Tales of the Sausage Factory: Why A Comcast/Disney Merger Sucks Rocks

This op ed appeared in the industry Magazine Broadcasting and Cable on Monday Feb. 23.

NB: Because I wrote this for a trade journal (and had to come in under 600 words), it uses a lot of industry jargon. I will append some defintions of terms at the end.


What’s Good For Comcast Is Not Good For The Country

A former President of GM once told Congress “what’s good for GM is good for the country.” Comcast now repeats this refrain. Although cable rates keep rising faster than inflation, cable remains the dominant provider of residential broadband, and the public has grown deeply suspicious of the power of “big media,” Comcast wants to convince Congress and the FCC that its proposed takeover of Disney will serve the public interest and shareholders at the same time.

Comcast has certainly shown it knows what’s good for Comcast. In Philadelphia, to fend off a competitive threat from cable overbuilders such as RCN, Comcast spent whatever it took to get a lock on Philadelphia’s sports franchises. Then Comcast exploited the “terrestrial loophole” in the program access rules to avoid making its sports programming available to any rivals.

Good for Comcast, but was it good for Philadelphia? Comcast has not passed along any savings in sports programming to Philadelphia subscribers. At the same time, the people of Philadelphia have been denied the only form of competition which the General Accounting Office finds effective – cable overbuilders.

On the content side, Comcast has again shown that it knows what’s good for Comcast. It has a reputation for ruthlessness in leveraging its lock on 30% (or more, depending on how you count) of the cable market to its advantage, and resisting the efforts of communities to create PEG and leased access channels. That’s good for Comcast, but bad for subscribers. When Comcast uses its power to dominate programming and block local community access, it denies subscribers diversity of views and independent programming. Coverage of local affairs, locally targeted educational programming, and locally produced programming give way to more pay-per-view channels and ten different flavors of Discovery Network. Good for Comcast, bad for subscribers.

Worse, Comcast’s conduct hints it may not be above a bit of corporate censorship. In January 2003, Comcast refused to air cable ad buys from an anti-war group before and during the President’s State of the Union Address. Critics accuse Comcast of doing favors for the party in power in the hope for a return favor someday, such as when the same administration reviews any proposed merger. Comcast maintains that the ads made unsubstantiated allegations. Was it a case of Comcast doing what’s good for Comcast?

Now Comcast wants to add Disney’s news operations, broadcast stations, programming networks, and content production to its arsenal. This will give Comcast unprecedented leverage over rivals. It will control some of the most watched local voices in Disney owned stations, and exercise further control over affiliates. It will have unmatched power to leverage in negotiations with rivals over digital must carry, cable programming, and broadband content. It can lend mammoth support to useful political causes or candidates by selecting what issues to cover on ABC News or Nightline, or what stories get covered in local communities. It can silence rivals and punish politicians by refusing to take ads or by declining to cover their issues. It can exercise its power as the dominant residential broadband provider in its franchise areas to promote its new Disney/ABC content while slowing access to rival content. And it can use its power over the cable box to “derez” rival content while giving its digital content preference.

That would be very good for Comcast. It would be a disaster for America.



Overbuilder- a cable competitor who builds a physical wireline plant to compete with cable, as opposed to DBS or other wireless technology.

Terrestrial Loophole- Before the 1992 Cable Act, cable cos could squash competitors by refusing to sell access to critical programming like HBO (owned by TCI and Time Warner) or CNN (owned by Turner). They also cut exclusive deals with other operators (like Viacom) that prevented them from selling to potential competitors. The 1992 Cable Act requires cable companies to make affiliated content available to rivals.

The problem is that Congress described the programing in terms of technology. It referred to cable programing distributed by satelite. So cable companies, no dummies, started clustering their systems and developed means of distributing programming via terrestrial networks. This is called the “terrestrial loophole.”

PEG- Public, educational and government channels. Local franchising authorities (the folks who license cable systems at a local level) can demand that cable systems set aside channels for government or educational programming.

Leased Access- As seen on Wayne’s World! Cable companies are required to lease channels for rival or community based programming.

General Accounting Office- the investigative arm of Congress. any member can ask GAO to produce a report on anything.

Stay tuned . . .

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