Democracy & Technology Blog Comcast + NBC = Blackmail

A Sunday editorial in the New York Times expressed concerns about Comcast’s proposed acquisition of NBC, but explicitly stopped short of calling for rejection of the deal.
According to the Times, this combination could be just awful

Comcast could bar rival cable and satellite TV companies from access to desirable NBC shows, or it could offer them only at a high price, bundled with less attractive content …. Comcast could now be tempted to limit access to NBC content on rival Internet services, or charge them high fees. And Comcast could take its bundling business model to the Internet by forcing customers to buy cable packages in order to see content from NBC’s network online.

After citing these horrific possibilities, the Times then says,

These concerns might not justify blocking a merger. But they do justify a careful review …. What regulators must not do is let this deal pass unchallenged.

What? If it’s so bad, shouldn’t we call 911?
Well, if the deal is rejected or withdrawn, various special interests get nothing.

Before Comcast can acquire NBC it has to get FCC approval to acquire NBC’s broadcast-TV licenses pursuant to an archaic provision in the 1934 Communications Act which allows the agency to blackmail investors like a corrupt government official in a third world country.
Commissioner Michael J. Copps issued a statement written in code that broadly outlines the categories of tribute which will have to be paid:

  • What is its impact on the prices consumers will pay?
  • Would the combination mean more newsrooms (but perhaps fewer reporters) controlled by one entity?
  • How would the transaction affect minorities and diversity on the airwaves?
  • Would this merger lead to fewer voices on both traditional and new media?
  • Does the nature of the transaction make even more urgent the need for FCC network neutrality rules?
  • What about the future of competition in the several markets these companies serve?
  • The list of questions and consequences goes on. Clearly this proposal requires close and comprehensive Commission review.

Translation: Sorry, Comcast. The people who help commissioners get their jobs expect something in return. Why don’t you consider lowering the prices for some of your most popular services, maintaining autonomous newsrooms with the same number of reporters, establishing quotas or set-asides to promote diversity in every segment of the business and ensuring low-priced access for independent content producers? You might also drop your opposition to network neutrality regulation and divest network-owned affiliates. Or something along these lines. Use your imagination. Don’t forget any constituency. Remember they’re our clients. Your mission is to buy all of them all off. Don’t disappoint us.
Yes, I wouldn’t put it past the clever operatives at the FCC to force Comcast to choose whether the company will continue to oppose network neutrality regulation or whether it would prefer to have its merger approved? Politics being what it is, and all that.
Comcast says it will

preserve and enrich the output of local news, local public affairs, and other public interest programming.

Public interest groups opposed to the deal have criticized Comcast for not making funding commitments for local or national news.
It is not inconceivable that the regulatory approval process can be used to force Comcast to cross-subsidize NBC. The network ranks a distant fourth in prime time; who knows, it may be a dinosaur.
Former FCC Commissioner Harold W. Furchtgott-Roth notes that the FCC can impose any condition for any reason on any merger.

Of course, in the exercise of its administrative authority, it would be entirely proper for the FCC to condition license transfers on compliance with FCC rules, and even to inspect closely whether the merging parties are in compliance with those rules. But compliance with existing rules rarely is the focus of FCC license transfer reviews. The merger reviews became examples of improper administrative behavior. The following is a list of the failings from just one merger review, SBC-Ameritech:

  • The transaction was found to be out of compliance, even though it did not violate any extant statute or rule.
  • The alleged harms were speculative and unrelated to the merger.
  • The conditions did not remediate the alleged harms.
  • The conditions were inconsistent with the Communications Act.
  • The conditions were disproportionate to the alleged harms.
  • The conditions placed undue administrative burdens and costs on both the FCC and participants in the telecommunications market.
  • The conditions were either voluntary and therefore unenforceable or involuntary and therefore judicially reviewable.
  • The FCC lacked merger-review authority.
  • The order was adopted pursuant to extraordinary procedures that undermined the appearance of impartial decision-making.
  • The order was adopted pursuant to an ad hoc and potentially arbitrary rule.
  • The order failed to articulate intelligible principles for the “public interest” test for mergers. (footnote omitted.)

These and other failings are found in practically every merger reviewed by the FCC.

The process by which the FCC’s approves, rejects or imposes conditions on the transfer of broadcast licenses has become corrupt and ought to be reformed. In the meantime, investors will pay extortion to politically-favored special interests simply for trying to improve the competitiveness of communications firms subject to the FCC’s archaic jurisdiction.

Hance Haney

Director and Senior Fellow of the Technology & Democracy Project
Hance Haney served as Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute, in Washington, D.C. Haney spent ten years as an aide to former Senator Bob Packwood (OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee during the deliberations leading to the Telecommunications Act of 1996. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a B.A. in history from Willamette University and a J.D. from Lewis and Clark Law School in Portland, Oregon.