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Why Comcast, NBC's "Commitments" Aren't Enough

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The two companies will tell Congress their merger makes sense. It doesn't.

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Brian Roberts, CEO of Comcast (CMCSA), the nation's largest cable company -- as well as the nation's largest wired broadband provider after topping AT&T (T) for the second consecutive quarter with 15.9 million high-speed Internet subscribers -- and NBC Universal (GE) CEO Jeff Zucker will appear before Congress today to defend the two companies' proposed $30 billion merger.

Comcast and NBC Universal are putting forth the dubious claim that the deal wouldn't be anti-competitive, but would, if fact, benefit consumers.

"The transaction is pro-consumer, pro-competition, and strongly in the public interest," Comcast Senior Vice President David L. Cohen said in a statement. Comcast insists the public's gain will be "substantial" and that it will foster "diversity, localism, competition, and innovation" among other "commitments" the company is attempting to convince regulators it is, uh, committed to -- like remaining "committed to continuing to provide free over-the-air television" and intending to "preserve and enrich the output of local news, local public affairs, and other public interest programming."

Not a lot of meat there, Dave. Post-game locker room interviews tend to be more substantive, what with athletes saying things like, "We won tonight because we put more points on the board."

The American Cable Association, a trade group of small and regional cable operators, issued a statement mocking Comcast's "commitments."

"Because Comcast and NBCU drafted these public interest commitments on their own, it shouldn't shock anyone that they are totally porous and inadequate," ACA President and CEO Matthew M. Polka said. "One of the commitments calls for Comcast-NBCU to self-apply the FCC's program access rules to its TV stations. This 'commitment' isn't without irony, given that Comcast is asking a federal appeals court to tear up those rules and toss them in the wastebasket."

Not surprisingly, others seem to agree.

Josh Silver, Executive Director of Free Press, a national, nonpartisan, nonprofit organization working to reform the media, said in a statement:

Comcast's claims that this merger will benefit consumers are positively Orwellian. The company gives little evidence beyond assertions that this merger will produce anything other than job cuts, higher cable bills, fewer independent programmers, and a retreat from public service media.


Silver continued:

Comcast's reputation for customer service ranks about one rung above Enron and Blackwater. The idea that it is magically going to be consumer friendly after it gets bigger doesn't pass the laugh test. Regulators at FCC and the Department of Justice should cut through the rhetoric and put a spotlight on the real problems with this kind of unprecedented media consolidation.


Corie Wright, Policy Counsel for Free Press, said:

In this testimony, we warn Congress, the FCC and the public about the effects of the takeover: higher cable bills, less competition and the concentration of power in one company across multiple media markets and platforms. Comcast is already the largest cable operator and broadband Internet access provider. Comcast will attempt to gloss over the fact that this takeover involves the elimination of head-to-head competition in the emerging online video market. If Comcast succeeds in bringing the cable model to the Internet, then consumers will lose.


And Internet distribution of video seems to be where the most damage can be inflicted on a helpless populace by a company holding 15.9 million people hostage to its broadband service.

Public Knowledge, a Washington, DC-based public interest group with a mandate to "promote innovation and the rights of consumers, while working to stop any bad legislation from passing that would slow technology innovation, shrink the public domain, or prevent fair use," points out that, in a filing regarding the merger, Comcast essentially dismissed the online video business model.

"We are incredulous that Comcast and NBCU would downplay Internet distribution of video at a time when the FCC has repeatedly identified online video as one of the primary drivers to broadband adoption," said Harold Feld, legal director of Public Knowledge.

Art Brodsky, Public Knowledge's Communications Director, said:

Our view is looking to the future, when consumers will be getting most of their TV off a broadband connection. Congress wanted this to happen in 1992 when they created the satellite industry, but at the time, no one saw the need to do it for websites because the technology couldn't handle it yet. If this deal is to be approved, we want to see that there will competition for programmers in the online world, otherwise consumers will be put at a big disadvantage.


However, Comcast may have a trick up its sleeve to force the much-maligned merger through.

On yesterday's earnings call, Comcast executives announced they would be changing the name of the company's services from Comcast to XFinity:

XFINITY represents the future of our company and it's a promise to customers that we'll keep innovating. When we launch XFINITY in a market, we'll rebrand our products: XFINITY TV, XFINITY Voice and XFINITY Internet (our company, of course, remains Comcast). This transition is already well underway across the country. Next week, XFINITY will roll out in 11 markets including: Boston, Philadelphia, Baltimore, Washington DC, Chicago, Portland, Seattle, Hartford, Augusta, Chattanooga, parts of the Bay Area and San Francisco, with more markets to come later this year.


Wait, what? Why? People may be dumb, but are they that dumb? Everyone knows Altria (MO) is still Philip Morris. And that Xe Services is still Blackwater.

It seems that "kurtmac," a commenter on Consumerist.com got it right in this post on the site's message board:

"Perhaps this is a ploy to push the purchase of NBC past the FCC. 'What? Xfinity is buying NBC, never heard anything bad of them. They must be on the up-and-up! Approved!' "

As someone going by the username "tape" posted in response, "What a bunch of morons."

Well put.

No positions in stocks mentioned.
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