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

[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]

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

[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.

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.

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...?