California Floats Conditional Approval For Comcast/TWC Merger

New submitter Lord Flipper writes: The California Public Utilities Commission decision on the Comcast/Time-Warner proposed merger has just been released. It's not an exciting read, but the 25-bullet-point Appendix to the decision is interesting (PDF, starts on page 75). For example: "19. Comcast shall for a period of five years following the effective date of the parent company merger neither oppose, directly or indirectly, nor fund opposition to, any municipal broadband development plan in California, nor any CASF or CTF application within its service territory that otherwise meets the requirements of CASF or CTF."

Whoa! Comcast was not expecting this at all, and they're not happy about it. Here's one more, as an example: "8. Comcast shall offer Time Warner's Carrier Ethernet Last Mile Access product to interested [Competitive Local Exchange Carriers] throughout the combined service territories of the merging companies for a period of five years from the effective date of the parent company at the same prices, terms and conditions as offered by Time Warner prior to the merger."

The ruling by the CPUC covers all customers, present or in the future of the merged company, in California. What they're talking about is opening up Last Mile Access. This could be a step in the right direction, but the ruling today is definitely a surprise. It could nix the merger in California, or it could light a fire under the FCC's butts, or it could bring real competition to Internet access in California.

The CPUC is basing their entire decision on Common Carrier law (Setion 706, as opposed to Title II), and, unlike the projected FCC decision (coming around the 26th of the month) the CPUC's decision has all kinds of "teeth" as opposed to the FCC's "Title II, with forbearance" approach. It could get very interesting, very soon.

Comments

Weak

[Rhyas]

So let's allow the monopoly and reduction consumer options, but we'll delay it's full impact for 5 years. This doesn't make much sense, except to the Judge, who will be getting one hell of a kickback in 5 years.

Re:Weak

[Frobnicator]

So let's allow the monopoly and reduction consumer options, but we'll delay it's full impact for 5 years. This doesn't make much sense, except to the Judge, who will be getting one hell of a kickback in 5 years.

Read the whole thing, there are some gems.

One particularly expensive gem the requirement that they must roll out to rural areas and low-density housing areas under their own funds. These areas would be expensive for the state and the companies don't want to pay the bill either.

They need to provide up to 45% coverage for a bunch of areas, and offer deep discounts to anyone earning less than 1.5x poverty level. They need to support the Lifeline program (communications equipment to elderly and disabled) through their entire coverage area. They must support Ethernet for the last mile for everywhere they cover. They must pay to hook up k-12 schools and libraries up to the same ratio as their subscribers in the area. They've got about 1.7M subscribers in the bay area, Google suggests there are about 2.3M homes in the area, so roughly 70% of the population. There's several hundred million dollars they'll need to pay for supporting schools and libraries. Running all that cable and fiber to the more sparse areas will also be expensive. Some quick back-of-the-envelope estimates show they're looking at around a $2B-$10B cost for that. Yes they could afford it, but it will certainly sting.

Then this line could also sting: "Comcast shall take action to improve customer service including respecting customer choice and competitive choices, and meet the Commission’s minimum service quality standards as set forth in GO 133-C". The standards include timeliness requirements that comcast currently does not meet, so they'll be hiring lots of service techs and buying lots of service trucks to get them out fast enough.

From their response "some of the penetration rates and time frames suggested by the conditions are simply unattainable under market conditions, especially with populations that have been slowest to adopt broadband." Which is true. "market conditions" means never installing fiber or high speed connections to those areas because it is expensive.

So on the one hand it does grant them permission to merge, on the other hand they're looking at quite a few billion dollars on government-mandated action.

No, this is just like Comcast's advertising: What the big print gives, the small print takes away.

Why only five years?

[zuki]

This smells just as good as these "only $24.99 for the first 12 months" offers.

Because after that, it reverts back to the old price of $49.99.

Why not indefinitely?

[Noxal]

5 years? Seriously? Sounds staged, like it's merely to give the APPEARANCE of being tough on Comcast instead of actually being tough when being tough is warranted.

Re:Why not indefinitely?

[swb]

5 years sounds like discouragement pricing. Long enough that they might turn the entire deal down.

But it's also long enough that if they DID take the deal they couldn't drag their feet so long that it never was effectively available.

And it may be long enough that the investment required on their part might be financially unpalatable to just walk away from at the 5 year mark, plus there's the chance that as the five year mark approached there might be all kinds of difficulty in actually stopping it, either from a disentangling networks perspective or from all kinds of protests and lawsuits that prevent them from stopping.

And who knows, maybe after five years of doing it their genius MBAs might just figure out that even though the margin on it is small, the revenue is like an annuity and has some kind of balance sheet value that they WANT to keep it going.

Re:Why not indefinitely?

[Em Adespoton]

There's something else that comes into play here too -- this would be brokered under Section 706, and they'd be held accountable to it. HOWEVER, they're also going to be accountable to Title II pretty soon, which will lay down an entirely different set of regulations they'll be required to follow, and (hopefully) last longer than 5 years. As such CPUC would be forcing them to open up the last mile while the FCC is also requiring them to stay net neutral (among other things). The combination of these two strategies doesn't give them too many ways to rake in the easy money -- they're going to have to work for it if they take the agreement. Smart move on CPUC's part! They can draft an agreement that by itself looks very innocent and somewhat reasonable, but paired with the other decisions coming down the pipe closes many of the loopholes in the short term, while giving communities time to start projects that won't be rescinded after 5 years (because when does that ever happen).

Hopefully other states follow suit.

Re:Why not indefinitely?

[swb]

I don't understand why they can't be happy with the annuity-like return on providing a utility service.

They could have been probably making better than average utility profits with no regulatory risk if they had backed off at some point in the past and quit jacking up the price of cable television, the cost of which pushed many people towards streaming in the first place and played fair with IP network management instead of gouging customers and content providers over phony congestion.

Instead they just had to keep pushing the rent-seeking, monopolist path and trying desperately to hold onto the TV business. Now the entire enterprise is at risk. People stream what they want cheaply instead of paying for shit channels at high prices, there's increasing regulatory pressure and entire cities are making an effort to supplant their true remaining value, high speed internet with a vastly superior replacement that only underscores their lack of investment and inferior product.

It's the same problem Microsoft faced in many ways. Relentless rent-seeking that only led people to seek other alternatives. Had Microsoft let up a little they could have probably put off the search for alternatives forever and been seen as a benign market giant like Google instead of as the evil empire.

Re: 8 - Isn't going to happen even if it happens.

[Catbeller]

"8 is related to a pre-existing requirement from awhile ago, they just want it extended for 5 years and to apply to the merged area, but even so, then what, whos going to use it or build a business around it knowing it will killed off after 5 years?"

Who? An organization who just wants to provide broadband, instead of a corporation which wants infinitely increasing revenue. For instance, a municipal government, or a companied chartered by that government. Who can also simply say "It will be so!" and lay the lines whereever they are needed.

I really don't care about the motive to make infinite profits. Water and electric and gas were provided for over a hundred years at a reasonable cost. People got paid to run and maintain the systems, and it worked. They're selling our municipal utilities off while we're speaking. Result: prices are doubling and will redouble, and service goes down or practically disapears, the systems disintegrate, and a few billionaires get rich.

Re:bullshit

[Catbeller]

You will use healthcare. Oh, you will. Care.

Garbage..

[wbr1]

BS Comcast is not happy about this. They have the cash and power to out compete any last mile startup on municipal network in that five years. this gives the public the feeling that something is being done about these ISPs, while giving them more of a stranglehold on the market in a short time. They may act affronted all they like but in reality, behind the mask they are rejoicing because they know what it would mean for them. Whoever architected this, be it lawmakers or some behind the scenes lobbyist or industryman, they are very smart. Well played there bro. I hope you karma is to be ass-fucked my syphilis ridden camels from here to eternity.
Data connections should be a public utility. period.

Re:Garbage..

[Shakrai]

Data connections should be a public utility. period.

That is a political non-starter in the United States. You may wish that wasn't the case but for better or worse it is, so there's no point in crying about it.

One can make a compelling case that Government has in fact make the situation worse, through franchising agreements and other artificial barriers to entry that keep upstarts out of the market. That's the Republican argument and it has some merit, though I think it kind of glosses over the bigger picture that broadband is no longer a growth market. Growth markets can maintain multiple providers of service; stable markets tend to gravitate towards mergers to take advantage of the real and imagined benefits of synergy.

Incidentally, more than anything I think the mature market consideration is the reason why Verizon and AT&T have halted upgrades of their wireline plant and equipment to focus on wireless, which remains a growth market. In wireline they're forced to compete against established cable companies that have the advantage of cheaper technology (HFC vs. ripping out an ancient twisted pair copper plant and rebuilding it with fiber from the ground up), the ability to cannibalize voice customers without meeting the same reliability metrics POTS has to live up to, a less restrictive regulatory framework, and no hassles offering video (Verizon had to kiss a lot of asses to get video franchises for FIOS in many markets)

At the end of the day we have to make a public policy decision regarding whether or not broadband internet is a natural monopoly. If it is then we should decide if we want to bring Ma Bell back or not. Is a regulated monopoly better for the internet than what we currently have? I can't answer that question. I do know that Ma Bell largely lived up to her obligation to maintain the network and believe that if she was still around she'd have brought the network into the 21st Century. Verizon and AT&T seem content to milk it for all it's worth before abandoning it. Conversely, there were plenty of people around who hated Ma Bell, for various reasons, so is that really a door we wish to reopen?

Lemme get this straight

[Snotnose]

You have 2 companies who each end up in the bottom 10 of the country's most hated companies, both are considered monopolies, and yet somehow, due to, I dunno, campaign contributions, you think letting them join forces to fuck their customers more than each entity alone can do, is a good thing?

I hate the D's and the R's equally, who the fark can I fire for letting this merger go through? Oh, none? You mean, I'm helpless? If I say any more I'll have agents from DHS at my door before my alarm goes off tomorrow morning.

Re: 8 - Isn't going to happen even if it happens.

[Catbeller]

It is nearly impossible to create a local carrier. Witness: no local carriers. All bought up by Comcast. Free markets create monopolies when the realities of the situation does not support multiple versions of the same service. Hence we go to what works - the local utility model. Kick the bastards out.

Re:More giveaways to non-workers

[pnutjam]

There is a cost to line-iteming that out. I don't object to it being shown, but then you end up with stuff like the phone companies do, advertise 19.99 and then you get your bill and it's 32.57 due to all the fee's and surcharges. Those should be included in any advertised price. How can you compare costs and have a workable free market when half the costs are hidden. I could honestly care less about the companies overhead.

Also, Company A might figure out that the cost to providing is x, because they are a crappy company. Company B figures the cost is X, based market rate, but they only really spend x/3. What do they report? Meanwhile company C is lean and mean and the provide the same services for x/4. Your demand is just asking to be abused by accounting tricks.