Charles B. Goldfarb
Specialist in Telecommunications Policy
The proposed combination of Comcast, the largest distributor of video services in the United States, and NBC Universal (NBCU), a major producer and aggregator of video content, would create a huge, vertically integrated entity with potentially enormous negotiating power at a time when market forces already are altering traditional content provider/distributor relationships. Comcast would own or control media and entertainment properties of significant scope and scale.
Despite the size and reach that Comcast would be afforded, there is so much uncertainty in the video market that the proposed combination has elicited a wide range of predictions about (1) how it would affect that market; (2) how it would affect the long-standing public policy goals of competition, diversity of voices, and localism; and (3) whether the merger would prove beneficial to Comcast’s shareholders.
From one perspective, the scope of the combination would be so broad that, in addition to requiring careful scrutiny of its competitive effects, it potentially could affect market structure and relationships in ways that have implications for a wide range of media rules, regulations, and policies, including program carriage rules, program access requirements, retransmission consent rules, long-standing policy supporting free over-the-air broadcast television, and even network neutrality and open access policies. From another perspective, the recent history of failed megamergers in the communications sector suggests that the vertically integrated post-merger entity may have so many parts with conflicting market incentives that it proves impossible to craft an internally consistent profit-maximizing business strategy, no less exploit market power to undermine competition.
There is consensus that the Department of Justice (DOJ) and the Federal Communications Commission (FCC) are likely to approve the combination subject to merger conditions and/or license conditions—intended to protect competition, diversity of voices, and localism—that may significantly affect the impact of the combination. It is possible, however, that such conditions might have the effect both of protecting the public against significant harms created by the combination and of limiting potential benefits created by the combination.
The traditional business models of just about every participant in the video market are potentially challenged by structural market changes and as a result the current environment is characterized by very contentious programmer-distributor negotiations and a multitude of novel new ways to distribute content as incumbents and new entrants experiment with new business models.
The issues likely to require the most attention of the DOJ and the FCC include whether Comcast would be able to use its vertically integrated position to deny rival distributors (including independent Internet video distributors and over the top service providers) access to programming or to raise the cost of that programming; whether Comcast would be able to use its vertically integrated position to favor the programming of NBCU at the expense of independent programmers; whether Comcast would have the incentive to use the merger to change NBC into a cable network, at the expense of local programming; and whether a combined Comcast-NBCU might have the unique ability to craft new business models that benefit consumers.
Date of Report: January 11, 2011
Number of Pages: 31
Order Number: R41063
Price: $29.95
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Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Specialist in Telecommunications Policy
The proposed combination of Comcast, the largest distributor of video services in the United States, and NBC Universal (NBCU), a major producer and aggregator of video content, would create a huge, vertically integrated entity with potentially enormous negotiating power at a time when market forces already are altering traditional content provider/distributor relationships. Comcast would own or control media and entertainment properties of significant scope and scale.
Despite the size and reach that Comcast would be afforded, there is so much uncertainty in the video market that the proposed combination has elicited a wide range of predictions about (1) how it would affect that market; (2) how it would affect the long-standing public policy goals of competition, diversity of voices, and localism; and (3) whether the merger would prove beneficial to Comcast’s shareholders.
From one perspective, the scope of the combination would be so broad that, in addition to requiring careful scrutiny of its competitive effects, it potentially could affect market structure and relationships in ways that have implications for a wide range of media rules, regulations, and policies, including program carriage rules, program access requirements, retransmission consent rules, long-standing policy supporting free over-the-air broadcast television, and even network neutrality and open access policies. From another perspective, the recent history of failed megamergers in the communications sector suggests that the vertically integrated post-merger entity may have so many parts with conflicting market incentives that it proves impossible to craft an internally consistent profit-maximizing business strategy, no less exploit market power to undermine competition.
There is consensus that the Department of Justice (DOJ) and the Federal Communications Commission (FCC) are likely to approve the combination subject to merger conditions and/or license conditions—intended to protect competition, diversity of voices, and localism—that may significantly affect the impact of the combination. It is possible, however, that such conditions might have the effect both of protecting the public against significant harms created by the combination and of limiting potential benefits created by the combination.
The traditional business models of just about every participant in the video market are potentially challenged by structural market changes and as a result the current environment is characterized by very contentious programmer-distributor negotiations and a multitude of novel new ways to distribute content as incumbents and new entrants experiment with new business models.
The issues likely to require the most attention of the DOJ and the FCC include whether Comcast would be able to use its vertically integrated position to deny rival distributors (including independent Internet video distributors and over the top service providers) access to programming or to raise the cost of that programming; whether Comcast would be able to use its vertically integrated position to favor the programming of NBCU at the expense of independent programmers; whether Comcast would have the incentive to use the merger to change NBC into a cable network, at the expense of local programming; and whether a combined Comcast-NBCU might have the unique ability to craft new business models that benefit consumers.
Date of Report: January 11, 2011
Number of Pages: 31
Order Number: R41063
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
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