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Study: Comcast-NBC merger will raise cable fees

Mon, 11/08/2010 - 7:15am
Brian Santo

 A study from a former FCC economist concludes that consumers over the next nine years will pay at least $2.4 billion more for pay TV if restrictions are not imposed to keep the new Comcast from abusing its market power.

The American Cable Association, which commissioned the study, immediately seized on the results to bolster its arguments that the FCC cannot approve the deal without restrictions.

"It is clear that the Comcast-NBCU deal will send monthly cable bills higher by billions of dollars over the next decade, underscoring ACA's view that regulators must protect consumers and competition from a transaction whose benefits are vastly outweighed by its harms. Without meaningful and cost-effective conditions on the Comcast-NBCU transaction, regulators also run the risk of crippling effective competition in the pay-TV distribution market," ACA President and CEO Matthew Polka said.

Consumer Harm Resulting from the Comcast-NBCU Transaction

The study was conducted by William Rogerson, professor of economics at Northwestern University, who served as the FCC's chief economist for the 1998-99 academic year.

Rogerson's study concluded that the transaction will allow Comcast-NBCU to raise programming fees way above levels the two would be able to command as separate and independent companies, and that these fee increases will largely be passed through to subscribers in the form of higher subscription prices.

According to Rogerson, the quantifiable consumer harm of the transaction ($2.566 billion) is more than 10 times greater than the quantifiable consumer benefit ($204 million) claimed by Comcast-NBCU.

Rogerson's conclusion is based on two assumptions. First is that that Comcast-NBCU will raise the fees it charges for NBCU programming to Comcast's cable and satellite rivals, including nearly 40 ACA member companies, such as RCN, WOW!, Wave Broadband, Broadstripe and SureWest.

The other assumption is Comcast-NBCU jointly negotiating NBCU's suite of highly rated NBCU national cable programming networks and/or NBC O&O TV stations with Comcast's key programming asset, regional sports networks (RSNs), allowing the company to negotiate higher prices for the packages.

Separately, the suspension of MSNBC analyst Keith Olbermann (for having made campaign contributions to several Democratic candidates without disclosing those donations) is having some minor fallout for the deal.

Consumer Benefit and Harm Resulting from the Comcast-NBCU Transaction

Sen. Bernie Saunders points out that Comcast COO Stephen Burke was a fund raiser for former president George W. Bush, and others theorize that Phil Anschutz, a major Comcast shareholder and contributor to right-leaning organizations, may have some undue influence that might tilt MSNBC to the left, much like Rupert Murdoch's purchase of Fox led to Fox News taking a rightward tilt.

There's little to connect the dots, but the suspicions are enough to lead Sanders to oppose the merger.

The fight between Fox and Cablevision, in which Fox pulled all of its programming – including World Series games – from Cablevision for almost two weeks before they resolved their retransmission rights dispute has also inspired sentiment against approval of the merger without restrictions, inasmuch as it gave further credence to fears that large programmers will abuse their market power.

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