Archive for June, 2010

I’m routinely early for appointments, and yesterday was no exception.  So I found a place to read a book – standing up on a sidewalk on the Upper East Side, leaning against a concrete area railing.  After a few minutes, someone came up from the area and said, “This is private property, and the family doesn’t like to have people leaning against the railing.”  I left right away.

This incident reminded me of a time a few years ago, also in NYC, when I knocked on my landlord’s front door to tell him something.  He lived right below me.  He answered the door, livid.  “Why didn’t you call?”  He was furious, but he managed to explain to me that people in New York don’t knock on doors – that’s an invasion of private space, and it breaks the illusion that there’s privacy at home.

These are small spaces.  The street on the UES was thronged with people and trucks belching smoke.  The place where I was renting (I’ve since moved to my own place) was a walkup with small apartments looking out on a large back garden.  The illusion of complete private control – even over seemingly innocuous and even customary invasions – was clearly vital to the people in both of these vignettes.  It surprised me, both times.

Last week, Sen. Herb Kohl (D-WI), the Chairman of the Judiciary’s Subcommittee on Antitrust, Competition Policy and Consumer Right, released a letter about the Comcast/NBCU merger addressed to Antitrust Division head Christine Varney and FCC Chairman Julius Genachowski.

Sen. Kohl’s concerns about the merger fall into three categories:

1.  the ability of the new entity to foreclose competition in the video distribution marketplace, by price squeezing, exerting control over retransmission consent costs, and the creation of ferocious bundles that Comcast competitors will have no choice but to swallow in order to survive;

2.  the ability of the new entity effectively to block distribution of independent programming; and

3.  the ability of the new entity to choke off development and distribution of competitive online (over-the-top) video.

To address these concerns, Sen. Kohl suggests that key conditions be applied to the merger if it is allowed to go forward.  These conditions include:

• making all Comcast-affiliated programming available on a nonexclusive, reasonable basis
• making sure that if there are tussles over the making-available of NBC programming to other distributors, Comcast will submit the dispute to binding arbitration and won’t yank the programming during the dispute
• not allowing NBC to be used as a conduit for corporate espionage concerning the deals  other video distributors are offering
• no discrimination by Comcast in carrying programming (lots of disputes about this – Comcast sends competing channels to upper-tier Siberia)
• no strong-arming by Comcast forcing program sources to keep their material away from the Internet
• Comcast has to distribute its programming online on reasonable terms to other distributors
• no tying of content made available online to video subscriptions
• Comcast has to give up its 1/3 control of Hulu
• Comcast not to move NBC programming to cable for ten years
• NBC independence in selling local advertising
• no discrimination re online programming traveling over Comcast’s broadband network.

This set of terms will have to be taken seriously by the agencies.  If adopted and (importantly) enforced, they could go a long way to making it difficult for Comcast to use its new NBC role to protect against the commoditization of its infrastructure.

The concerns expressed in the letter about the future of online video are particularly salient. Comcast has argued that online videos aren’t substitutable for their products, and that therefore there is no antitrust issue to be dealt with, but Kohl is firm:  “when examining these issues, we urge you to be guided by the pronouncement of the new proposed Justice Department/Federal Trade Commission Horizontal Merger Guidelines that it is “Congressional intent that merger enforcement should interdict competitive problems in their incipiency.”

Translated:  Despite Comcast’s assurances to the contrary, this merger does indeed have horizontal effects – and the ability of a key player to strangle new competitive businesses is appropriate for review by DOJ and FCC.