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Back to the Future With Comcast

After hammering out the details in daily meetings with Comcast over a three-month period in late 2010

After hammering out the details in daily meetings with Comcast over a three-month period in late 2010, the Federal Communications Commission (FCC) and the Department of Justice (DOJ) approved the $30 billion merger of Comcast and NBC/Universal in January 2011. The nation’s largest Internet and TV provider is about to get much bigger. The public can comment for 60 days, but it’s pretty much a done deal.

Coriell Wright, an attorney with Free Press, a nongovernmental organization (NGO) opposed to the merger, watched it all go down.

“I was genuinely positive about the process until November. The FCC staff asked great questions, they requested a lot of information from Comcast, But a lot of the good points that were made in the flings didn’t make it to the end game when push came to shove in bargaining with Comcast.”

Wright said a coalition of merger opponents met with FCC staffers about once a week during that time, while Comcast and NBC met with them “once a day or more.”

“I don’t feel we were excluded, but we didn’t have meetings every single day like Comcast and NBC did. And we don’t have hundreds of lobbyists on call like they do,” Wright said.

Comcast spent $100 million to get the merger approved. It hired 100 former government employees and paid $8.8 million to 30 lobbying firms to help seal the deal. It dumped a lot of cash all over Capitol Hill in the past two years. The numbers are here.

Twice in October 2010, the FCC granted Comcast and NBC enhanced confidential treatment, related to their programing and carriage agreements and their “current and forwardlooking business strategies and plans, which contain the company’s analyses of particular sectors of the media and communications industry and detail perceived trends, possible business initiatives to respond to those trends, and customer analyses.”

In other words, Comcast met behind closed doors with the FCC to map out the future of broadband service and video streaming over the Internet. Anyone who wonders how federal banking regulators got captured by the financial industry, or how lawmakers got neutered by the insurance companies on the health care bill, or how big money is going to buy the next presidential election, should study the Comcast merger. It is a cautionary tale of things gone awry in Washington, where corporate speech is heard and heeded and the voices of actual citizens are ignored.

The DOJ checked the deal for any anticompetitive elements. Under a much weakened Taft Hartley law, the DOJ doesn’t really oppose monopolies these days, but rather imposes conditions to protect the status quo of the so-called “free market.” So, under the terms of the agreement, Comcast cannot discriminate against program producers or distributors who want to provide Comcast programs to their customers. About 173 of the agreement’s 279 pages deal with those matters.

About 75 pages deal with the FCC’s job, which is quite different than the DOJ’s legal one. Under its mandate as a federal agency that regulates telecommunications, the FCC has to affirm that the merger would advance the public interest in some way and not just preserve the status quo.

The FCC says the conditions it put into the deal require Comcast/NBC “to take affirmative steps to foster competition” and based on the company’s promises, the FCC found the merger to be “in the public interest.”

“ComcastNBC will increase local news coverage to viewers, expand children’s programing, enhance the diversity of programing available to Spanish-speaking viewers, offer broadband services to low-income Americans at reduced monthly prices, and provide high-speed broadband to schools, libraries, and underserved communities, among other public benefits,” the FCC announced.

“Those are all good things,” says Wright, “but ultimately don’t touch on the problems that are baked into the structure of the new company.” In other words, a newer bigger Comcast won’t change your cable lineup much, if at all.

“I tried to find a place where the FCC says that the merger would result in more competition, lower prices, or more diversity. But that’s not in there because the merger won’t do any of those things,” she said.

How Big Is the Deal?

Very big. In addition to its cable systems in 39 states, Comcast would get a production arm, Universal Studios; and a broadcast network, NBC, with its 10 wholly owned stations; and CNBC, a financial news cable network; and 16 Spanish language stations on Telemundo. The combined company would own or control 125 cable channels, studios, stations and web sites that would provide 20 percent of what people watch on TV, and by next year, according to the FCC, broadband companies like Comcast will have monopolies in about 80 percent of the country.

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Media scholar Ben Bagdikian, author of “Media Monopoly,” paints a grim picture of the future when Comcast has its way.

“The Comcast NBC merger will have twice as many customers as any other broadband service. Everyone who is dependent on AT&T for telephone service knows that their response to subscriber complaints is notoriously poor and woefully slow for repairs. NBC’s merger with Comcast will make it the world’s largest cable company and if history is repeated, a public service company that is twice as large as it’s nearest competitor, does not have to worry if it tells its customers to wait for repairs or service and the general public will suffer from restricted choices and programs. A generation ago when Gannett became the giant in newspapers good papers disappeared. If this happens to cable, the fate of newspapers will be repeated in the cable industry,” he said.

Even basic cable coach potatoes like me understand that this bleak future is already here. I’ve seen “Rocky” so many times, I’ve started hoping he’d just stay down in the fifth round and be done with it. I suspect it’s about the same everywhere else: the same action movies over and over and over again. Watching bowl games on New Year’s Day used to be a tradition in America. Not anymore, unless you pay to see them. ESPN carried 33 of 35 bowl games on their subscription channels this year. The take-away lesson about cable TV is that more is really less.

Critics say the merger will mean fewer choices and higher prices for consumers. Well, we’re already used to that. Will the future bring us better fare than “Deal or No Deal,” “Minute to Win It,” or “Dancing With the Stars”? These shows may be popular, but they are also pathetic because so many Americans are downwardly mobile these days. Mainstream TV is just a mass opiate to help us forget our misery.

What passes for quality programing on TV gives cold comfort to the three million Americans facing foreclosure this year, the 15.5 million American kids living in poverty and the 16 million Americans without a job. Remember “Playhouse 90,” “The Honeymooners,” “See it Now,” “The Twilight Zone”? For my money, there’s nothing comparable on TV today at any premium program price.

Rates for Cable TV have been going up 5 percent a year and more Americans aren’t buying it anymore. Last year, 800,000 households in the US dumped their TV provider and that number is expected to double this year. That’s a small proportion of the nation’s 100 million TV subscribers, but why pay money for shows you don’t want to watch, when you can see the ones you do for free or a lot cheaper on line?

Stifling Innovation

Comcast built its empire out of wire and lowest common denominator programing. The first has been around since the telegraph and the second since at least the third or fourth Grade. Now we have satellites, Dish TV, FiOS and wifi and all of these new technologies threaten Comcast, which lost 275,000 cable customers in the third quarter last year.

The Internet as video platform is just a few years old, but already has 150 million people watching at least once a month. Sales of web ready TVs and other equipment to watch Internet video will jump from 14.6 million to 83.4 million by 2014, according to InStat, an Internet, marketing research company.

Here’s the bad news: a combined Comcast/NBC will create a vertically integrated behemoth like the trusts and monopolies of Teddy Roosevelt’s day. It could operate with virtual impunity toward the public and over its rivals, like a Mexican drug cartel.

“The rise of the Internet makes cable companies obsolete…. the only way for them to stay alive is to generate so much power, both as a distributor and content provider, they become a mafia-style vertically integrated market. They will use content as a cudgel to extort exorbitant fees out other cable companies and customers,” said Josh Silver, President of Free Press.

Comcast’s Business Plans

John Dunbar, a former AP reporter who now works at American University’s Investigative Reporting Workshop, published a report in the January/February 2011 issue of Columbia Journalism Review. He looks under the rug of the proposed merger and notes that Comcast wants to protect its revenue streams in broadband and cable, and grow them both, even as TVs and computers become one.

“One way to do that is to keep competition in check. Comcast would be in a unique position to do just that especially because, by adding NBC Universal to its holdings, Comcast will become one of the nation’s largest television programmers, too the only company to have such a large position in programing, cable and Internet distribution,” Dunbar wrote. His article is available here.

“Don’t hold your breath waiting for ComcastNBC Universal to welcome an Internet utopia of free-flowing, no-charge television content,” he concludes.

Comcast says after the merger, broadcast programs will most likely wind up on Hulu, in which it will have a 27 percent stake but no operational control, and cable shows will go to TV Everywhere, a joint venture Comcast started with Time Warner in 2009. Hulu is free, but TV Everywhere is only free to cable subscribers and only for the programs they already pay for.

“It’s not that Comcast thinks it can kill online video. They’re not stupid like the recording industry was,” said Harold Feld, legal director with the Washington, DC, digital advocacy group Public Knowledge. “What they want to do is manage the terms under which we’re going to change so that they can continue to make the tons of money they’re making right now selling their cable service.”

A Short History of Cable TV and Why Americans Are so Dumb

American broadcasters once described, reflected upon, entertained and helped shape our national identity. But maybe I’m just being nostalgic for a time that never really was. Way back in 1961, FCC Chairman Newton Minow called television a vast wasteland. (Oh, how I long for the days when a federal regulator called a spade a spade.) But let’s review some history.

In the halcyon days of broadcast TV, Walter Cronkite was the most respected man in America. Over time, pretenders, who looked good and could read other people’s copy as if they wrote it, replaced the sober men of Cronkite’s generation. Authenticity went out the window and with it our collective grip on reality. Then we got cable and that’s when everything started to go South. We stopped living the American dream, more or less together, and started listening to hucksters, spin doctors and pundits, dreaming our lives away in some ersatz reality via television.

Getting people to pay for what they used to get for free turned the country upside down. It was a very big deal … for the cable companies. In exchange, we got CSPAN. Then, in 1984, we got the Cable Act. It was the first major revision of telecommunications policy in the US since 1934. The law deregulated the industry that quickly spread like a cancer all over the country and into fewer and fewer hands. By 1991, just nine companies owned more than half the cable business in the US. Today, six media giants control most of what we see, hear and read.

Former Washington Post editor and scholar, Ben Bagdikian, has been like Paul Revere on this issue for nearly three decades. He and other media critics, mostly from the left, have been warning about the dangers inherent in such concentration. In short, robust public discourse is stifled when huge corporations control the marketplace of ideas. Same thing when it comes to cultural programs. Producers get strong-armed, competitors are squeezed out and consumers get gouged wherever a monopoly controls a market. The public interest is not served.

Window Dressing the Public Interest

For its part, the FCC wanted assurances from Comcast that it would play fair after the merger was approved. But that’s like asking the greedy banker not to foreclose on the sweet, old widow because she can’t pay the mortgage any longer. All regulators have a similar problem: they presume the innocence, if not the good will, of the industry players in whatever game they referee. They are hopelessly utopian in a dystopic world. All corporations engage in the single-minded pursuit of money. They aren’t moral or engaged in fairness, and it sometimes takes years before some kind of remedy can be found for the bad things they do. And by then it can be too late. Think Bernie Madoff, not Bill Gates.

Comcast sweetened the deal by agreeing to provide a $10/month broadband service to low income families. And it agreed to add ten new channels, to its D1 Digital Tier lineup. Eight of them will be minority owned or at least partly minority owned. Comcast will pick the owners. It also agreed to give two Asian groups $1 million dollars to develop programs and committed $20 million in venture capital to Hispanic and African-American producers to develop “new media content and applications.” It is not clear if that content would be created for the new channels or not.

That sounds pretty good, but it breaks down to the average price of just one Hollywood action movie spread over eight years and a very wide demographic. There will be no lack of ethnic producers to fight over the money. They will be picked by Comcast, of course, and they may or may not produce programs that rise above your average “ghetto channel” offerings. But even if they do, they won’t be able to reach a really big audience because their programs will likely run only in Detroit; Washington, DC; Atlanta; Chicago; and Philadelphia. Comcast will decide where the channels will be carried, of course. And after a few years it will probably shut them down for failure to thrive.

The company also agreed to support local partnerships between nonprofit news sites and ten of its NBC broadcast stations and six of its Telemundo Spanish language stations. NBC’s San Diego affiliate currently takes two stories a week from a local news startup called Voice of San Diego.

Adding 1,000 more hours of news and public affairs programs a year sounds good, but it comes out to about 16 minutes a day, and its just 16 markets out of about 300. And it will almost certainly be more of the same dumbed-down and warmed over mainstream pabulum that we already have. Why? Because Comcast has not promised a plug nickel to fund the newsgathering operations of their prospective news partners in those markets. Where will the investment come from to nurture news startups in those cities? Presumably, from some rich philanthropist, but it’s a safe bet it won’t be Comcast CEO Brian Roberts.

“You can’t point to any current Comcast owned channels as exemplary public interest programing,” claims Josh Silver, president of Free Press. “Now that they are taking on $30 billion in added debt to NBC, you can be 100 percent sure they aren’t going to surprise us with quality content,” he added.

Its critics say Comcast is a notoriously bad actor on public interest issues. It has a long history of opposing local journalism efforts on public access channels that it is required to provide wherever it operates cable systems. Indeed, the company blocked local PEG channels for decades in Philadelphia, where the company is headquartered. In any case, Comcast’s promises aren’t nearly enough to satisfy opponents of the deal because the conditions the FCC imposed all sunset after seven years.

“The conditions are sort of a side show and the negative impacts of the merger are still going to happen, they just aren’t going to happen until 2018,” Silver said.

Two Cases in Point

If Comcast’s critics are right, the merger puts the entire communications infrastructure, the information superhighway and the entertainment industry all at risk by putting too much control in too few hands.

Take former Vice President Al Gore’s ill-fated Current TV, for example. Even a Nobel Prize-winning author and former presidential contender, some say undeclared winner, even he could not muster enough venture capital to get his channel onto a major cable network.

“It’s because of the whims of these cable companies whose policy decisions are completely corrupt. It’s a walled garden they run,” says Silver. “Their goal is part of a master plan to turn online video into the 21st Century version of cable TV.”

If the past is any guide, the merger won’t boost news and public interest programing, but rather stifle it. Al Jazeera is a perfect example of that. It is well-funded and the quality of its news is first rate and no news organization anywhere can match its coverage of the Arabs-peaking world. By and large, Americans can’t watch it.

“Other than in a handful of pockets across the U.S. including Ohio, Vermont and Washington, D.C. cable carriers do not give viewers the choice of watching Al Jazeera,” wrote Ryan Grim of Huffington Post recently.

“That corporate censorship comes as American diplomats harshly criticize the Egyptian government for blocking Internet communication inside the country and as Egypt attempts to block Al Jazeera from broadcasting,” he wrote.

On cable systems in Canada, Al Jazeera became widely available after the network ran a successful campaign to get Canadians to demand it from the Canadian Radiotelevision and Telecommunications Commission. Not so in the US with the FCC.

“There is no policy teeth, no leverage or hook in order to compel Comcast to carry certain kinds of programs like Al Jazeera,” said Silver.

Is Redemption Possible?

When the FCC approved the merger, Commissioner Mignon Clyburn, who voted for it, released a statement that sums things up and may prove to be prescient:

“I encourage people to speak out should they see the slightest bit of programing discrimination or any other type of questionable behavior from the soon-to-be-formed entity. My door will remain open and I will be perpetually available to field any and all future concerns in this regard,” he wrote.

“I expect the parties to live up to the letter and spirit of their commitments. I, and the American people, will be watching,” he concluded.

Well, some of us are watching now, and the FCC just gave away the farm with damned little to show for it. So, if exhortation does not work and several years down the road we are faced with more insipid programs, higher prices, and a less informed public, will the FCC step in to fix what they have wrought?

Stay tuned.

Bio: Peter White is a former USFS smokejumper, surfer, and has covered two wars and three civil conflicts on four continents. He has written anchor copy and produced news for a number of foreign networks, NBC, ABC, PBS. NPR, and a number of print media outlets including The New York Times and San Francisco Examiner. He lives in Nashville with his two sons.

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