A new study estimates that the proposed merger between Comcast Corp. and NBC Universal Inc. could boost bills for subscribers to DirecTV and other non-Comcast pay-TV providers in the Philadelphia area by $2 a month, or roughly 3 percent on a $70-a-month bill.
Comcast subscribers would be insulated from higher pay-TV rates related to the merger for a year or so. But the cable giant would have "headroom" to boost its own rates as competitors' bills climb, said William P. Rogerson, an economics professor at Northwestern University and author of a national study financed by an association of small cable operators and other opponents of the Comcast/NBCU deal.
Rogerson was a former chief economist at the Federal Communications Commission, which is reviewing the Comcast/NBCU merger for its public benefits.
The American Cable Association, based in Pittsburgh and a vocal critic of the merger, released the study that estimates the total cost of Comcast/NBCU to consumers across the nation will be about $2.4 billion in higher pay-TV bills over nine years. These higher bills would be in addition to typical cable-bill inflation.
Comcast dismissed the study as flawed and an attempt to delay the government review.
Comcast and government officials have been meeting in recent weeks to discuss the deal. Comcast will acquire a 51 percent stake in NBCU, which would include cable networks, the NBC broadcast-TV network, and the Universal movie studio and theme parks.
Brian Roberts, Comcast's chief executive officer, has said he hopes to obtain approvals from the Department of Justice and the FCC by year's end. Some observers believe it might not happen until early 2011.
According to Rogerson, higher bills for non-Comcast, pay-TV customers in the Philadelphia area would result from the negotiating leverage Comcast would gain through its control of an array of broadcast entities, including the Comcast regional sports network, NBC cable networks, and the local NBC10 broadcast-TV station.
If the merger is approved, operators in the region such as DirecTV, Dish, RCN, and Verizon will have to negotiate for access to that "must-see" programming and Comcast can hold out for higher prices, Rogerson said. The higher charges for the programming will then be passed along to subscribers.
Philadelphia is one of several markets where Comcast will obtain the most negotiating leverage, the economist said. The other markets include Chicago and San Francisco. Rogerson said any potential hike in pay-TV bills because of the merger should trouble government regulators.
Comcast, in a statement, said: "Once again, ACA has submitted flawed economic analysis. It relies on assumptions and calculations that are unsupported, directly contradicted by available data, and contrary to previous FCC rulings.
"After having more than nine months to make its case, and after two prior attempts that we thoroughly rebutted, ACA is making an obvious attempt to further delay the approval of the Comcast/NBCU transaction. ACA's efforts should be rejected by the FCC on both substantive and procedural grounds."
Comcast said some of the issues raised by small cable operators were examined in prior mergers by the FCC "and in each case [the FCC] rejected imposition of a condition on national cable networks."
Ross Lieberman, the vice president for government affairs at the American Cable Association, said, "We believe that $2.4 billion in price increases will have a significant impact on consumers across the country. And actually, we think the calculation is a conservative one, so the harm could be greater."
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