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Comcast and Time-Warner Cable

Playing Real-Life Monopoly

by ALFREDO LOPEZ

It might seem like a game of Monopoly played by real monopolies and, with a tired groan, one might be tempted to dismiss it as part of an ugly but irreversible trend. But the merger of cable-television mammoth Comcast with its runner-up competitor Time-Warner Cable is a huge piece of news whose outcome, if it goes forward, will be crippling to communications in this country.

With this $45-billion deal, Comcast’s 21.7 million subscribers will combine with Time-Warner’s 11.4 million to put most tv subscribers in the pocket of one company, giving it control over about a third of all cable TV customers and unprecedented leverage over smaller regional and local providers. (Comcast has agreed to “divest” or sell off about 3 million subscribers, a ripple in the power pond.) Since cable television is now the primary source of news, education and entertainment for a large and increasing number of American families, this deal would make one company our primary newspaper, movie theater and library.

What’s more, the deal would deepen the grave for the Internet as we know it: a grave already being dug with the recent Net Neutrality decision. Both Comcast and Time-Warner are major providers of high-speed Internet services. By combining Internet with the cable television services, the companies have been able to offer a slightly lower price and more convenient hook-up for Internet connectivity than the telephone and other companies offering it. That’s won them a huge market — about 40 percent of all high-speed connections in this country.

That market power has allowed Comcast to strike first in taking advantage of the recent Net Neutrality decisions. Netflix, the popular Internet-based movie and television provider, has now agreed to pay Comcast more money for smoother and quicker connections signalling a blow to Net Neutrality.

What that will do to prices is anyone’s guess but the more important threat is to Net Neutrality because, with one company controlling so much of the market and legally allowed to choose what you can and can’t access, there will be no open Internet. It will turn into a clone of cable television: charging you more for seeing some pages on the newspaper, viewing certain movies in the theater and accessing sections of the library.

The courts can stop this merger. Most analysts doubt they will.

Anti-trust laws have a critical place in modern capitalism. With an imperative to grow, companies always attempt to corner their market. And when they become big, companies can do virtually anything they want and have always been able to. The only real blocks they confront are labor unions (which are weaker than ever) and a set of laws explicitly outlawing monopoly: the ability of one company to control an entire market through take-over or purchase of its competitors.

As hard as it is to imagine, regulators once enforced those anti-trust laws and, until the mid-2000s, they strictly prohibited any vendor from controlling more than 30 percent of the cable market. That prohibition was a product of decades of pressure and protest by consumer advocates and free media organizations. Comcast wasn’t happy with that restriction and, starting around 2005, it poured a fortune into fighting to over-turn the federal 30 percent rule. In 2009, a federal appeals court threw the rule out.

The FCC and federal litigators may go to court to oppose this merger but it’s difficult to see what ground they will stand on. Monopoly, in today’s capitalism, isn’t only permitted, it’s ubiquitous.

In fact, both Comcast and Time-Warner are already monopolies. This merger is merely a logical extension.

The history of Comcast is a case study in corporate gobbling of selections all over the menu. Since 1990, when it began its quest to become the major player in entertainment transmission, the company has acquired AT&T Broadband (which set its footprint in cable TV) and then literally dozens of local and regional cable companies. It also bought MGM (the movie studio), Universal Pictures (ditto), a controlling interest in the NBC system (including MSNBC), a dizzying array of companies like theme parks and investment firms and over a dozen local systems previously controlled by Time-Warner.

If something makes you cry or laugh when you see it, there’s a good chance Comcast owns it. The company serves cable television to about 21 million homes in the U.S.

While Time-Warner Cable is the little guy in this deal, it is hardly a slouch. It runs cable systems in 29 states serving nearly 11 million homes and offices with basic and digital cable. It was once part of the Time-Warner company — one of the richest entertainment companies in the world — but it was spun off in 2009 and really has no relationship to the giant parent except the name (which it leases). Still with all that cable hook-up, it is a formidable presence and its footprint has grown steadily.

Both companies are also Internet heavies. Comcast serves about 20 million homes and offices with high-speed cable. Time-Warner serves about 8.6 million (through its Road-Runner service).

In places where they operate, these companies are literally the only game in town. You get your cable from them or you don’t watch tv. That’s monopoly.

Given the federal court’s 2009 decision, and the fact that these companies already monopolize communications in their markets, a challenge to this merger appears almost hopeless. The aggressive opposition from advocates, law-makers and regulators to Comcast’s NBC majority-stock purchase didn’t stop that recent deal. Since Comcast CEO Brian Roberts is a good friend of several Obama Administration heavies — Attorney General Eric Holder recently vacationed at Roberts’ retreat in Martha’s Vineyard — the good money is that this deal won’t hit many road-blocks.

This merger would effectively end diversity within the cable industry. The most powerful information system we have would suddenly be controlled or heavily influenced by one company and, by any reasonable definition, it’s a bad company. If you want an image of what an evil monopoly looks and acts like, Comcast fills the bill perfectly.

With a pricing policy and remarkably dismissive support systems, both Comcast and Time-Warner routinely appear on lists of “the worst companies in the country”.

Consumers have continuously complained about both systems’ down-time and spotty, often dismissive, customer service.

They also complain about content. Much specialized and “alternative” programming available on satellite dish and some local cable systems can’t be found on Comcast or Time-Warner. If you’re a big cable subscriber, you won’t find Free Speech TV (which carries, among other things, Amy Goodman’s Democracy Now program), or Link TV (the progressive documentary network) or even Al Jazeera America (a mainstream news network that actually covers the world, competing head to head with CNN International and the BBC). There are, in fact, scores of networks and stations that you’ll never see. The steady growth of DirectTV and Dish TV — which carry all those networks and much more — are a direct result of Comcast’s and Time-Warner’s service and content rstrictions and limitations.

This arrogance and outright censoring makes their pricing — which, in Comcast’s case is 400 percent above the average cable price in Europe — all the more galling. And the gall overflows when Comcast charges “special fees” like the $1.50 monthly delivery fee for “premier content” for more popular networks.

Not only are customers stuck with paying more but they can’t even skip the commercials. Comcast actually disables fast-forwarding for some of its programming and markets this capability to advertisers, promising them a captive audience for their less that artful commercials.

But nowhere is Comcast more of a bully than in its Internet policies. The clearest reflection of that is its pricing and product “shaping”. Comcast’s high-speed is about as expensive as any other company’s, but it is now about to get more expensive and that’s accomplished in several ways. There is now a “data limit” in place for Comcast customers. If you flow 300 gigabytes of data into your home, you’re covered by your monthly fees. If you go over that, you get slammed with a $10 fee for every 50 GBs you received.

That means nothing to most people because few flow 300 GBs of data into your home. But those who work on the Internet (like activists) do sometimes hit that limit and, if you’re watching Internet movies or shows through your cable system, so will you. The threat here isn’t to today’s usage, it’s to the future. And, given cable watching trends, it’s the near-future.

Comcast’s explanation for this data-limitation policy is revealing. They claim it’s to protect most users (who don’t use this kind of data) from “usage hogs.” In short, Comcast has developed a sneaky pricing policy which inhibits the full use of the Internet but is shifting the blame to…you guessed it: consumers.

That’s why activists are particularly concerned. The company that will now be selling all the information needs that subscribers have has traditionally shown no respect for information users. And since it can now offer “tiered content delivery” on the Internet (due to the recent court trashing of Net Neutrality rules), the morphing of the Internet to an on-line “bazaar” is almost a foregone conclusion.

Comcast’s recent Netflix deal demonstrates how it plans to take advantage of the Net Neutrality demise. The deal doesn’t violate Net Neutrality in the traditional sense. Net Neutrality prohibits a service provider (like Comcast) from dividing its data lines into faster and slower lines and then charging more to put certain websites into the faster ones. This isn’t about the speed of your connection to the Internet (which already involves paying more or less), it’s about allowing certain sites to move more quickly over those connections than others. This deal actually offers Netflix its own speedy connection directly to your television. That might sound good if you’re a Netflix viewer, but you’ll probably end up paying more for your movies because Netflix will be paying more for the faster connection, and, more importantly, other sites that you want to visit will become harder, or impossible to access.

“Officially, Comcast’s deal with Netflix is about interconnection, not traffic discrimination,” explains Timothy Lee in his informative Washington Post piece on the deal. “But it’s hard to see a practical difference between this deal and the kind of tiered access that network neutrality advocates have long feared. Network neutrality advocates are going to have to go back to the drawing board.”

As bad as all this might be currently, the most destructive impact of this merger will be felt in the future because new technologies — like Google Fiber — can deliver Internet speeds that make Comcast’s look slow. But the company insists that consumers don’t want that kind of speed. “Our business customers can already order 10-gig connections,” wrote Comcast Vice President David Cohen. “Most websites can’t deliver content as fast as current networks move, and most U.S. homes have routers that can’t support the speed already available to the home.”

In cyber-corp speak, that means that if enough Comcast customers want the higher speed, they will have to pay top dollar for it. Not only will this put Comcast in control of the Internet’s content. If the merger is approved, Comcast will control the Internet’s access and speed.

Internet activists expected and warned of developments like this when the courts threw out Net Neutrality in January but the speed with which Comcast has moved has unquestionably surprised us. As I wrote in my last piece, we need to de-privatize the Internet…now more than ever.

Alfredo Lopez writes about technology issues for This Can’t Be Happening!