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Long List of Public Interest Groups Sign on to Free Press Letter Opposing Comcast Time Warner Cable Merger

The Free Press announced that more than 50 public interest groups, including the Institute for Local Self-Reliance, signed on to its letter in opposition to the Time Warner/Comcast merger.

The letter, addressed and delivered to Attorney General Eric Holder and FCC Chairman Tom Wheeler, begins:

The proposed Comcast-Time Warner Cable merger would give one company enormous power over our nation’s media and communications infrastructure. This massive consolidation would position Comcast as our communications gatekeeper, giving it the power to dictate the future of numerous industries across the Internet, television and telecommunications landscape.

In the press release, Craig Aaron, President and CEO of the Free Press, stated:

“The question before the FCC is whether this deal serves the public interest. The answer is clear: A bigger Comcast is bad for America.

“Merging the nation’s two biggest cable-Internet providers would turn Comcast into our communications gatekeeper, able to dictate the cost and content of news, information and entertainment. We need an Internet and video marketplace that offers people high-quality options at prices they can afford — not a near-national monopoly determining what we can watch and download.

“In the past four years, Comcast has raised basic cable rates in some markets by nearly 70 percent. Its top lobbyist has admitted that the price increases will continue to skyrocket if the merger goes through. And that's about the only thing Comcast has said about this deal that you should believe.

“The growing chorus of groups opposing this takeover knows the truth. The only rational choice is for the FCC and Justice Department to reject this merger."

 

Process Matters: Harold Feld's Guide to the Time Warner Cable/Comcast Merger

The proposed Comcast/Time Warner Cable deal will be on everyone's mind for many months to come. Thanks to Harold Feld, it is now possible to follow the process as it moves forward. Feld began a series of posts earlier this month that map out the review as it moves from the Department of Justice Antitrust Division to the Federal Communications, and finally to Congress. As Feld notes, the entire process will last six months at least and could run for more than a year. 

In addition to drawing a process map, Feld provides insightful subtleties on the purpose behind each step in the review. He also offers political analysis that may influence the outcome. Feld gets into the unique review process, burdens of proof, and relevant definitions at each stop along the way. Highly recommended, especially for law students.

Part I - Introduction

Part II - Antitrust Review at the DOJ

Part III - Federal Communications Commission analyzes public interest

Part IV - The proposal moves through the committee process and the public has a chance to express themselves to their elected officials (including lobbyists)

 

Lexingtonians Consider Municipal Network Options in Kentucky

Community leaders in Lexington are the latest to stand at a fork in the broadband road. In September, the franchise agreement between the Lexington-Fayette Urban County Government (LFUCG) and Time Warner Cable expired, resulting in a month-to-month agreement continuation. As they negotiate a new contract, local citizens have called for consideration of a municipal network.

When the contract was originally negotiated in the 1990s, the community was primarily interested in cable TV servce. As broadband has become critical infrastructure for residents, businesses, and government, the community's focus shifted. Lexington customers have complained repeatedly about Internet and cable TV service from Time Warner Cable. A February Kentucky.com article noted that local consumers complained over 300 times to Lexington's Urban County Government, the entity responsible for contract negotiations. According to the article:

The biggest single category of complaints was about price and the volatility of monthly rates. Other complaints were that the cable TV service "repeatedly fails, resets or freezes"; that there was an extended wait time and/or "unhelpful responses" in customer service; and that email and Internet "had declined in service" and showed "significantly slower service."

The City Council considered the situation bad enough to debate whether or not to appoint an ombudsman to advocate for Lexington consumers.

The community wonders how the proposed merger between Time Warner Cable and Comcast will impact their current service. While the Vice Mayor seems to think it is an "almost golden opportunity" to deal with a different provider, local citizen Roy M. Cornett has a different perspective. He wrote for Business Lexington.com:

We can choose to maintain the status quo and allow out-of-state corporations to continue to control our access to the Internet, or we can rescind the franchise agreements to the copper and fiber lying in the ground around our community and treat the Internet as the piece of infrastructure essential for our future economic growth that it is. 

We would just note that this is not an either/or proposition. They can both develop a new franchise or not separately from deciding to move forward with some smart municipal investments.

As the LFCUG has moved forward with franchise negotiations, they opened up the discussion at City Council meetings. Cornett attended a Cable Franchise Workshop to learn about the process. What he learned is that the LFCUG possesses very little power in negotiations, due to federal law. In fact, if Time Warner Cable meets a very low standard, the LFCUG has no option but to renew.

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Cornett and others in the community wonder if Lexington wants to go down the same Internet road again - expensive, unreliable, and ruled from a far off corner office. He addresses the question in another article on the Barefoot and Progressive site:

If the Time Warner [Cable] and Comcast merger goes through, Lexington will not only have piss poor download speeds, but caps on the amount of data you can use in a month. Comcast currently has a cap of 300 gigabytes per month for customers in Elizabethtown and Campbellsville, Kentucky. To put this in perspective, my family’s usage as of February 15, was 99 gigabytes for the month and we still have two weeks to go. I am terrified of what it will be in a few years when my youngest kids become teenagers. 

Cornett reached out to us when he wanted to learn more about the possibilities of a muni for Lexington:

The City of Chattanooga just recently built a municipal ISP to provide gigabit service to 147,000 homes at a cost of $330 million (of which $111 million was provided by the feds). Christopher Mitchell, the director of Telecommunications as Commons Initiative for the Institute for Local Self-Reliance, did some very rough back-of-the-envelope calculations for the City of Lexington and estimates that a full gigabit fiber network to every resident and business would be somewhere in the $200 million range. 

Those are huge numbers and should give anyone pause, but consider that we are spending $1.6 million on sidewalks for Tates Creek Road, $17 million for resurfacing a few blocks of South Limestone and $310 million dollars renovating Rupp Arena. Ask yourself if any of the above projects could come close to offering the economic impact that gigabit internet service would bring. It isn’t even close.

In his Business Lexington.com article, Cornett encourages a new coalition, the Bluegrass Economic Advancement Movement (BEAM), to take up the muni possibility. The group is a collaboration between Louisville and Lexington with support from the Brookings Institute. The goal of BEAM is to bring quality jobs to the Bluegrass and increase export activity.

Cornett, who we expect to hear more from, writes in his Barefoot and Progressive article:

I won’t speculate on the motives of the corporations for attempting to kill competition, but the issue of our city possessing a modern, reasonably priced, continually upgraded network is essential to our future.

This is not a fight we should shy away from. On the contrary, this is a fight we need to embrace, and it can be the lynchpin that takes the BEAM super region from a good idea to a shining success. I urge Mayors Gray and Fischer to – at the very least – explore the option of retaking control of this vital component of our infrastructure.

Krugman Calls out the Barons of Broadband

We should probably be thanking Comcast for its attempt to take over Time Warner Cable. It has inspired a shocking amount of vitriol against the cable monopolies, including an entertaining but NSFW video with strong language from Funny or Die.

Whereas people were largely content to mostly silently hate Comcast and Time Warner Cable separately, the idea of them officially tying the knot to screw consumers even more has apparently hit a tipping point. As I noted a few days ago, we are seeing a more communities considering their own networks to avoid being stuck with a Wall Street monopoly forever.

Paul Krugman was inspired to write "Barons of Broadband," which accurately reflects the modern dynamic:

The point is that Comcast perfectly fits the old notion of monopolists as robber barons, so-called by analogy with medieval warlords who perched in their castles overlooking the Rhine, extracting tolls from all who passed. The Time Warner deal would in effect let Comcast strengthen its fortifications, which has to be a bad idea.

Krugman talks about monopoly as well, reminding me of one of our most important podcasts - Barry Lynn, Monopoly Expert.

And the same phenomenon may be playing an important role in holding back the economy as a whole. One puzzle about recent U.S. experience has been the disconnect between profits and investment. Profits are at a record high as a share of G.D.P., yet corporations aren’t reinvesting their returns in their businesses. Instead, they’re buying back shares, or accumulating huge piles of cash. This is exactly what you’d expect to see if a lot of those record profits represent monopoly rents.

It’s time, in other words, to go back to worrying about monopoly power, which we should have been doing all along. And the first step on the road back from our grand detour on this issue is obvious: Say no to Comcast.

There is no public benefit to this merger - none. Meanwhile it will give even more power to a corporation already slowing our economy by refusing to invest in communities that desperately need better connections so businesses can remain competitive. Allowing this merger will be just another step in the direction of powerful corporate lobbyists officially running the country rather than unofficially.

In Fear of Comcast Warner Cable

It is hard to say just how bad of an idea it is for us to allow Comcast to buy Time Warner Cable. This is not just about consumers having to pay more, which they do every time we allow massive consolidation, but about access to information.

I can't help but think back to our conversation with Barry Lynn on monopoly a few weeks ago. People get so focused on consumer prices and a narrow view of competition that they miss important impacts of consolidation.

One impact is moving Comcast from the seventh biggest DC lobbyist to the fourth.

This consolidation is a recognition that the private sector simply will not provide meaningful competition for Internet access. Communities need to recognize what a do-nothing approach means: relying on a distant cable monopoly for the most important services of the 21st century.

If I had to guess what will happen - Comcast will buy Time Warner Cable but have to sell off some pieces to get approval. Comcast will grow larger and more powerful, making future mergers even more difficult to stop despite more and more evidence that these firms are strangling our economy. We can stop it - but will we? Specifically, will we force our representatives in DC to stop it?

Stay tuned to the organizations that are covering it well - Free Press, Karl Bode, Public Knowledge, Common Cause, and many others.

New Free Press Infographic: Stop the Corporate Cyclops From Gobbling Up Local Media

When we think of the enormous cyclops we don't usually imagine him in a suit and tie but the Free Press does and it works. In their recent Media Giants infographic, the Free Press uses the hulking one-eyed beast to represent corporate behemoths slowly taking control of our media through smaller shell companies.

As media power is consolidated, every one else's voices fade. We all become like the one-eyed cyclops: seeing things through his limited vision. The Free Press sums it up like this:

Media companies are using shady tactics to dodge the Federal Communications Commission’s ownership rules and snap up local TV stations across the U.S.

Gannett, Nexstar, Sinclair and Tribune are on major buying sprees. To grow their empires, these corporations are using shell companies to evade federal caps on how many stations one company can own. And so far the FCC has done nothing to stop this trend.

In some communities, one company owns two, three and even four local TV stations — and airs the same news programming on all of these outlets. The result: An echo chamber where all the news looks and sounds the same.

Take action now through the Free Press' campaign or contact your elected officials directly.

AT&T's Many Broken Merger Promises

AT&T and others regularly woo their regulators and policymakers with promises to built increase investments or expand networks in return for deregulation or merger approval. A recent Gerry Smith Huffington Post article examines a familiar pattern of broken promises made by telcos, what has developed into a chronic wham-bam-thank-you-ma'am attitude by these massive corporations.

We actually have a name for this, Kushnick's Law: "A regulated company will always renege on promises to provide public benefits tomorrow in exchange for regulatory and financial benefits today." 

Smith revisits promises made back in 2006 when AT&T merged with BellSouth. AT&T promised to roll out broadband to every customer in its territory by 2007. Tell that to Cedric Wiggins from rural Mississippi. From the article:

But five years after that deadline, Wiggins, 26, is still waiting. Inside his trailer, his only affordable Internet option is a sluggish dial-up modem that takes five minutes to load the online job listing sites he has visited since being laid-off as a truck driver in May. Every few months, he calls AT&T to ask when he will receive a faster connection. The answer never changes.

“They said they don’t offer it in my area right now,” he said. “There’s nothing I can do.”

Smith found that promises made to gain merger approval are traditionally broken and/or so weakly constructed that the players can comply with little or no effort. Empty promises continue to be accepted by the feds and conveniently forgotten, except people like Wiggins.

No one knows the pattern better than those on the inside:

“We have a problem at the commission, historically, with following-up on merger conditions,” said Michael Copps, who served on the FCC from 2001 to 2011, and who voted to approve the AT&T-BellSouth merger. “A lot of these conditions that get attached are not that great, and they are not always really enforced.”

AT&T tells Smith it kept its promise, but would not respond when pressed for details about where it had expanded. Self reporting is accepted from the FCC on merger conditions, putting the burden on the public to demonstrate noncompliance -- though most of the public is rarely even aware that such promises were made.

Promises are often littered with loopholes. From the article:

AT&T committed to provide Internet service at minimum speeds that were hardly faster than dial-up, they say, while pledging to deliver “alternative technologies,” including satellite Internet, through as much as 15 percent of its territory. And at the time, satellite Internet was already available through nearly all of BellSouth’s turf, making AT&T’s commitment “utterly meaningless,” said Dave Burstein, editor of the telecom industry publication DSL Prime.

Smith also looks into a 2009 promise made by CenturyLink in order to get approval to buy Ebarq in the South and Midwest. CenturyLink promised to bring wired Internet access to 90% of the population within three years but 87% of those customers already had it. Meeting that commitment was almost meaningless. 

Monopoly Money

But we cannot simply leave the blame at the feet of the FCC or other agencies. Smith details how the gigantic AT&T/BellSouth merger almost fell through, but for the efforts of AT&T's lobbyists. FCC Commissioners received a letter signed by 29 members of Congress - all but two had each received significant contributions from AT&T and BellSouth PACs and PAC employees over three election cycles, according to InfluenceExplorer.com.

When the deal was finally approved, expectations were high:

AT&T had made “real, tangible, and important broadband commitments” and there would be “no exceptions for sparsely populated areas,” Copps said at the time.

AT&T’s commitment “will only further encourage the deployment and adoption of broadband networks into yet unserved or underserved areas,” Chairman Kevin J. Martin and Commissioner Deborah Taylor Tate said back then.

The 2006 CEO, Ed Whitacre, doubled his salary to $31 million, stock price almost doubled, and $5 billion in dividends went out to investors. The following year, stock went up another 16% and the company paid another $8.7 billion in dividends. Clearly, AT&T reaped the rewards for making promises, but it is equally clear that they also reaped rewards for breaking promises. Even 2006 backers of the deal now realize AT&T has not lived up to its commitment:

“It gives me heartburn,” said Tyrone Ellis, who as chairman of Mississippi’s public utilities committee in 2006 wrote to the FCC to urge approval of the deal, citing the promise of rural broadband throughout AT&T’s territory. “They didn’t follow through. But I don’t have the power to force their hand. The FCC does.”

Meanwhile in Mississippi, Wiggins and his neighbors sit on the unfortunate side of the digital divide. Looking for a full time position, paying bills, conducting business, public safety, and the ability to communicate with loved ones are all hampered by the lack of anything beyond dial-up or expensive satellite.

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For years now, the FCC and other agencies have allowed harmful consolidation while failing to attach meaningful conditions. We just examined how Comcast gamed the FCC to take over NBC -- the public gained practically nothing in allowing a massive company even more market power. 

The problem with such massive companies is not just that they can squash competition and raise prices with impunity. Their scale and dominance allows them to shape how the entire industry is regulated by the public. They buy legislation in DC and state capitals with near-impunity. They slow innovation, harming the economy. 

Communities are smart to depend on themselves for essential infrastruture, not promises from distant mega-corporations. 

Comcast Gamed FCC for Internet Essentials "Concession" in NBC Merger

Last year, when Comcast unveiled its Internet Essentials program, the corporate powerhouse received accolades from FCC Chairman Julius Genachowski. The program was promoted as an example of corporate philanthropy helping to bridge the digital divide.

Comcast received all kinds of positive media coverage for its program. Most of that coverage failed to note that the FCC required Comcast to integrate the program as one of the supposed concessions offered in return for Comcast being able to take over NBC -- giving the largest cable monopolist in the US even more market power.

DSLReports has publicly exposed what many of us suspected all along -- the program was not a concession on Comcast's part. Internet Essentials was originally conceived as a program that would offer slower connections to certain low income households at affordable rates that nevertheless remain profitable for Comcast.

A recent Washington Post Technology profile on Comcast's Chief Lobbyist David Cohen, notes how the program was actually conceived in 2009, but:

At the time, Comcast was planning a controversial $30 billion bid to take over NBC Universal, and Cohen needed a bargaining chip for government negotiations.

“I held back because I knew it may be the type of voluntary commitment that would be attractive to the chairman” of the Federal Communications Commission, Cohen said in a recent interview.

Eligibility depends on four factors:

  • Participants must reside in an area serviced by Comcast
  • Participants must not have an overdue Comcast bill or have unreturned equipment
  • Participants could not have had Comcast service within the last 90 days
  • Participants must have at least one child in the house that qualifies for free or reduced lunches

Comcast Logo

When the program launched in 2011, only households with children qualifying for free lunches under the National Free Lunch Program were eligible. After residents in Philadelphia expressed their derision at the narrow eligiblity, Comcast broadened the criteria to include those that qualified for reduced lunches. Even with this one requirement relaxed, eligibility is narrow. From a 2011 DSLReports article released when the program was new:

Once you've eliminated those who don't qualify for the school lunch program, eliminated those who already have service (not uncommon even in poor homes), and eliminate those who also owe Comcast money (also obviously not uncommon in poor homes), how many customers will Comcast actually wind up having to serve at the $10 price point? Even then, they'll only have to offer it for a few years, making it significantly less of a difficult merger condition than it might originally appear.

The Philly.com article notes that Comcast estimates 2.3 million people nationwide are eligible for the program. Even though meeting the participation criteria is incredibly difficult, Comcast blames low participation rates to on the people they are supposed to be helping:

Comcast says it has found that the biggest barrier to Internet Essentials' adoption is that many people in poor neighborhoods don't understand the Internet (emphasis added by me).

"They think it may be used for Comcast or the government to spy on them," said David Cohen, the program's chief booster and an executive vice president at Comcast.

I am one of those 2.3 million, used to help Comcast increase its market power with the NBC merger. Very few of us think much about the government or Comcast spying on us. In fact, we spend most of our time thinking about paying the bills. If Comcast or the government DID spy on us, we know they would be pretty damn bored.

As a lower-income single parent of two children that qualify for reduced lunches, our household qualifies largely because a subscription to paid TV is a luxury that we have chosen to avoid for several years. But believe it or not, I DO understand the benefits of Internet access and so do all the parents of all the kids that I know who are similarly situated. In fact, the kids understand the Internet, too.

As an experiment, I called Comcast and am happy to report that a very nice lady helped me. After answering all the questions she presented, my application for the Internet Essential program is on its way. 

I hate to report stories like this for multiple reasons. First, there is the conscious decision on the part of Comcast to cynically delay a program supposedly designed to benefit the most vulnerable populations. Then there is Comcast's obvious goal of positive media attention for their hated brand rather than effectively advertising the program to the vulnerable populations.

DSL Reports Logo

There is a policy lesson that DSLReports nails:

On the plus side, some people got less expensive broadband, which certainly isn't a bad thing. On the other hand, you've got a Comcast lobbyist who delays a program for the poor in order to profit handsomely by buying NBC, and an FCC claiming credit for a show pony program just to earn political points and to avoid imposing tougher conditions. As we'ved noted previously, hollow programs that do little but sound great has been a constant theme at an agency too timid to actually regulate.

The obvious question that has been utterly ignored by just about all the press coverage of this program is if Comcast makes a profit on its $9.95 service, why is the price so high for everyone else? Comcast, AT&T, and others are constantly crowing about how much competition supposedly exists in U.S. broadband but their profit margins and capacity to incease rates year after year proves the opposite is true.

We need to continue pushing the FCC to protect the rights of all Americans, not just a few big cable and telephone companies.

Community Broadband Bits 23 - Harold Feld from Public Knowledge

One hundred years after Teddy Roosevelt and AT&T agreed to the Kingsbury Commitment, Harold Feld joins us on Community Broadband Bits podcast to explain what the Kingsbury Commitment was and why it matters. In short, AT&T wants to change the way telecommunications networks are regulated and Harold is one of our best allies on this subject.

AT&T is leaning on the FCC and passing laws in state after state that deregulate telecommunications. Whether we want to deal with it or not, these policies are being discussed and consumer protections thus far have taken a beating. This interview is the first of many that will help us to make sense of how things are changing and what we can do about it.

We also discuss the ways in which the Federal Communications Commission and Federal Trade Commission spurred investment in next-generation networks by blocking the AT&T-T-Mobile Merger on anti-trust grounds.

Harold is senior Vice President of Public Knowledge and writes the Tales of the Sausage Factory blog.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 22 minutes long and can be played below on this page or subscribe via iTunes or via the tool of your choice using this feed. Search for us in iTunes and leave a positive comment!

Listen to previous episodes here.

Thanks to mojo monkeys for the music, licensed using Creative Commons.

Harold Feld Examines The Meaning Behind The Verizon/SpectrumCo/Cox Deal

Several months ago, we wrote this post but it got lost in the system. We think it still worthwhile, so here it is.

The word "cartel" drums up many negative annotations - drug cartels, oil cartels. Never anything positive, such as bunny cartels or chocolate cartels. Harold Feld (of Public Knowledge) explains the emergence of another cartel in My Insanely Long Field Guide To The Verizon/SpectrumCo/Cox Deal, on his Tales of the Sausage Factory blog. This is  great tutorial on how the deal came about and what it can mean for the future of broadband.

Rather than chocolate, drugs, oil, or bunnies, the product in question is telecommunications services. At the heart of the cartel are the familiar names: Verizon, Cox, and SpectrumCo. The latter being a consortium of Comcast, Time Warner Cable, and Bright House. All the big hitters in telecom are involved in a way that is veiled, secretive, and not good for competition.

"It's almost as if your companies got in a room together, and you agreed to throw in the towel and stop competing against each other," Sen. Al Franken to representatives from Verizon and the cable companies at the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, March 21, 2012.

Feld's investigation begins with the licensing and collecting of spectrum by SpectrumCo but ends with a more practical look at how these big hitters have decided that it is better to join forces than to compete. Side agreements, secretive multi-layered entities, and threaded loopholes keep the FCC at bay. This begins as an article about telecommunications, but quickly expands into an antitrust primer. The most alarming facet of this situation is that the product in question is information.

Joel Kelsey of Free Press testified at that same committee, warning how this deal will compromise access, quality, and affordability to broadband in America and how drive us further behind the rest of the world.

Update:

On August 16, 2012, the Department of Justice announced that it approved the deal with changes. Citing:

"...the spectrum transactions facilitate active use of an important national resource and thereby promise substantial benefit to wireless consumers."

Video: 
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