PITTSBURGH, July 13, 2010 - Colleen Abdoulah, President and CEO, WOW! Internet, Cable & Phone, called on regulators to impose conditions on the Comcast-NBC Universal merger that would convincingly restrain the new media giant from using its market power to injure cable operators that purchase programming from Comcast-NBCU and operators that compete for pay-TV subscribers with Comcast's cable systems.
"We have the experience and history to say that the FCC must impose robust, complete and long-lasting conditions on this deal, or else it will result in material harm to consumers and competition," said Abdoulah, who is an ACA board member.
Abdoulah's comments came at the first FCC public forum on the Comcast-NBCU deal, the most significant media transaction in more than a decade that is also under Department of Justice review. The FCC event, held at Northwestern University Law School in Chicago, was hosted by senior agency officials, including John Flynn, Senior Counsel to Chairman Genachowski for Transactions; Sherrese Smith, Genachowski's Legal Advisor for Media, Consumer and Enforcement Issues; and Media Bureau Chief William Lake.
Abdoulah's company provides residential services to over 460,000 customers in five Midwest markets, including 22 communities in the Chicago metro area. About 66 percent of all WOW! video customers today are passed by Comcast wires in Illinois and Michigan.
In prepared testimony, Northwestern University Economics Professor William Rogerson asserted that the merger was anti-competitive in that it would injure multichannel video programming distributors (MVPDs) that buy just programming from Comcast-NBCU as well as other MVPDs, including many ACA members, that both acquire Comcast-NBCU programming and compete head-to-head for cable subscribers with Comcast. ACA outside counsel Thomas W. Cohen, of the law firm Kelley Drye & Warren, delivered the testimony on behalf of Rogerson, who was unable to attended the FCC forum.
Rogerson, an ACA consultant on the Comcast-NBCU merger, described the deal as presenting both "vertical" and "horizontal" competitive harms across many regions of the country.
"The horizontal harm is that combined ownership of NBCU and Comcast programming will increase the joint venture's market power over programming and allow it to charge higher programming fees. These fee increases will be substantially passed through to subscribers in the form of higher subscription prices," Rogerson said.
Announced last December, the Comcast-NBCU merger represents an unprecedented combination of the country's largest cable company and a Big Four broadcast television network. Together, the two companies will control such key assets as 10 NBC-owned TV stations located in many of the biggest markets; 20 cable networks, including No. 1 ranked USA Network; and 9 regional sports networks (RSNs), which air the games of local professional sports teams to an audience of devoted fans.
In previous merger reviews, the FCC has classified Big Four TV stations and RSNs as "must have" services to which an MVPD must have access in order to attract and retain customers in a commercially viable way.
Comcast-NBCU would control the NBC-owned TV station and the Comcast RSN in Chicago and five other major metropolitan areas containing approximately 12% of all TV households, which would be placed at the greatest risk of suffering competitive harm.
"Rather than engage in separate negotiations, we would be dealing with one consolidated programming entity which controls multiple blocks of 'must have' content," Abdoulah argued. "This would give Comcast-NBCU even greater and, in fact, unprecedented leverage to extract higher fees from operators and consumers than either entity would have absent the deal."
Comcast-NBCU's effort to distribute marquee video programming on an exclusive basis online was raised as another harm stemming from the transaction to broadband access providers like WOW.
"We are concerned that Comcast will not grant us the rights to allow our customers to view combined Comcast-NBCU programming online," Abdoulah said, adding that talks with Comcast were inconclusive. "We are still not certain that these online rights will be made available to WOW, and, if we do obtain these rights, whether they will be granted on a non-discriminatory basis."
FCC program access rules and arbitration proceedings are not sufficient remedies to offset Comcast-NBCU's market power, Abdoulah explained. For example, program access rules do not apply in the online environment and do not prevent Comcast-NBCU from charging competitors a higher price for programming than it charges itself. Arbitrations are costly and lengthy and do not represent a realistic avenue of relief for small MVPDs with limited budgets.
"Comcast has offered to abide by the extremely flawed program access rules that exist today. This concession is weak at best and demonstrates that Comcast recognizes that there are legitimate harms arising from this deal; but in actuality, Comcast does not seem to want to effectively address them," Abdoulah said.
Although ACA has not provided a detailed list of merger conditions at this stage in the government's transaction review, the trade group has suggested that properly crafted structural and behavioral conditions would help alleviate the harms arising from the Comcast-NBCU combination.
About the American Cable AssociationBased in Pittsburgh, the American Cable Association is a trade organization representing nearly 900 smaller and medium-sized, independent cable companies who provide broadband services for more than 7.6 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit http://www.americancable.org/
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