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

by Susan P. Crawford J. D.

  13. In May 2011, Meredith Attwell Baker announced that she would leave the FCC, when her term ended in June, for a position as senior vice president for government affairs for NBC Universal. See Marguerite Reardon, “FCC Commissioner Leaves for Comcast,” CNET News, May 11, 2011, http://news.cnet.com/8301-30686_3-20062054-266.html; Edward Wyatt, “F.C.C. Commissioner Leaving to Join Comcast,” New York Times, Media Decoder (blog), May 11, 2011, http://mediadecoder.blogs.nytimes.com/2011/05/11/f-c-c-commissioner-to-join-comcast/.

  14. John Dunbar, “Ex-Reps. to Aid Comcast Takeover Bid,” Politico, May 26, 2010, http://www.politico.com/news/stories/0510/37772.html.

  15. “Comcast has become one of the bigger meal tickets in Washington, on its way to spending more $12.5 million [in 2010] in lobbying, more than six times the amount it spent around the time of its last major merger, the 2002 acquisition of AT&T's broadband Internet business” (Cecilia Kang, “Comcast's Fast-Growing Washington Presence,” Washington Post, February 4, 2010, available at http://voices.washingtonpost.com/posttech/2010/02/comcasts_mighty_washington_pre.html); Hill staffer, interview with the author, August 23, 2010.

  16. Federal Communications Commission, “John Flynn Named Senior Counsel to the Chairman for Transactions,” news release, May 19, 2010.

  17. Government official, interview with the author, January 20, 2011.

  18. Ibid. Several other people also mentioned this.

  19. Content-industry employee, interview with the author, August 6, 2010.

  20. Washington, D.C., bloggers such as Marvin Ammori have noted Chairman Genachowski's reputedly “thin skin.” See Marvin Ammori, “The FCC Chairman's D.C. Reputation: Or the Wimpy Kid Who Could Preserve an Open Internet, Marvin Ammori blog, December 1, 2010, http://ammori.org/2010/12/01/the-fcc-chairmans-d-c-reputation-or-the-wimpy-kid-who-could-preserve-an-open-internet/.

  21. Josh Silver, “Comcastrophe: Obama's FCC Approves Enormous Corporate Media Merger for Comcast/NBC,” Alternet, January 18, 2011, http://www.alternet.org/media/149579/comcastrophe%3A_obama%27s_fcc_approves_enormous_corporate_media_merger_for_comcast_nbc/?page=entire.

  22. “The Comcast/NBC Universal Merger: What Does the Future Hold for Competition and Consumers”: Hearing Before the Subcomm. on Antitrust, Competition Policy and Consumer Rights of the S. Comm. on the Judiciary, 111th Cong., 15–17 (February 4, 2010) (Statement of Andrew Jay Schwartzman, President and Chief Executive Officer of Media Access Project).

  23. Harold Feld, “Where Does Comcast/NBC Rate on the ‘Trade Association Scale'?” Huffington Post, December 3, 2009, http://www.huffingtonpost.com/harold-feld/where-does-comcastnbc-rat_b_379574.html. See also Harold Feld, “Public Knowledge Comment on Comcast-NBCU Merger,” Public Knowledge, January 18, 2011, http://www.publicknowledge.org/public-knowledge-comment-comcast-nbcu-merger.

  24. John Eggerton, “Public Interest Groups, Cable Ops, Unions Slam Comcast/NBCU Merger,” Broadcast Union News (blog), February 4, 2010, http://broadcastunionnews.blogspot.com/2010/02/public-interest-groups-cable-ops-unions.html.

  25. Letters opposing and in support of the merger can all be found through the FCC's Electronic Comment Filing System, available at http://apps.fcc.gov/ecfs//fulltext/form.jsp.

  26. A Hill staffer told me in an interview on September 3, 2010, that blocking the merger was always considered unrealistic. “[T]he elimination of double marginalization of NBCU programming costs likely will result in some benefits for consumers” (In the Matter of Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc. for Consent to Assign Licenses and Transfer Control of Licenses, 26 F.C.C.R. 4238, 4335 ([January 20, 2011]). Jonathan B. Baker, “Comcast/NBCU: The FCC Provides a Roadmap for Vertical Merger Analysis,” Antitrust 25, no. 2 (spring 2011): 36–42, available at http://transition.fcc.gov/osp/projects/baker_vertical_mergers.pdf (“When analyzing vertical mergers, the antitrust enforcement agencies employ a contemporary economic analysis of exclusionary conduct, but they have not litigated any vertical merger challenges to a decision in the modern era. All such mergers have been permitted to proceed without a challenge, or challenges were settled by consent.”).

  27. “Malone Says Telecoms Lack ‘Firepower’ Versus Cable,” YouTube video, 06:04, posted by “Bloomberg,” July 14, 2010, http://www.youtube.com/watch?v=QUbQRwKXeCU; “John Malone and David Faber,” video of interview, 41:07–41:22, CNBC, November 23, 2009, http://video.cnbc.com/gallery/?video=1340949341.

  28. “AT&T Chief Executive Randall Stephenson … told Dow Jones Newswires … that he wasn't nervous about the deal, and expects to get the same access to programming” (Robert Cheng, “Update: Comcast Makes Switch to Content Partner from Rival,” Dow Jones Newswires, March 12, 2009). Companies including DirecTV, Dish Network, News Corporation, and Viacom filed letters with the FCC expressing concerns about possible anticompetitive results of the merger. See William M. Wiltshire, Counsel for DirecTV, to Marlene H. Dortch, Secretary of the Federal Communications Commission, January 12, 2011; Pantelis Michaelopoulos and Christopher Bjornson, Counsel for Dish Network, to Marlene H. Dortch, January 14, 2011; Maureen A. O'Connell, Senior Vice President, Regulatory & Government Affairs, News Corporation, to Marlene H. Dortch, January 13, 2011; Keith R. Murphy, Vice President, Government Relations and Regulatory Counsel, Viacom Inc., to Marlene H. Dortch, January 13, 2011.

  29. According to the Independent Film & Television Alliance, “since the mid-1990s—when ownership of major studios, broadcast networks and cable companies ‘have become almost fully intertwined’—the volume of independent produced programming available to the public ‘has dropped precipitously’” (Comments of the Independent Film & Television Alliance, In the Matter of Applications of Comcast Corporation, General Electric, and NBC Universal, Inc., For Consent to Assign and Transfer Control of FCC Licenses, Federal Communications Commission, August 17, 2010). Al Jazeera has been unable to reach a deal with Comcast since at least 2006. See Michael Matza, “Protesters Seek to Get Al Jazeera on Comcast,” Philadelphia Inquirer, February 14, 2012, available at http://articles.philly.com/2012-02-14/news/31059023_1_al-jazeera-english-comcast-demonstrators; Sam Gustin, “Al Jazeera in Talks with Comcast over U.S. Distribution,” Wired Magazine, February 22, 2011, http://www.wired.com/epicenter/2011/02/al-jazeera-comcast/; “Al Jazeera Meets American Resistance,” Bloomberg Businessweek, April 23, 2006, http://www.businessweek.com/magazine/content/06_14/b3978036.htm.

  30. Stephen Díaz Gavin, Counsel for Bloomberg, LP, to Marlene H. Dortch, Secretary of the Federal Communications Commission, November 16, 2010, available at http://apps.fcc.gov/ecfs//document/view.action?id=7020920769.

  31. In its order approving the Comcast-NBCU merger, the FCC “Recogniz[ed] the danger this transaction could present to the development of innovative online video distribution” (In the Matter of Applications of Comcast Corporation, 26 F.C.C.R. at 4241). Jeffrey Silva, telecommunications and media analyst with Medley Global Advisors, said, while the merger was still being considered, “Online video is an emerging market and if someone gained power really early, it could stifle it” (Joe Flint, “Internet Issues Bog Down Comcast-NBC Merger,” Los Angeles Times, December 10, 2010, available at http://articles.latimes.com/2010/dec/10/business/la-fi-ct-comcast-20101210).

  32. The FCC noted, in its approval order, “EarthLink and DISH also express concern that Comcast will have an increased incentive post-transaction to raise the price of its standalone broadband service, thereby effectively tying its cable and broadband services by making the bundled option the consumer's only reasonable economic choice” (In the Matter of Applications of Comcast Corporation, 26 F.C.C.R. at 4278).

  33. Consumer Federation of America, Consumers Union and Free Press, Comcast's Hollow “Public Interest” Commitments, 2, accessed March 4, 2012, http://www.freepress.net/node/76419; Michael Hiltzik, “Comcast-NBC Merger Does Nothing to Enhance the Public Interest,” Los Angeles Times, January 1, 2011, available at http://articles.latimes.com/2011/jan/01/business/la-fi-hiltzik-20
110101.

  34. Content-industry executive, interview with the author, October 11, 2010.

  35. “And when Comcast wanted to merge with NBC Universal, Clyburn withheld her support until she got assurances from Comcast that it would launch—and regularly make improvements to—a program to provide cheap broadband service and digital equipment to low-income families” (Kim Hart, “Mignon Clyburn: When a Daughter Votes Her Mind,” Politico, February 13, 2012, http://www.politico.com/news/stories/0212/72822.html).

  36. Government staffer, interview with the author, January 20, 2011.

  37. By January 13, 2011, Commissioner Genachowski was circulating a draft order approving the merger, among his colleagues. See Zachary Hunchar, “NBC Universal/Comcast Merger Closer to Approval by FCC,” Technorati (blog), January 13, 2011, http://technorati.com/entertainment/tv/article/nbc-universalcomcast-merger-closer-to-approval/. Kim Hart, “Mignon Clyburn.” Author interviews with government staffers, January 20, 2011.

  38. “FCC Approves Comcast NBC Merger,” NASDAQ blog, January 19, 2011, http://community.nasdaq.com/News/2011-01/fcc-approves-comcast-nbc-merger.aspx?storyid=53900. The information that Comcast could still bundle at will came up in my interview with a government official, February 4, 2011.

  39. “For any Qualified OVD that meets the Benchmark Condition, C-NBCU Programmers shall provide Online Video Programming sought by the OVD that constitutes Comparable Programming” (In the Matter of Applications of Comcast Corporation, 26 F.C.C.R. at 4360); Ben Fritz, “Comcast Tries Tiered Data Pricing, Continues Fight with Netflix,” Los Angeles Times, May 17, 2012, available at http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-comcast-netflix-20120517,0,4027578.story.

  40. “At a minimum, Comcast shall offer a service of at least 6 Mbps down at a price no greater than $49.95 for three years (provided that the price can be increased by no more than any increase in the CPI-U for Communications after two years)” (In the Matter of Applications of Comcast Corporation, 26 F.C.C.R. at 4362). “Within nine months of the Closing of the Transaction, Comcast shall commence a program, the Comcast Broadband Opportunity Program ('CBOP'), to substantially increase broadband adoption in low income homes throughout Comcast's service area … each eligible participating household shall … receive the Economy version of Comcast's Broadband Internet Access Service for $9.95 per month” (ibid., 4379).

  41. Content-industry executive, interview with the author, February 13, 2011.

  42. Joe Flint, “Bloomberg and Comcast Fighting Again,” Los Angeles Times, Company Town (blog), May 27, 2011, available at http://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/05/bloomberg-and-comcast-fighting-again.html?dlvrit=52115. Fitzmaurice said (correctly), “The FCC clearly stated that ‘we decline to adopt a requirement that Comcast affirmatively undertake neighborhooding.’” However, the FCC did explicitly “adopt a narrowly tailored condition related to channel placement for independent news channels,” noted Joe Flint, “Bloomberg Files FCC Complaint over Comcast Channel Lineups,” Los Angeles Times, June 14, 2011, available at http://articles.latimes.com/2011/jun/14/business/la-fi-ct-bloomberg-comcast-20110614; see In the Matter of Applications of Comcast Corporation, 26 F.C.C.R. at 4287–88. Greg Babyak, Bloomberg‘s head of government affairs, called it a “test case,” as reported in Brooks Boliek, “Bloomberg: Comcast Is Cheating,” Politico, May 26, 2011, http://www.politico.com/news/stories/0511/55810.html.

  43. Thomson StreetEvents, “Comcast Corporation Conference Call to Discuss It's [sic] Joint Venture with General Electric,” January 18, 2011, available at http://www.comcast.com/nbcutransaction/pdfs/CMCSATranscript-1.18.2011.pdf.

  44. Marguerite Reardon, “FCC Commissioner Leaves for Comcast” Edward Wyatt, “F.C.C. Commissioner Leaving to Join Comcast.”

  45. Cecilia Kang, “Tweet About FCC Member's New Job at Comcast Sets off Firestorm,” Washington Post, May 19, 2011, available at http://www.washingtonpost.com/business/economy/tweet-about-fcc-members-new-job-at-comcast-sets-off-firestorm/2011/05/19/AFZNiP7G_story.html; Cecilia Kang, “Reel Grrls Turns Down Comcast Funds, Cites Free Expression,” Washington Post, Post Tech (blog), May 20, 2011, http://www.washingtonpost.com/blogs/post-tech/post/reel-grrls-turns-down-comcast-funds-cites-free-expression/2011/05/20/AFYAJx7G_blog.html.

  46. Kim Hart and Eliza Krigman, “Comcast Eyes Future, Hires Big Guns,” Politico, September 12, 2011, http://www.politico.com/news/stories/0911/63313.html.

  Chapter 12. Aftermath

  1. Joelle Tessler, “Conditions on Comcast, NBC Deal Sought: FCC Wants Guarantees that Cable Giant Will Not Stifle Video Competition,” Associated Press, December 24, 2010.

  2. Sam Thielman, “Comcast-NBC U Execs Tout Synergy, Muscle,” Daily Variety, January 27, 2011, available at http://www.variety.com/article/VR1118031020?refcatid=4076&printerfriendly=true.

  3. Brian L. Roberts, “The President's Council on Jobs and Competitiveness,” Comcast Voices (blog), February 23, 2011, http://blog.comcast.com/2011/02/the-presidents-council-on-jobs-and-competitiveness.html.

  4. “In 2010, we added 1.3 million net new customers to end the year with 22.8 million video customers, 17.0 million high-speed internet customers” (Comcast, Comcast 2010 Annual Review, available at http://www.comcast.com/2010annualreview/?SCRedirect=true#/highlights). “Combined Video, High-Speed Internet and Voice customers increased by 414,000” (Comcast, Comcast Reports 4th Quarter and Year End 2010 Results, December 31, 2010, available at http://www.cmcsk.com/releasedetail.cfm?ReleaseID=550450).

  5. Jennifer Saba, “Time Warner Raises Outlook; Ad Revenue up 9 Pct,” Reuters, May 5, 2010; “Cable Networks Weather Economic Storm, Positioned to Remain Strong,” SNL Kagan, August 2011; Tom Lowry, “Poverty a Problem for Pay TV,” Variety, May 31, 2011, available at http://www.variety.com/article/VR1118037755?refcatid=14; Henry A. Jessell, “Uncovering the Truth About Retrans Value,” TVNewsCheck, December 2, 2011, http://www.tvnewscheck.com/article/55785/uncovering-the-truth-about-retrans-value.

  6. Michael Powell, “Let's Be True to Our Principles,” Cable Tech Talk, September 28, 2011, http://www.cabletechtalk.com/fcc/2011/09/28/let%E2%80%99s-be-true-to-our-principles/.

  7. “I think [Brian Roberts will] get the deal through. The question is really what kind of restraints he'll have to agree to. And that will then be a clue to other distributors as to whether they need to go vertical, and have something to fight back with” (“John Malone and David Faber,” video of interview, 41:07–41:22, CNBC, November 23, 2009, http://video.cnbc.com/gallery/?video=1340949341).

  8. Mike Flacy, “Comcast Rolling Out Test of $60 First-Run, Theatrical Movies over VoD,” Digital Trends, October 6, 2011, http://www.digitaltrends.com/home-theater/comcast-rolling-out-test-of-60-first-run-theatrical-movies-over-vod/; Mike Masnick, “No One Wanted to Pay $30 For In-Home Movie Rentals … So Now Universal Will Try $60?” Tech Dirt, October 7, 2011, http://www.techdirt.com/articles/20111007/02570316246/no-one-wanted-to-pay-30-in-home-movie-rentals-so-now-universal-will-try-60.shtml.

  9. Swanni, “Universal Comes to Senses; Drops $60 VOD,” TVPredictions, October 13, 2011, http://www.tvpredictions.com/universal101311.htm.

  10. Deborah Yao, “Comcast CFO: Not Interested in Acquiring Wireless Network,” SNL Insurance Daily, September 21, 2011.

  11. “Wireline Costs and Caps: A Few Facts,” FNN: DSL Prime, March 6, 2011, http://dslprime.com/dslprime/42-d/4148-costs-and-caps.

  12. Comcast Corporation, “Q4 2010 Earnings Call,” transcript, February 16, 2011, available at http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cts=1330567895551&ved=0CDYQFjAC&url=http%3A%2F%2Ffiles.shareholder.com%2Fdownloads%2FCMCSA%2F0x0x442204%2Fdc126a85-c48e-4f65-85ce-750ed50a1fdd%2FCMCSA_Transcript_2.16.11.pdf&ei=C9pOT8fGJ6Lg0QHQ56i_DQ&usg=AFQjCNGJAWH3Ql60yAojg_BCv1iu1YEa9g&sig2=6yEI8oJEKQ_iygHx7Xyasg.

  13. Bob Fernandez, “Comcast Fourth Quarter Profit Jumps,” Philadelphia Inquirer, February 17, 2011.

  14. “Q1 ‘11 Cable, DBS, Telco Video Subscribers by DMA,” OSP Mag, Jul
y 4, 2011, http://www.ospmag.com/osp-central/ospcentralresearchreport/q111-cable-dbs-telco-video-subscribers-dma.

  15. Comcast Corporation, “Q4 2010 Earnings Call.”

  16. “Comcast Is King of Its Empire,” Courier-Post (Cherry Hill, N.J.), May 14, 2011, available via Westlaw (www.westlaw.com) at 2011 WLNR 9636907.

  17. Jessica E. Vascellaro and Lauren A.E. Schuker, “Comcast Plays Up ‘Symphony,’” Wall Street Journal, April 30, 2011.

  18. Ken Auletta, “A Conversation with John Malone,” New York, October 16, 2002, available at http://www.kenauletta.com/2002_10_16_johnmalone.html.

  19. Betty Liu, interview with John Malone, Bloomberg News, July 14, 2010, Voxant Business Transcripts, available via Westlaw (www.westlaw.com), 2010 WLNR 14208095.

  20. Jonathan Baker, “Continuing a Conversation About the FCC's Merger Review Process,” Reboot FCC blog, March 17, 2011, http://reboot.fcc.gov/blog?entryId=1340463.

  21. In the Matter of Media Bureau Seeks Comment on the Regional Sports Network Marketplace, Federal Communications Commission, MB Docket No. 11-128, September 9, 2011, 2 (Comments of Comcast Corporation).