WASHINGTON -- May 24 -- Ever ravenous to swallow up more media properties, Comcast and Time Warner are poised to jointly carve up Adelphia Communications (which currently has 5 million cable subscribers). Comcast and Time Warner, the first and second largest U.S. cable operators respectively--expect to acquire the fifth largest cable company with hardly a whisper of protest from the two federal regulatory agencies responsible for its approval (FTC and FCC) or from Congress.
In their Application and Public Interest Statement (PDF) to the FCC, filed on May 18, 2005, Comcast and Time Warner claim that this deal will generate substantial public interest benefits
and will do so without producing any possible countervailing harm. Of course, this is 86 pages of pure fiction--if not outright lies. Comcast and Time Warner hope that their political clout will win favor and intimidate any opponent. Certainly, their phalanxes of lobbyists, bought politicians, and nonprofit groups on their financial dole are already working overtime to grease the wheels of the regulatory approval process.
But a close examination of the Adelphia deal should set off alarm bells, especially for those who are concerned with diversity of local and national video programming, and the future of broadband expression.
First, the deal further concentrates the power of already too powerful companies. With 70% of (cable) subscribers in the top 20 U.S. markets and more than 21 million customers overall, Comcast has virtual veto power over any new programming ventures. Time Warner currently serves almost 11 million cable subscribers--primarily very large systems with 300,000 or more customers. The two giants not only will control more cable consumers--they will swap various systems to help each gain further control over markets and adjacent geographical areas. Called clustering in the industry, this practice gives one cable company primary control of a vast amount of electronic real estate. It eliminates competition and ensures that one cable company will be an areas dominant provider. In what surely is a new contribution to George Orwells doublethink and doublespeak lexicon, Comcast and Time Warner assiduously avoid the use of the term clustering--knowing that it conveys the kind of tight market control they actually seek. To the FCC, they prosaically describe it as enhanced geographic rationalization. Of course, it is cable consumers and the public interest that is being rationalized here.
Time Warner will be "geographically enhanced" by controlling almost all of Los Angeles, as well as obtaining systems in Cleveland, Dallas and the Buffalo area. Comcast will gain huge territory in Florida, as well as systems in Colorado, Connecticut, Georgia, Kentucky, Louisiana, Massachusetts, Maryland, Minnesota, Mississippi, North Carolina, New Hampshire, New York, Pennsylvania, Tennessee, Virginia, Vermont, Washington, West Virginia.
By extending its super clusters (as the industry actually calls them), Time Warner, for example, will be able to determine what new programming can be made available in the Los Angeles market. And Comcast will similarly have greater dominance in the entire Northeast of the US (where it controls most of the major markets from Boston down to Virginia). The two will also increase their individual and collective power to shape programming nationall --including the emerging video-on-demand and interactive TV markets. As John Malone recently told Broadcasting and Cable magazine, the consolidation of the [cable] business has got to the point where I dont believe that an independent programmer has any chance whatsoever of doing anything unless hes heavily invested in and supported by one of the major distributors
. [T]heres no way on earth that you can be successful in the U.S. distributing a channel that Brian Roberts doesnt carry
. (Mark Robichaux, From Darth Vader to Yoda, Broadcasting and Cable, April 4, 2005).
Even after the deal is consummated, the two companies will continue to work closely together. They already control, for example, the inDemand pay-per-view movie service.
In addition to concerns about the fate of video programming competition, the two companies will further consolidate control over the residential broadband market. Since both companies are opposed to a policy of non-discrimination (as well as ISP competition), expect them to use their high-speed data clout to favor their own content and services.
Finally, one is struck with several ironies about this deal. First, both Comcast and Time Warner tell the FCC that they are just helping the poor Adelphia customers who were left stranded by the financial mismanagement of its former owners--the Rigas family. But it is very likely that in the tight familial world of the cable industry both Comcasts Roberts family and Time Warners Richard Parsons knew exactly how Adelphia was being run. As good cable "costra nostra" soldiers, Comcast and Time Warner (along with the rest of the TV industry) kept their silence, even as consumers and cities were being defrauded (thus setting the stage for the eventual sale of Adelphia).
As for their claims that they are good citizens--tell that to the shareholders and pension funds burnt by Time Warners purchase of AOL. Hopefully, someone at the FCC and FTC will actually read the many lawsuits filed against the company. Comcast, of course, is known for a corporate governance structure that gives CEO Brian Roberts and family the kind of control that even Disneys Michael Eisner would envy. It is also notoriously anti-union.
The stripping of Adelphia by Comcast and Time Warner doesnt serve the public interest. Regulators actually concerned about it will need to speak out, as will the public.
Clearly, the FCC simply cant trust Comcast and Time Warner to be honest. Take, for example, their claim that the deal will accelerate deployment of advanced services on Adelphia systems. According to the cable giants, Adelphia has lagged in deploying broadband, for example. And Comcast and Time Warner--surprise--suggest that only they can fix the problem. Yet, according to Adelphias CEO, the company has upgraded
95% of their systems so they can offer almost everything that Comcast and Time Warner promises. (Mike Farrell, Definitive Adelphia Sale Bolsters 2 Top Cable Ops, Multichannel News, April 25, 2005).