=”https://www.scribd.com/embeds/243886115/content?start_page=1&view_mode=scroll&show_recommendations=true” width=”100%” height=”600″ frameborder=”0″ scrolling=”no”]

7 Comments

Ben Dover

listen up people, for any comment that backs Concast, the person has to be in upper management in the Co.
1) Concast is payed by advertisers, and all the consumers also pay Concast to watch these commercials. Double dip!
2) Try calling to deal with a dispute about a bill, on hold disconnect, on hold disconnect, all day long. Just like insurance co’s DENY, DENY, DENY.
3) What happened to no commericials???
4) Customer service, empty office.
5) If you think all the housing forclosures had nothing to do with Concasts billing, now lets see 2-3 million forclosures times say $200.00 a month equals $600,000.000.00 if you think that was not passed to Concasts customers, think again.
6) I love when people start throwing out terms like Socialists, Communists, and Unions, because YOU KNOW THE STOCK MARKET RUNS ON MANIPULATED NO’S, NOT TRUE SUPPLY AND DEMAND!

J. Woods

I’m confused by the the use of the word “experts” in the headline. How are college professors “experts”? Considering there are more than 4,000 accredited universities/colleges in the United States, not hard to scrape up 30 socialists who oppose all things capitalism, including one of the undersigned, Mark Lemley, who’s “Socialist Theory of Invention” paper claims that “inventions are really created by society and the idea of individual inventors coming up with important inventions is a myth”.

So bravo on the scoop, maybe your next article could reference 30 professors at Oral Roberts and Liberty University who are “experts” in asserting that the earth is only 7,000 years old.

Remember, those who can’t do, teach.

Richard Bennett

Trite, I give it a C-. If the combined entity were to charge Netflix excessive interconnection fees, the FTC would have a case for intervention; the law does not permit the blocking of mergers on the basis of speculative fears based on Ars Tecnnica blog posts.

Concerned Consumer

“It adds that Comcast could also, in a similar anticompetitive move, demand higher fees from the likes of Netflix, which spend heavily on content but don’t have “last mile” distribution capacity — meaning Netflix and others would be forced to pay tolls, as they are doing now, to ensure that Comcast doesn’t interfere with their streams to consumers.”

Netflix today, the consumer tomorrow, through a tiered based internet in which companies such as Comcast will interfere with the quality of the subscribers service, if it isn’t a Comcast owned or sponsored entity! (Currently, the internet service providers market in the U.S. doesn’t have enough competition, to even affect prices or raise the quality of services to it’s customers, just prices. The same could be said about cable television, as well!)

“Greed is a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction.” -Erich Fromm

deanramseur

I think somebody’s been reading my post. FCC needs to get some spine and bring his monster to its knees. Their goal is to rule the telecommunication market And never be told what to do. Finally someone to say this is truly an antitrust case .

Jeff John Roberts

Thanks for the comment, deanramsuer. I think a lot of people are also wondering why the feds aren’t jumping in more. I’ve heard people say Justice is worried they don’t have a strong horizontal competition theory, and are fearful of pursuing a vertical theory. The document above describes a “horizontal” theory based on the Clayton Act but offers almost no details.

Comments are closed.