Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age

by Susan P. Crawford J. D.

  41. Parsons, Blue Skies, 481.

  42. Behrend v. Comcast Corp., 264 F.R.D. 150, 156 n.8 (E.D. Pa. 2010) (describing the acquisitions and including specific subscriber counts).

  43. Reuters, “Comcast to Buy Scripps Cable Television Unit: Media: $1.6 Billion Acquisition Would Make the Firm the Third-Largest U.S. Cable Operator,” Los Angeles Times, October 30, 1995, available at http://articles.latimes.com/1995-10-30/business/fi-62858_1_cable-operator; “Comcast to Buy MacLean's Cable,” Los Angeles Times, June 20, 1994, available at http://articles.latimes.com/1994-06-20/business/fi-6190_1_cable-operator.

  44. Neel, “Life of Brian.”

  45. Keller, interview with Julian Brodsky.

  46. Leo Hindery, The Biggest Game of All (New York: Free Press, 2003), 73–74.

  47. Parsons, Blue Skies, 670, 675; Matt Carolan, “AT&T Broadband and Comcast to Merge,” PCMag.com, December 20, 2001, http://www.pcmag.com/article2/0,2817,58020,00.asp; “Comcast, AT&T Broadband in $52 Billion Deal,” ABC News, December 20, 2001, http://abcnews.go.com/Business/story?id=87476&page=1#.T0PuVFHRfdk.

  48. Parsons, Blue Skies, 675, quoting Rebecca Blumenstein, “Sweet Revenge: Bid for AT&T Cable,” Wall Street Journal, July 10, 2001.

  49. Jeremy Feiler, “RCN Out to Block Comcast,” Philadelphia Business Review, August 19, 2002, available at http://www.bizjournals.com/philadelphia/stories/2002/08/19/story7.html?page=2.

  50. Federal Communications Commission, “Memorandum Opinion and Order,” MB Docket No. 05-192, July 21, 2006.

  51. In June 2006, there were 65.3 million basic cable subscribers. Comcast had 21.7 million (33 percent) and Time Warner 11.1 million (17 percent). In Re Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, Thirteenth Ann. Rep., 24 F.C.C.R. 542, 555 (2009).

  52. As this book went to press, the case continued: Behrend et al. v. Comcast et al., “Memorandum Opinion and Order,” CV. No. 03-6604 (E.D. Pa., April 12, 2012), 35, 58, 68 (“We find that the Class has produced evidence from which a jury could find in its favor on the [Sherman Act's] section 1 claim's requirement that Comcast conspired with competitors to allocate markets” “We find that the Class has succeeded in creating a genuine issue of material fact that Comcast acted with predatory intent regarding RCN's access to cable infrastructure installation contractors” “The Class has created a genuine issue of material fact that Comcast, a firm possessing market power, was able to lock up 70% to 77% of the potential customer base available to the new entrant. Because it possessed market power, its decision to target promotional discounts to deter a new entrant may be deemed predatory and an exercise of market power to maintain its monopoly.”)

  53. Todd Wallack, “A Father-Son Team That Usually Wins: Comcast Leaders Set Sights on Disney Co.,” San Francisco Chronicle, February 15, 2004, available at http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2004/02/15/BUGEN50OL71.DTL&ao=all.

  54. David Murphy, “Verizon Axes FiOS Expansion,” PCMag.com, March 27, 2010, http://www.pcmag.com/article2/0,2817,2361919,00.asp.

  55. Bernstein Research, “U.S. Telecommunications and U.S. Cable & Satellite: Nature Versus Nurture,” May 2012, 133, 132; Verizon Wireless Allies with Cable in $3.6 Billion Deal,” Bloomberg News, December 2, 2011, http://www.bloomberg.com/news/2011-12-02/verizon-wireless-allies-with-cable-carriers-in-3-6-billion-spectrum-deal.html.

  56. Liberty Media Corporation, “Q1 2011 Earnings Call,” transcript, May 6, 2011, http://www.morningstar.com/earnings/PrintTranscript.aspx?id=27506514.

  57. “A Decade of Innovation: The History of CableLabs, 1988–1998,” CableLabs, June 4, 1998, available at http://www.cablelabs.com/downloads/pubs/history.pdf.

  58. “Brian L. Roberts, Chairman & CEO, Comcast Corporation,” accessed March 9, 2012, http://www.comcast.com/nbcutransaction/pdfs/Bios%202.13.10.pdf.

  59. Rob Rowello, “Capturing Major Growth in Commercial Services: An Untapped Opportunity for Cable MSOs,” Cisco Internet Business Solutions Group, August 2011, 2, http://www.cisco.com/web/about/ac79/docs/sp/Next-Generation-Access-Networks_Cable-MSOs_and_SMB_Market.pdf. Comcast offers a broad array of promotions and bundles, and it is very difficult to discover its standard pricing for standalone high-speed Internet access. It appears that this product was about $115/month as of May 2012 for 50Mbps download service (http://www.comcast.com/internet-service.html, accessed May 31, 2012). This price is far higher than the prices charged for speeds that are twice as fast (or more) in other OECD countries such as the Netherlands, Sweden, Japan, Korea, and France. See OECD, Communications Outlook 2011, 274 (esp. fig. 7.28), accessed May 31, 2012, available at http://www.mediatelecom.com.mx/doc_pdf/OCDE%20communications%20outlook.pdf.

  60. Keller, interview with Julian Brodsky.

  61. Ibid.

  62. Mark Robichaux, Cable Cowboy: John Malone and the Rise of the Modern Cable Business (Hoboken, N.J.: Wiley, 2005), 13.

  63. Keller, interview with Julian Brodsky.

  64. Parsons, Blue Skies, 620–21.

  65. In the Matter of Request for Comments on Deployment of Broadband Networks and Advanced Telecommunications, National Telecommunications and Information Administration, U.S. Department of Commerce, Docket No. 011109273-1273-01 (Comments of Seren Innovations, Inc.), accessed March 9, 2012, http://www.ntia.doc.gov/legacy/ntiahome/broadband/comments4/Seren.htm.

  66. Paul R. La Monica, “Comcast Bids for Disney,” CNN Money, February 18, 2004, http://money.cnn.com/2004/02/11/news/companies/comcast_disney/.

  67. Scott W. Fitzgerald, Corporations and Cultural Industries: Time Warner, Bertelsmann, and News Corporation (New York: Lexington, 2011).

  68. Reinhardt Krause, “Upbeat Mood for Big Cable Show Unlike Gloom of 2009,” Investor's Business Daily, May 10, 2010.

  69. Bob Fernandez, “On Eve of His Departing, Comcast's Brodsky Looks Back at the Many Wins,” Philadelphia Inquirer, May 1, 2011, available at http://articles.philly.com/2011-05-01/business/29493381_1_comcast-s-brodsky-comcast-board-julian-brodsky; Testimony of Dr. Mark Cooper on Behalf of Consumer Federation of America, Free Press, Consumers Union Before the Senate Judiciary Committee Subcommittee on Antitrust, Competition Policy and Consumer Rights Regarding “The Comcast/NBC Universal Merger: What Does the Future Hold for Competition and Consumers?” February 4, 2010, 1, available at http://www.freepress.net/files/Comcast_NBC_Testimony_of_Mark_Cooper_Senate_Judiciary.pdf.

  70. Ron Chernow, Titan: The Life of John D. Rockefeller, Sr. (New York: Vintage, 2004), 223.

  71. Liu, “Liberty Media's John Malone Talks Communications.”

  72. Liberty Media Corporation, “Q1 2011 Earnings Call.”

  Chapter 4. Going Vertical

  1. “The Comcast/NBC Universal Merger: What Does the Future Hold for Competition and Consumers”: Hearing Before the Subcommittee on Antitrust, Competition Policy and Consumer Rights of the Committee on the Judiciary, 111th Cong. 12 (2010) (statement of Colleen Abdoulah, President and CEO of WOW!).

  2. WOW! was the fifteenth-largest multichannel video programming distributor in America as of September 2011 with 432,000 video subscribers. “Top 25 Multichannel Video Programming Distributors as of Sept. 2011,” National Cable & Telecommunications Association, accessed February 28, 2012, http://www.ncta.com/Stats/TopMSOs.aspx. WOW! has received wide recognition for its customer service, not only from Consumer Reports but in the J.D. Power and Associates Internet Service Provider Residential Customer Satisfaction Study. “Save a Bundle: How To Piece Together a Great Deal for TV, Phone, and Internet Service,” Consumer Reports, February 2010, available at http://www.consumerreports.org/cro/magazine-archive/2010/february/electronics-and-computers/bundling/overview/bundling-ov.htm; J.D. Power and Associates Reports, “Press Release: Internet Service Provider Residential Customer Satisfaction Study: Customer Satisfaction with Residential High-Speed Internet Service Declines Slightly from 2009,” October 28, 2010, http://www.jdpower.com/content/press-release/CiPf4Zw/internet-service-provider-residential-customer-satisfactio
n-study.htm. Colleen Abdoulah made clear in her written testimony that smaller cable systems pay more for programming than large systems; programming entities justify this discrimination by claiming it is based on volume-rated cost differentials, and arbitration proceedings concerning this discrimination are prohibitively expensive (“Comcast/NBC Universal Merger,” 8).

  3. “Comcast/NBC Universal Merger,” 12, 18.

  4. Ibid., 34.

  5. Tamber Christian, “The Financial Interest and Syndication Rules—Take Two,” Commlaw Conspectus 3 (1995): 107.

  6. “Comcast/NBC Universal Merger,” 6.

  7. Ibid., 20.

  8. Michael Riordan and Steven Salop, “Evaluating Vertical Mergers: A Post-Chicago Approach,” Antitrust Law Journal 63 (1995): 522.

  9. Gregory Rosston, Benefits Report: An Economic Analysis of Competitive Benefits from the Comcast-NBCU Transaction, Comcast Corp., General Electric and NBC Universal, Inc., May 24, 2010, 44.

  10. Mike Farrell, “Agencies Approves [sic] Time Warner Cable Split,” Multichannel News, February 16, 2009, http://www.multichannel.com/article/174237-Agencies_Approves_Time_Warner_Cable_Split.php.

  11. David Lieberman, “Deal Would Give Liberty Reins of DirecTV,” USA Today, December 7, 2006.

  12. James Quinn, “AOL Officially Splits from Time Warner After 10 Years,” The Telegraph, December 9, 2009.

  13. Richard A. Epstein, “The Dogmatic Posture of a Consumer Advocate: A Second Response to Mark Cooper,” The Free State Foundation: Perspectives from FSF Scholars 5, no. 6 (March 10, 2010): 1–6, 5–6, on file in “Comcast/NBC Universal Merger, available at http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66290/pdf/CHRG-111shrg66290.pdf.

  14. Holly Becker, America Online, Lehman Brothers, June 29, 2000.

  15. Andy Kessler, “The Sinking Case of AOL Time Warner,” Wall Street Journal, October 8, 2002.

  16. “AOL-Time Warner Merger: 10 Years Later,” CNBC video, January 4, 2010. http://video.cnbc.com/gallery/?video=1376488035.

  17. Amendments of Part 69 of the Commission's Rules Relating to Enhanced Service Providers: Notice of Proposed Rulemaking, 2 F.C.C.R. 4305 (July 17, 1987).

  18. Karyl Scott, “Foes of FCC Plan Cry Foul,” Network World, October 5, 1987.

  19. Mary Sit, “Data Industry Threatened by Phone Fees, Hearing Told,” Boston Globe, October 3, 1987.

  20. Deborah Mesce, “Computer Users Criticize Plan to Hike Phone Fees,” Associated Press, October 3, 1987.

  21. “FCC Chief Defends Data Plans,” Associated Press, October 3, 1987.

  22. Representative Ed Markey, interview with the author, January 2011.

  23. Amendments of Part 69 of the Commission's Rules Relating to Enhanced Service Providers: Order, 3 F.C.C.R. 2631 (April 27, 1988).

  24. Markey, interview with the author, January 2011.

  25. Ibid.

  26. Kara Swisher, There Must Be a Pony in Here Somewhere: The AOL-Time Warner Debacle and the Quest for a Digital Future (New York: Random House Digital, 2003), 41.

  27. “AOL: The Internet Company That Grew Up,” BBC News, October 11, 2000, http://news.bbc.co.uk/2/hi/business/597479.stm.

  28. Greg Sandoval, “AOL, Here's How You Screwed Up,” CNET News, August 5, 2010, http://news.cnet.com/8301-31001_3-20012730-261.html.

  29. “Thriving Netscape Could Set Standard for All Commercial On-Line Businesses,” San Francisco Chronicle, April 3, 1995.

  30. “The growth of the Web was supposed to kill proprietary online services. That was why the New Media committee at Time Warner had recommended against buying AOL in 1994” (David Streitfeld, “AOL Rode a Wave, Time Missed the Boat; How Steve Case's Crew Beat the Odds,” Washington Post, January 16, 2000); Stacy Cowley, “Red Hat Picks up Pieces of Netscape,” InfoWorld Daily, September 30, 2004. Kara Swisher (There Must Be a Pony, 58) quotes Steven Levy's crack of 1996: “Every day the Net gets closer to filling its ambitious promise, [the Big Three's—CompuServe, Prodigy, and AOL] clock ticks closer to midnight. They look a lot like dead men walking.” Steven Levy, “Dead Men Walking?” Newsweek, January 21, 1996, http://www.thedailybeast.com/newsweek/1996/01/21/dead-men-walking.html.

  31. “Historic Dates for AOL,” San Jose Mercury News, January 11, 2000.

  32. In the Matter of Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations by Time Warner Inc. and America Online, Inc., to AOL Time Warner Inc., 16 F.C.C.R. 6547 (January 22, 2001).

  33. This statistic was set out in a staff report to FCC chairman William Kennard: Deborah Lathen, Broadband Today (Washington, D.C.: Federal Communications Commission, 1999).

  34. Ibid., 11–12.

  35. “Management's goal is to make AOL services available from any electronic device short of a blow dryer (and maybe even a blow dryer) within a handful of years” (Jeff Fischer, “AOL Anywhere,” The Motley Fool, May 12, 1999, http://www.fool.com/portfolios/RuleBreaker/1999/RuleBreaker990512.htm).

  36. Swisher, There Must Be a Pony, 156.

  37. In the Matter of Applications for Consent to the Transfer, 16 F.C.C.R. at 6561.

  38. Ibid., 6566.

  39. Swisher, There Must Be a Pony, 80–81.

  40. “AOL-Time Warner Merger,” PBS Online NewsHour, January 10, 2000, http://www.pbs.org/newshour/bb/business/jan-june00/aol_01-10.html.

  41. Nina Munk, “Power Failure,” Vanity Fair, July 2002.

  42. “Reliable Sources,” CNN, January 15, 2000, http://transcripts.cnn.com/TRANSCRIPTS/0001/15/rs.00.html.

  43. “NBC Warns on Merger Plans,” Financial Times, July 26, 2000.

  44. Allan Sloan, “3 Worst Deals of 2009,” Fortune, November 17, 2009, available at http://money.cnn.com/2009/11/16/news/economy/bad_business.fortune/index.htm.

  45. Content industry executive, interview with the author, June 24, 2010.

  46. Andrew Jay Schwartzman, Counsel for Consumers Union, et. al., to Deborah Lathen, Chief, Cable Services Bureau, Federal Communications Commission, November 14, 2000, cited in In the Matter of Applications for Consent to the Transfer, 16 F.C.C.R. at 6658, n. 687.

  47. “AOL-Time Warner Merger.”

  48. Tom Rosenstiel and Bill Kovach, “The Bad Business of Media Mergers,” New York Times, January 14, 2000, available at http://www.nytimes.com/2000/01/14/opinion/the-bad-business-of-media-mergers.html?scp=2&sq=aol+time+warner+merger+press&st=nyt.

  49. Richard Cotton, Executive Vice President and General Counsel, and Diane Zipursky, Vice President, Washington Law and Policy, National Broadcasting Company, Inc., to Magalie Roman Salas, Secretary of the Federal Communications Commission, July 24, 2000, cited in In the Matter of Applications for Consent to the Transfer, 16 F.C.C.R. at 6591, n. 298; David Hatch, “NBC on Record Opposing Consolidation,” National Journal, December 7, 2009, available at http://techdailydose.nationaljournal.com/2009/12/nbc-on-record-opposing-consoli.php; Mike Masnick, “A Look Back: NBC's Words Against AOL/Time Warner Merger May Come Back to Haunt,” TechDirt, December 8, 2009, http://www.techdirt.com/articles/20091207/1559557238.shtml.

  50. In the Matter of Applications for Consent to the Transfer, 16 F.C.C.R. at 6644.

  51. “AOL/Time Warner: Open Up,” The Economist, November 23, 2000, available at http://www.economist.com/node/434130; Bloomberg News, “AOL, Time Warner Grant Access to 2nd Web Firm,” Baltimore Sun, November 21, 2000, available at http://articles.baltimoresun.com/2000-11-21/business/0011210008_1_time-warner-aol-america-online.

  52. Federal Trade Commission, “FTC Approves AOL/Time Warner Merger with Conditions,” news release, December 14, 2000, http://www.ftc.gov/opa/2000/12/aol.shtm; Jim Hu, “FTC Approves AOL-Time Warner Merger,” CNET News, December 14, 2000, http://news.cnet.com/2100-1023-249897.html; Federal Communications Commission, “Subject to Conditions Commission Approves Merger Between America Online, Inc. and Time Warner, Inc.,” news release, January 11, 2001, http://transition.fcc.gov/Bureaus/Cable/Public_Notices/2001/fcc01011.txt.

  53. In 2003, the AOL Time Warner Inc. board voted to
drop “AOL” from its name. See Chris Isidore, “Time Warner Drops AOL Name,” CNN Money, September 18, 2003, http://money.cnn.com/2003/09/18/technology/aol_name/. “Employees from the Time Warner side blame [Steve Case] for crippling their company (and destroying their retirement accounts)” (see Nina Munk, “Steve Case's Last Stand,” Vanity Fair, January 2003, available at http://www.ninamunk.com/documents/SteveCasesLastStand.htm). In 2005, six former executives of Time Warner Inc.’s America Online unit and former business partner PurchasePro.com were indicted on charges of conspiracy to inflate revenues through back-dated contracts and revenue swaps. See Andy Sullivan, “Former AOL, PurchasePro Execs Indicted,” Reuters, January 10, 2005, available at http://www.eweek.com/c/a/IT-Management/Former-AOL-PurchasePro-Execs-Indicted/.