Thursday, May 28, 2015

Comcast-Time Warner: Not exactly monopoly...

Monopsony

Comcast-Time Warner: Not exactly monopoly...

FILE- In this Wednesday, Nov. 28, 2012, file photo, Comcast Corp. CEO Brian Roberts, arrives at the White House to attend a meeting of business leaders with President Barack Obama and Vice President Biden at the White House in Washington. (AP Photo/Jacquelyn Martin, File)
FILE- In this Wednesday, Nov. 28, 2012, file photo, Comcast Corp. CEO Brian Roberts, arrives at the White House to attend a meeting of business leaders with President Barack Obama and Vice President Biden at the White House in Washington. (AP Photo/Jacquelyn Martin, File)

In pleading for #1 cable company Comcast's proposed takeover of #2 Time Warner Cable, Comcast boss Brian L. Roberts and his top lobbyist David L. Cohen have insisted the deal isn't creating a monopoly, or anti-competitive, since Comcast and Time Warner serve different towns and don't compete in their local service areas. 

But of course that's not the issue, argues the New York Times editorial board here (cited by Camden Law School antitrust scholar Michael Carrier): "This deal is important because it would give Comcast greater power over media companies like CBS and Disney and Internet services like Netflix and Amazon. And that would ultimately give it more control over American consumers...

"Because it would control such a large chunk of the country, Comcast would have significant leverage in contract negotiations with media companies over what TV channels cable companies are willing to carry and how much they pay for them... The merger could also strengthen Comcast’s position in its dealings with businesses like Netflix that send data to customers over broadband connections...

"Monopolies... can raise the prices of goods and services... But officials should be just as concerned about deals that turn a business into a dominant buyer that can make or break its suppliers."

A dominant buyer isn't exactly a monopoly; the economic term is "monopsony": Where there's a controlling purchaser of anything -- labor, food, Internet access -- that buyer can jack or cut prices to the point where the whole economy suffers. The fact that Comcast and Time Warner both say they are already keeping more than 50 cents of every dollar as gross profit shows they don't face a lot of price competition.  

But it's not just about prices. "An all-powerful cable company," the Times adds, "would be able to influence and control what Americans could watch or read by refusing to carry channels or certain Internet services, or it could favor its own content. Comcast, for example, might find it tempting to treat programming from NBC Universal, which it owns, better than shows from rival networks and movie studios."

It wouldn't be like the Times to demand this deal be strangled outright. Rather, the editors call for the usual deep investigation by the Justice Department and the FCC, before they approve, modify or nix the combination.

Most initial reaction to the Comcast deal, except on Wall Street, has been negative. We'll see if Comcast can sweep past that, as it did for its earlier AT&T cable and NBC acquisitions -- and whether the cable-Internet industry can successfully postpone the day when the government decides the time has come to regulate cable and Internet access, and even pricing, the way it did for phone and power lines, roads and railroads.

It's inevitable the government will step in, given the historic communications cycle of innovation-monopoly-regulation, according to long-view industry-watchers like Craig Moffett, Timothy Wu and Susan Crawford. But when, and how, and to whose benefit?

About this blog

PhillyDeals posts drafts, transcripts and updates of Joseph N. DiStefano's columns and stories about Philly-area business, which he's been writing since 1989.

DiStefano studied economics, history and a little engineering at Penn and taught writing at St. Joseph's. He has written thousands of columns and articles for the Inquirer, Bloomberg and other media, wrote the book Comcasted, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com, distefano251@gmail.com, 215.854.5194 or 302.652.2004.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano