[opendtv] We Need Real Competition, Not a Cable-Internet Monopoly
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Fri, 14 Feb 2014 10:35:03 -0500
An interesting analysis!
The author provides a very good explanation of why we are in such a sorry,
expensive mess in the U.S. when it comes to the relationship between government
and the media oligopoly.
In essence the author tells us we need an "Act of Congress" to restore
competition.
Maybe Bert can argue with him!
Regards
Craig
http://www.newyorker.com/online/blogs/comment/2014/02/comcast-time-warner-acquisition-competition-cable-internet-monopoly.html?mobify=0
We Need Real Competition, Not a Cable-Internet Monopoly : The New Yorker
Comcast Corporation is America’s biggest cable company, its biggest
internet-service provider, and its third-biggest home-telephone provider. As
the owner of NBCUniversal, it’s also one of the largest producers of
programming for film, cable, and television; on NBC’s networks, it is currently
showing the Olympics. It’s not just big by American standards. It’s the largest
media company in the world. In 2013, it took in $64.67 billion, generating
$13.6 billion in operating income and $7.1 billion in net profits.
Now this behemoth wants to get even bigger, and you have to give its C.E.O.,
Brian Roberts, some marks for chutzpah. In announcing Comcast’s intention to
swallow up Time Warner Cable, the second-biggest cable company in the country,
he brushed aside concerns that the regulators and anti-trust authorities might
veto the deal, describing it as “pro-consumer, pro-competitive, and strongly in
the public interest.”
As you digest these words, it is well to set them in a broader perspective. As
residents of the country that came up with Hollywood, Silicon Valley, and the
Internet, we like to think that we lead the world in communications and
entertainment. And we’re certainly ahead in one way: we pay far more for
broadband Internet access, cable television, and home phone lines than people
in many other advanced countries, even though the services we get aren’t any
better. All too often, they are worse.
Take the “triple-play” packages—cable, phone, and high-speed Internet
access—that tens of millions of Americans buy from companies like Comcast and
Time Warner Cable. In France, a country often portrayed as an economic and
technological laggard, the monthly cost of these packages is roughly forty
dollars a month—about a quarter of what we Americans pay. And, unlike in the
United States, France’s triple-play packages include free telephone calls to
anywhere in the world. Moreover, the French get faster Internet service: ten
times faster for downloading information, and twenty times faster for uploading
it.
These figures are taken from an informative 2012 book, “The Fine Print: How Big
Companies Use ‘Plain English’ to Rob You Blind,” by David Cay Johnston, a
Pulitzer Prize-winning financial reporter. In response to Johnston and other
critics, the cable and telecommunications industry commissioned its own
research, which, predictably enough, made the U.S. performance look a bit
better. But more recent independent reports, from the Organisation for Economic
Co-operation and Development and the New America Foundation, have confirmed
what anybody who has spent some time abroad already knows. “Americans in major
cities such as New York, Los Angeles, and Washington, DC are paying higher
prices for slower Internet service.”
In Seoul, triple-play packages start at about fifteen dollars a month—yes,
fifteen. In Zurich, otherwise a pretty expensive place to live, they start at
thirty dollars. When it comes to stand-alone services, it’s a similar story. In
Britain, for example, monthly cell-phone charges start at about fifteen
dollars; unlimited broadband starts at about twenty-five dollars a month. And,
if you buy a television that was built since 2008, you get access to Freeview,
a digital television service that provides more than sixty television channels,
about thirty radio channels, and about a dozen streaming Internet channels, all
at no cost.
Why are things so different, and so expensive, in the United States? There are
various answers, but by far the most important ones are competition and
competition policy. In countries like the U.K., regulators forced incumbent
cable and telephone operators to lease their networks to competitors at cost,
which enabled new providers to enter the market and brought down prices
dramatically. The incumbents—the local versions of Comcast, Time Warner Cable,
Verizon, and AT&T—didn’t like this policy at all, but the regulators held firm
and forced them to accept genuine competition. “The prices were too high,” one
of the regulators explained to the media writer Rick Karr. “There were huge
barriers to entry.”
That quote accurately describes the situation in the United States today, where
vigorous competition is almost non-existent. In some big cities, broadband
consumers have a choice between a cable operator, such as Comcast, and a
telephone provider, such as Verizon. But that’s practically no choice at all.
Although the cable and telephone companies spend huge sums of money on
advertising trying to lure each others customers, they rarely compete on price.
To use the economic jargon, they act as a cozy “duopoly,” keeping prices well
above their costs. Many people, myself included, don’t even have two options to
choose from. On my block in Brooklyn, Verizon’s high-speed FiOS service isn’t
available yet, so I’m stuck with Time Warner. (And, no, they don’t rush out to
repair the frequent outages.)
This sorry situation isn’t an accident. It’s the predictable outcome of
Congress bowing to the monopolists, or quasi-monopolists, and allowing them to
squelch potential competitors. “Americans pay so much because they don’t have a
choice,” Susan Crawford, a former adviser to President Obama on science and
innovation, and the author of a recent book, “Captive Audience: The Telecom
Industry and Monopoly Power in the New Gilded Age,” told the BBC. “We
deregulated high-speed internet access ten years ago and since then we’ve seen
enormous consolidation and monopolies… Left to their own devices, companies
that supply internet access will charge high prices, because they face neither
competition nor oversight.”
Comcast, which is based in Philadelphia, is one of the big consolidators and
overchargers. In 2005, it teamed up with Time Warner to buy Adelphia
Communications, which was then the fifth-biggest cable company. In 2011, it
bought fifty-one per cent of NBCUniversal from G.E., and last year it bought
the other forty-nine per cent. If it succeeds in buying Time Warner Cable, it
will have about thirty million subscribers, with systems in almost all the
country’s major media markets. In order to avoid going above thirty per cent of
over-all market share (the limit once imposed by the Federal Communications
Commission), it has said that it will divest a few of Time Warner Cable’s
systems, but doing that would wouldn’t make much difference. In the words of
Public Knowledge, a Washington-based public-interest group that has called upon
Congress to block the merger, “Comcast would become even more powerful, harming
consumers and innovators by further limiting competition in a market with very
few competitors and ever-rising prices.”
During the coming months, as regulators consider the deal, the two big cable
companies and their defenders will make the argument that an enlarged Comcast,
despite its size, would remain vulnerable to new competitors, such as Netflix
and Apple. But that’s an old and tired argument. I’ve been writing about the
cable industry since the late nineteen-eighties, and something has always been
about to destroy it. For a time, the threat was satellite television; then it
was the Web; now it’s Netflix or YouTube. But it never materializes. With their
quasi-monopoly franchises, and the ability to charge their customers for
everything from voice mail to remote controls—look closely at your cable
bill—the cable companies get bigger and more profitable every year. No wonder
Comcast’s stock price has quintupled since 2009. (Time Warner Cable’s stock has
gone up even more.)
What we need is a new competition policy that puts the interests of consumers
first, seeks to replicate what other countries have done, and treats with
extreme skepticism the arguments of monopoly incumbents such as Comcast and
Time Warner Cable. But will we get it? Under President Obama, the anti-trust
division of the Justice Department has nodded through a number of dubious
mergers, the most recent of which was the takeover of US Airways by American
Airlines. The new head of the Federal Communications Commission, Tom Wheeler,
is a former lobbyist for two sets of vested interests: the cell-phone operators
and, you guessed it, the cable companies.
Wheeler took office in November, after seeing his nomination to head the F.C.C.
criticized in many quarters, including this one. He has pledged to do all he
can to defend the public interest. He’s said that his motto will be
“competition, competition, competition.” If Wheeler means what he says, this is
a good opportunity for him to demonstrate it. He could start by tossing out the
merger as another self-serving scheme and announcing that he’s flying to London
to find out how the British managed to introduce some real competition. That
would give Brian Roberts and his fellow cable guys something to think about.
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