National Voices

Saturday, Feb 15 2014 11:00 PM

SUSAN CRAWFORD: Comcast's Time Warner deal is bad for America

David Cohen, Comcast Corp.'s executive vice president and the mastermind behind its deal to buy Time Warner Cable Inc., sounded pugnacious and confident on a recent conference call with investors. Regulatory and antitrust approval of the deal, he says, will happen within the next nine to 12 months. But even Cohen had to acknowledge that the public might be worried about the power of this combination. "It may sound scary," he said.

Indeed it does. Although Comcast's management points out that when they're finished -- and after they divest some of their systems to others -- the combined company will have just 30 percent of the national share of pay-television subscribers. Nationwide share means little to people and businesses, which often have little choice when it comes to cable: Ninety-one percent of Americans who subscribe to data services also buy video services, so the relevant market for them is the bundle. When it comes to bundles, satellite companies Dish Network Corp. and DIRECTV can't offer the data capacity that Comcast can; their communications have to travel more than 22,000 miles one way.

The reason this deal is scary is that for the vast majority of businesses in 19 of the 20 largest metropolitan areas in the country, their only choice for a high-capacity wired connection will be Comcast. Comcast, in turn, has its own built-in conflicts of interest: It will be serving the interests of its shareholders by keeping investments in its network as low as possible -- in particular, making no move to provide the world- class fiber-optic connections that are now standard and cheap in other countries -- and extracting as much rent as it can, in all kinds of ways. Comcast, for purposes of today's public, is calling itself a "cable company." It no longer is. Comcast sells infrastructure subject to neither competition nor a cop on the beat.

For a country attempting to compete on the global stage, this is a problem. It's time to recognize that industrial policy -- true leadership, the kinds of initiatives that brought us the federal highway system and national electrification -- is called for. If regulating these guys is too difficult, let's allow mayors to build alternative fiber-optic networks such as the one in Chattanooga, Tenn., that has lured businesses and spurred economic growth. We can't allow our future to be captured by the short-term cash flow desires of Comcast's investors.

Comcast's job today is to create an air of inevitability about the deal. It's busy pointing out that prior cable combinations have been approved by regulators and that competition won't be reduced through the merger. Cohen sounded particularly bullish on this point, pointing out that these two companies don't compete in a single ZIP code in America. That's because they long ago clustered their operations and divided markets: Where consolidation is possible, competition is impossible.

The Department of Justice has a problem: It doesn't do industrial policy. It can't create competition where none exists. It can't mandate that all U.S. businesses have world- class, inexpensive fiber-optic connections. But the Federal Communications Commission and the executive branch can. Along the way, by the way, we'll have far better wireless connections because wireless needs fiber to flourish.

If all of this sounds technical, try this: We're all the people of Fort Lee, N.J., trying to get on the George Washington Bridge. There's a bully narrowing our access to the world whose interests aren't aligned with ours. What we need is for that bridge to be maintained, for traffic to flow and for the bully to get punched in the nose, collectively, by the entire country. Let's be clear: This is old-school monopolistic behavior.

Whatever happens to this particular combination, let's keep the bigger picture in mind: High-speed wired connections are now infrastructure, just like bridges, roads, and water.

We can't flourish as a country unless someone takes the long view and ensures that American businesses aren't forced to pay whatever tribute Comcast demands in order to thrive.

Susan Crawford, the John A. Reilly visiting professor in intellectual property at Harvard Law School and a fellow at the Roosevelt Institute, is the author of "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age."

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