Krugman: Say No To Comcast Acquisition of Time Warner

nbauman writes "In his column, 'Barons of Broadband' New York Times columnist Paul Krugman says: 'Comcast perfectly fits the old notion of monopolists as robber barons, so-called by analogy with medieval warlords who perched in their castles overlooking the Rhine, extracting tolls from all who passed. The Time Warner deal would in effect let Comcast strengthen its fortifications, which has to be a bad idea. Comcast's chief executive says not to worry: "It will not reduce competition in any relevant market because our companies do not overlap or compete with each other. In fact, we do not operate in any of the same ZIP codes." This is, however, transparently disingenuous. The big concern about making Comcast even bigger isn't reduced competition for customers in local markets — for one thing, there's hardly any effective competition at that level anyway. It is that Comcast would have even more power than it already does to dictate terms to the providers of content for its digital pipes — and that its ability to drive tough deals upstream would make it even harder for potential downstream rivals to challenge its local monopolies.'"

Comments

Ok

[The Cat]

Of course they don't compete. Cable companies have government-sanctioned monopolies.

I'd say give them a choice. You can merge if you relinquish your monopoly.

Then we'll see what's most important to them.

Re:Ok

[hey!]

Well, in a lot of places they have competition from fiber, and places where they *don't* are places where building out a competitive network is unprofitable. Relinquishing the monopoly on cable would be no big deal.

Krugman's point is that consolidating all those places where cable is the only game in town gives them a powerful middleman position. The monopoly has done its damage as far as the market is concerned; you can take the legal monopoly away and the de facto monopoly on access to the market will remain.

Re:Ok

[admiralh]

Cable is a natural monopoly. Competition really doesn't work in this type of business.

What we really need is for cable high-speed internet service to be declared a "Common carrier", so they are required to not discriminate against NetFlix, etc.

Re:Ok

[SQLGuru]

De-regulation along the lines of the power companies? In other words, break apart "generation" and "distribution"......make TV/broadband one entity and then make the lines themselves a different entity. Have the distribution entity charge customers the same rate scale so that other companies can compete on equal footing.

Re:Ok

[Obfuscant]

De-regulation along the lines of the power companies? In other words, break apart "generation" and "distribution"......make TV/broadband one entity and then make the lines themselves a different entity. Have the distribution entity charge customers the same rate scale so that other companies can compete on equal footing.

The problem with this solution is that the cable system isn't designed that way. The electric grid is, in essence, wires. Generators put electrons onto the wire, customers pull them back off. You can't tell where an electron came from, but the utility company bills you for them at the rate of the company you choose (assuming that company has actually put enough electrons onto the wire to cover their customer's use.)

Cable TV isn't that way. You can't put two channel 5s on the same system. There is a limit to how much can be put on. A provider that gets to use channels 1-20, for example, prevents anyone else from using 1-20. How do you divvy up the limited space? Once you get 83 content providers, you've pretty much used up the full system. And multiple Internet providers would be even worse -- the space is smaller. (And before someone points out that under the wonderful new digital world anything can appear on your TV as "Channel 5", I'm talking about the frequencies and not the arbitrary digital channel id.)

Re:Ok

[morgauxo]

I suspect that only people who live in an area with fiber would say that a LOT of places have fiber.

Re:Ok

[SQLGuru]

In my area, I can actually opt to have Earthlink as my ISP instead of TWC. Earthlink offers a similar service level using the same lines that TWC laid. If I paid Earthlink for my connection, Earthlink would keep some portion and then pay TWC for use of the lines. That's more or less how deregulated power companies operate.

Re:Ok

[icebike]

Well, in a lot of places they have competition from fiber, and places where they *don't* are places where building out a competitive network is unprofitable. Relinquishing the monopoly on cable would be no big deal.

In vastly more places there is exactly ONE cable plant in the ground. There is no competition.
Further, most municipalities will not allow building out competitive networks, simply because the disruption is so great.
These plants went in when the neighborhood was built, and no late comers will be allowed.

Re:Ok

[icebike]

Cable is a natural monopoly. Competition really doesn't work in this type of business.

What we really need is for cable high-speed internet service to be declared a "Common carrier", so they are required to not discriminate against NetFlix, etc.

Or pry the last mile out of the fingers of cable companies and put it in the hands of Local government, like streets, water, sewer.
That way the local rate-payers and tax payers can allow multiple content and internet providers, and maintain their own fiber/cable plant.

Natural monopolies require special treatment.

Re:Ok

[cusco]

Enron's market manipulations were enabled by separating production from transmission. If they had been required to sell for Generation Cost + X% (the old rule) there wouldn't have been the rolling blackouts and grotesque pricing.

Re:Ok

[jedidiah]

> Because the market isn't there.

Yet cities decide to take matters into the own hands only to be subjected to corruption of their own state government at the hands of the Robber Baron in question.

Re:Ok

[desertfool]

Time to kill my Karma....

I was living in Arizona at the time of the rolling blackouts in California. I remember newspaper stories about how APS and TEP (Arizona power companies) were planning to build power lines to northern Mexico to sell their excess power. Now, I don't know what power lines existed between Arizona and California at the time, but I would assume 2 big power companies with excess power (to the point they wanted to build lines across the border!) would have been able to add power to southern California.

Re:Ok

[Vitriol Angst]

In my state they "deregulated" our Natural Gas supply. Now they've got about 2 dozen companies I can shop with -- only they cost about 5 times what we used to pay for Natural Gas. The same guys who install and cut off your gas are the same guys now -- only they have no job security and they can work for any of 2 dozen companies that someone has to bill and compensate them for. Same work, less pay.

You call them and get either a robot "Your call is important to us, press 3 if you would like another series of options" or you get someone after a long wait who is doing a passing job with English and can't solve any of your problems.

So one pipe, one gas supply, 24 different P.O. Boxes and bills that have "transfer fees" and every few months a new company runs a special because it's their turn.
I've got no interest in a pretend free market on one pipe without regulations.

Who is he talking to

[neminem]

Certainly not us. We don't really have a choice. Comcast could merge with freaking Verizon, thus giving us the granddaddy of all broadband monopolies and dooming to forever pay too much money for a crappy connection and no recourse when stuff breaks (which would be often), and our choices would be to suck it up, or just suck it. So I'm not sure what he thinks we should be doing about it...?

Let them merge then split

[sanosuke001]

Let them merge and then split into two companies; the one that owns the fiber/hardware and the one that sells services. Force the hardware company to sell bandwidth to anyone that wants to offer services.

Re:Let them merge then split

[Obfuscant]

While this kind of arrangement has finally worked itself out in the telecom divestiture, for a long time it was a big big mess. Especially messy for the consumer who was stuck trying to get problems fixed. "It's the local loop." "It's your long distance provider". "If we come out to fix the wire and it turns out to be your CPE, we'll charge you a large fee for a visit."

And for a very long time it was a real battleground for the long distance carriers (i.e. "content"). Consumers would get called regularly trying to get them to change carriers, and then get "slammed" -- involuntary changes. You'd get a number that started out 10-xxx-... and find out after you called it that you had manually picked a shyster LD company that charged astronomical rates.

Sure, yeah, let's do it all again with cable TV.

Re:Let them merge then split

[don.g]

The trick is to have the lines providers wholesale to the retail ISPs/etc, who then provide CPE. If the service doesn't work, the end user's contract is with their retail service provider, who has to sort it out, no matter where the problem is. That's how it works here in New Zealand on our fancy new fibre network that's slowly replacing the old copper phone network. It's mostly how it worked on the old copper network, too.

My ISP (Orcon) provide CPE (a router with voice ports) that plugs into the fibre company's ONT. If the internet or phone doesn't work, it's Orcon's problem. I don't have a contractual relationship with the fibre company so if it's the fibre that's down, it's still Orcon's problem as far as I'm concerned.

Re:Comcast challengers? What is K been smoking?

[MarkWegman]

If you read the article you'd know he was pointing out that with this merger Comcast could force other companies that provide them with content sweetheart deals.

As a Comcast employee...

[Slartibartfast]

I don't really know how I feel about the acquisition. I think some of the things Krugman talks about -- e.g., no incentive to upgrade networks -- certainly has validity; I also know that we *HATE* network congestion, and just in my unit, alone, spend tens of millions a year to avoid it. Of course, without incentive, that's just 'cause we feel like doing that, not because we have to.

The one that has me really, truly worried, though, is Net Neutrality. I am *STRONGLY* in favor of the FCC saying "F*** you all: it's time," and pushing it out. I think that neutrality, combined with the rise (and eventual commoditization) of cellular networks, as well as good ol' Ma Bell and DSL, will be able to offer competing solutions. Of course, then there's satellite, as well, but the inherent latency makes that a poorer option by definition.

Comcast is, however, essentially right: they don't compete with other cable companies because of the infrastructure; one thing that might be interesting -- though I have a sneaking suspicion Republicans would cry foul about over-regulation all day long -- would be if the gov't enforced a move akin to the telecom and power companies: if cable companies could offer the landline connection, but you were able to get service from anyone. That would go a great way toward leveling the playing field.

Re:Paul Krugman, 1998

[jcr]

Krugman admits to not be a technologist.

Well, that's a start. Let us know when he admits to not being an economist.

-jcr

Re:Comcast challengers? What is K been smoking?

[evilviper]

Who exactly is rising up to challenge cable monopolies? What downstream challengers is he talking about? Netflix? Aereo?

Netflix, Hulu, Amazon, Apple, Google, etc.

If I'm some dinky little neighborhood cable company, and I'm negotiating a contract with Viacom for carriage on my network (with my 30,000 subscribers) and I insist that part of the agreement is that they can't license any of their shows/movies for streaming from Netflix, Viacom would tell me to fuck off.

Now, if it's Comcast instead, Viacom has a hard choice... Do they cut access to all their shows off from the 40 million Netflix subscribers, or from the 30 million Comcast subscribers? How about if they do the same to HBO, and their DVD releases have to be delayed an extra year...?

Re:Paul Krugman, 1998

[jedidiah]

> I disagree. The burden of proof is on those who want to interfere with the right of the rightful owners of these companies to dispose of their property as they damn well please.

We already have experience in these areas. We even wrote a body of laws to address this particular problem. There is nothing new or interesting here.

We just have libertardians trying to pretend that history doesn't exist and these kinds of problems haven't happened before.

Your notion of capitalism is about 150 years out of date.

Re:Comcast challengers? What is K been smoking?

[hermitdev]

Except the fact that Comcast has methodically been working on both vertical and horizontal monopolies. Did you miss their acquisition of NBC Universal? Funny thing about that acquisition, as a Comcast subscriber, I lost channels I used to have. One offhand was Universal Sports. Between then Versus, now NBC Sports Networks and Universal Sports, I used to be able get TV coverage of nearly all major cycling events. Comcast dropped Universal Sports, and now the only cycling I can get are maybe 1 or 2 spring races, and the grand tours.