Wednesday, January 19, 2011

Comcast-NBC Deal: No Regulation Is Good Regulation?

Part of the point of Teddy Roosevelt and the Trust Busters was, of course, to prevent the kind of vertical integration which has become rampant in the last couple of decades.

Take the Comcast acquisition of NBC Universal: The cable giant will own NBC, and be able to distribute its content through its distribution network.

The FCC recently approved the deal with some unbelievably light caveats (NBC can no longer manage, but can retain its stake in the online distributor; Comcast cannot exclude Bloomberg from its “channel neighborhoods” that it provides its customers)—these caveats were so light that they were more along the lines of cheerleading the deal, rather than true regulation.

If this deal had been cut in 1950, it would have been challenged by anti-trust crusaders. Hell, if it had been cut in 1960, 1970, 1980, even 1990—it would not have been approved.

Why? Simple:

The Comcast-NBC Universal deal goes directly against the spirit of the United States v. Paramount case, the 1948 Supreme Court decision that prohibited film studios from owning an exhibition network. Before, each studio owned its theaters—and only exhibited the parent studio’s products, squeezing out any independent producers. After the decision, independent producers were able to get their films on the screen.

The Paramount case gave the Federal Communications Commission the standing to demand that the nascent television networks limit their ownership of affiliates to a set percentage of the total market. That’s why NBC, CBS and ABC can only own and operate the local channels in New York and Los Angeles, while their affiliatated local stations in every other market are independently owned.

The whole rationale was so as to prevent a concentration of power, and thereby foster competition.

The Comcast-NBC Universal deal goes directly against this American precedent, as Comcast (the distributor) will now be one with the producer, in this case NBC Universal.

In other words, it will be a trust—a monopoly.

This is part and parcel of a wider problem in the United States: The oligopolization of America.

Consider the repeal of the Glass-Steagall Act, which separated investment banking from commercial banking: There was a reason for this division—it was not arbitrary. And the world found out about it in 2008, during the Global Financial Crisis: The repeal of Glass-Steagall created the Too Big To Fail banks, which are now an albatross around the American economy’s neck. 

Regardless of the mealy-mouthed FCC caveats in its approval, Comcast will now be able to squeeze out any competing programming—or else be able to demand of the other networks exorbitant fees to carry their channels.

Since cable service providers cannot be changed—if you have Comcast in your neighborhood, that’s it—viewers will be forced to watch what Comcast decides.

In other words, by acquiring NBC Universal, Comcast will be vertically integrated, and be able to squeeze out any competition directly for its benefit, at the cost of consumer choice as well as industry growth.

Or to say it in yet another way: With this deal, the FCC is allowing Comcast to purchase NBC Universal, and thereby stifle the marketplace, stunt the growth of the industry, and provide viewers with fewer choices.

What a great deal . . .


  1. I am torn on this type of issue: On one side, i do not think the government has any place in these matters at all. On the other side, some entity needs to prevent monopolies from being created, or at least to break them up. In this case, it seems like another step in the direction of state capitalism. And why not, over here in China they are experiencing 10% growth and selling electrical generators to India at a 60% discount (against GE). Facetious??? Nooooo...

    C deK

  2. GL,

    I think you have this one partly wrong. The examples you cite in favor of anti-trust actions are monopolies. However, their monopoly status doesn't come from some innate problem in the market. It comes from the government itself. NBC and the movie studios before them share intellectual property monopolies granted and enforced by the government. Without these IP grants there would be no problem for independent studios or cinemas. The same thing applies to the banks. Financial services are basically completed controlled by the FED, SEC, tax law, etc. There is no free market at all. That is why the banks were so large.
    The laws you refer to exist because the government has already created a monopoly market. Without the government interference there would be no need for antitrust laws or similar regulations.


  3. FIOS TV, Dish Network, DirecTV, Netflix,, iTunes, BitTorrent, YouTube,,,, Podcasts

    I'm no fan of Comcast but they aren't the only game in town. In fact, traditional Cable TV like Comcast is perhaps the most limited viewing available next to OTA. I'm not really in favor of the merger but it's not going to impact my viewing. I have the most limited possible cable TV and that's only for Sunday Football. The other 95% of video content comes from somewhere other than my TV and if Comcast Internet starts to throttle I'll switch to FIOS, DSL, Clear or similar. There are plenty of choices for most people. Perhaps the best choice would be to pick up a book.

  4. @Count deKuntier

    It was the government themselves who made the regional monopolies in cable television. It is the government who created the copyright laws. It is the government who divided the radiospectrum as they did at the advent of the FCC.

    You cannot separate modern broadcasting from government regulation. The question is how do you do it in the best way.

  5. @Ben:

    Your post was good until you concluded with this absolute:
    "Without the government interference there would be no need for antitrust laws or similar regulations."


  6. @ JRigs

    Thanks for the complement. However, can you show me one example of a prototypical monopoly that is not heavily subsidized by government? My point is that the type of powerful institutions that anti-trust laws and regulations are supposed to stop are inevitably institutions that are supported by government. Without this special benefit those institutions would not have to power that is worrisome in the first place.

  7. GL --

    two things:

    you're a media guy -- so i know this issue really hits home for you (it's subtly evident in the writing style even without that knowledge), and .. ..

    this reads like something from adbusters, dude

    AOL had the early internet by the balls, but they got too big and bureaucratic and unimaginative, which encumbered their ability to innovate, and where are they now?

    the point is: sometimes monopolies happen, but i don't see any reason why they could last -- there will always be a younger, nimbler startup providing something new that the big, slow, old, lumbering monopoly won't be able to implement, and it'll catch fire .. .. at most, the monopoly would be late for that party (as creative ideas take much more time to escalate up the ranks of the cutthroat corporate monopoly .. .. the startup, on the other hand, has nothing to lose -- including time)

    i would liken a big monopoly business to a big monopoly government -- there comes a point when it collapses under its own gravity, like a star collapsing into a black hole

    sometimes you don't have to resist by direct oppositional force, _especially_ when that force is great -- when computer hackers want to render a site inoperable, they decide (instead of rallying behind a boycott) to flood the offending party's servers with so much traffic that those servers crash .. ..

    sometimes it's more effective to gorge the beast with its favorite food until it dies of a heart attack than to fight it head-on .. .. in the meantime, it's still there, but you know what's going to ultimately happen

    j.j. from pittsburgh


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