Earlier this week — just after US Federal Communications Commission (FCC) staffers recommended that Comcast’s US$45 billion planned acquisition of Time Warner Cable be reviewed by an administrative law judge — Comcast withdrew its acquisition plan. The FCC’s primary evaluation criteria in such cases is whether or not the acquisition serves the public interest. US regulators, at both the FCC and the US Justice Department, were concerned that the merger could harm independent online video providers.
Had Comcast been successful in its acquisition of Time Warner Cable, it would have controlled just under 30 percent of the US’s pay television market and something more than one-half of the country’s broadband last-mile internet connectivity market.
Even with Comcast walking back its Time Warner Cable acquisition, the broadband last-mile internet connectivity market in the US remains deeply uncompetitive. Most of the citizenry is faced with a single choice of connectivity providers capable (or willing) to provide more than 25Mbps connectivity. That single choice was, and remains, Comcast. In December 2014, the US Department of Commerce published its analysis (.pdf; 691.5KB) of the domestic broadband last-mile internet connectivity market, finding that 44 percent of the population has two options to purchase 10Mbps connectivity and that 72 percent have two 25Mbps connectivity options.
Comcast lobbied the US government as heavily as it did relentlessly, using the same basic tactic that proved successful in gaining approval for its acquisition of NBC in 2011: Its Internet Essentials program, which pretends to provide 5/1Mbps broadband last-mile internet connectivity to homes that qualify for the National School Lunch Program at the rate of US$10 per month. After it became clear than only 11-15 percent of eligible households were able to sign up for the program, Susan Crawford writing for Medium accurately tagged Comcast’s Internet Essentials program as a “customer acquisition program masquerading as a philanthropic gesture:”
“For starters, only low-income families with school-age children are eligible for the program. It does nothing to close the digital divide for other underserved groups like the elderly, the disabled, and low-income childless adults. Plus, it’s hard to apply: The California Emerging Technology Fund says that it takes two or three months for applications to arrive. No existing Comcast customers are eligible – no matter how ‘low-income’ you are, you can’t decide to reduce your bill by applying for Internet Essentials instead.”
Couple Comcast’s Internet Essentials fiasco with its position in the national net neutrality debate, and it’s little surprise that the wheels fell off what once was seen as an inevitable corporate acquisition. In hindsight, Comcast’s acquisition dream was stomped out with all certainty last November, when President Barack Obama called on the FCC to adopt “the strongest possible rules” with regard to internet regulation. And before that, John Oliver’s 1 June 2014 hilarious response to FCC Chair Tom Wheeler’s misguided initial net neutrality proposal signaled the shift away from inevitability.
With or without Comcast’s acquisition of Time Warner Cable (or any other corporate entity for that matter), the US last-mile internet connectivity problem — the lack of any meaningful competition at all — remains precisely the same. Perhaps even more importantly, Comcast remains a threat to innovation on the internet (and not just to internet-based video streaming services like Netflix). The only viable solution is a forced split of Comcast into at least three separate businesses:
- Video production
- Cable television delivery
- Broadband last-mile internet connectivity
This is reminiscent of the contemplated breakup of Microsoft beginning in 1991 and ending in 2001. Free marketeers argue that the markets worked by correcting Microsoft’s monopoly. US justice system apologists argue that the system worked when the DC Circuit Court of Appeals overturned the lower court’s finding. I argue that we all lost a full decade — and probably much more — of innovation.