Cable TV

FCC: Dish Network resists Comcast-Time Warner Cable merger

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BENGALURU:  Citing irreparable harm to competition and consumers, and no discernible benefits, from the proposed union of the first and second largest cable companies in the nation, Dish Network Corp (Dish Network) filed its reply at the FCC to Comcast-Time Warner Cable’s (TWC) Opposition to the Petitions to Deny their proposed merger.

“Everyone who likes to watch high-quality online video has particular reasons to worry about the proposed merger,” said Dish Network senior vice president and deputy general counsel Jeff Blum. “More than 54 per cent of the country's high-speed broadband connections would be controlled by the combined company, and all online video distributors would be at the mercy of Comcast-TWC.”

Some of the key points of Dish Network reply include:

Comcast-TWC will be able to destroy OVDs with impunity. And destroy them it will: Dish’s experience based on the business case for Dish World and Dish’s soon-to-be-launched domestic OTT service demonstrates that an OTT could still turn a profit if it were to suffer foreclosure at the hands of a standalone Comcast, but not if the effects of the foreclosure spread across both of the Applicants’ systems. Based on his analysis of that business case, Dish’s expert economist Professor David Sappington concludes that, while foreclosure conduct on the part of Comcast today is probably survivable for an OVD such as Dish’s new OTT service, the same conduct would be lethal if undertaken by Comcast-TWC.

As the petitions and comments demonstrate, high-speed cable broadband connections are the lifeblood of over-the-top (“OTT”) video services that typically target national audiences. For that reason, among others, the relevant geographic market for this transaction is national. Furthermore, the relevant product market should include only those services capable of supporting the robust online video services that consumers demand, which requires a household to have actual and consistent download speeds of at least 25 Megabits per second (“Mbps”). If approved, the combined Comcast-TWC would control more than 54 per cent of the broadband pipes in the United States that have speeds of at least 25 Mbps, and will be on a path to virtual dominance of the high-speed broadband market given that the combined company will pass nearly 70 per cent of pay-TV households in the US.

Use of the Commission’s own method for estimating actual departures of a rival’s subscribers due to temporary foreclosure with a time horizon of six months leads to the conclusion that Comcast-TWC can reap eye-popping gains from denying its competitors NBCU programming. This will affect competition in a number of ways. It will cause subscribers to leave the competing distributor in favour of Comcast-TWC; it will cause dissatisfied Comcast-TWC subscribers to stay put instead of losing their access to NBCU; and it will let NBCU extract higher prices for its own programming by leveraging the fear of foreclosure.

The merger’s claimed benefits, if any, cannot outweigh the merger’s harms. In the Opposition, the Applicants devote hundreds of pages to extolling the purported benefits of the merger. Many of these benefits are illusory or speculative—characteristically, the Applicants offer no more precise quantification than “hundreds of millions of dollars.” Many of the benefits are also not merger-specific. The upgrade of TWC systems, supposedly made possible thanks to the merger, is a prime example. Public documents show that TWC had planned to complete this transition itself as a standalone company. This means that large portions of the claimed benefits attributed to TWC upgrades (again left unquantified) should be disallowed in their entirety.

Conduct conditions would fail to address the merger’s many harms. Conduct conditions did not work for Comcast-NBCU, and they would not work for this transaction, which poses substantially greater risks of harm. There is little reason to believe that Comcast will alter its pattern of repeatedly breaking promises. Moreover, the complexity of the gatekeeping function over the Internet choke points alone promises a myriad of technicalities that would likely allow circumvention of, and/or interpretive debate over, any conditions. Ultimately, if the Commission approves the merger believing that conditions are sufficient to address all the harms, there is no going back. The consequences of getting it wrong are too great, the risks too high. The public deserves better.

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