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Watch FCC Stand By As Verizon and Cable Form New Cartel

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On any given day, on any given cable or satellite system, subscribers will see a message telling them that a favorite channel which had been in one spot on the channel lineup has been shifted to another.  It happens all the time as channels are added, subtracted or moved around. 
It's not a big deal.

Unless, of course, the cable channel in question is Bloomberg Television.  Since March
2011, Bloomberg has been trying to hold the Comcast-NBCU media behemoth to the
promises it made, and agreed to, in order to complete the takeover that resulted in one of the biggest media companies in history.  Comcast's power and influence belies its rankings of #66 on the Fortune 500 and #101 on the Financial Times Global
500.  The numbers don't show the power of one of the largest cable provider, largest high-speed Internet provider, a TV network, a movie studio and numerous cable channels all rolled into one.

But the sad story of this issue and other behavior, including that of the Federal Communications Commission (FCC), begs the questions of how far the FCC is willing to go now that it has an even bigger deal with Verizon, Comcast and major cable companies to reshape the
telecommunications business in the U.S. Under the deal, Verizon will buy for $3.6 billion spectrum the cable companies couldn't or wouldn't use to go into the wireless business.  Verizon wireless will, in turn, market
cable's landline high-speed Internet businesses. They are basically dividing the world among the biggest players, tossing out almost completely the idea of "competition" that is supposed to take place between huge communications companies, creating instead a telecom cartel. The question is, will the FCC protect the public interest in this deal and if so, how?

The answers are not encouraging.  The FCC in its wisdom grants a big deal with "conditions" to protect the public.  Those "conditions" are then used, abused and
ignored by the big, powerful companies, which can force their will on the rest
of an industry and on cowed regulators who take months, if not years, to reach
their decisions. 

Battling With Bloomberg

Bloomberg's request wasn't all that complicated.  Bloomberg, which is already carried on
Comcast cable systems, simply wants to be inserted into the channel lineups
with the rest of the news channels, and particularly with CNBC, the business
channel that's owned by NBCU, which is owned by Comcast.  Bloomberg made the request after the Federal Communications Commission (FCC) approved the merger on Jan. 20, 2011.  In Washington, D.C., CNBC is channel 39, MSNBC is 38, CNN is 36.  Bloomberg is 103.  In Philadelphia, CNBC is at channel 47, Bloomberg is 103.  Many other Comcast systems have similar channel lineups.

Bloomberg's complaint comes from the language of the FCC order approving the takeover, which said:

"We require that if Comcast now or in the future carries news and/or business news channels in a neighborhood, defined as placing a significant number or percentage of
news and/or business news channels substantially adjacent to one another in a
system's channel lineup, Comcast must carry all independent news and business
news channels in that neighborhood."

After the deal was done, Comcast could have easily granted Bloomberg's request.  Instead, they are fighting it out to
the bitter end at the FCC and, as likely, in court after.  That aggressive response to what is
basically a nothingburger of an issue makes a joke of the "strong and
fair
" merger conditions that FCC Chairman Julius Genachowski praised when
the deal was approved. 

Bloomberg
warned the FCC that this very situation would occur, and the FCC knew it ahead
of time when it said in the order approving the creation of the conglomerate.  Bloomberg's concerns
that Comcast "will have the ability and incentive" to discriminate
against independent programmers "are supported by the evidence" in
the record that Comcast has done it before, the FCC said.

There aren't many Bloombergs out there big enough and rich enough to challenge Comcast.  Most companies which give it a passing thought usually pass, because of the fear of retaliation -- a practice officially banned by the merger order, but you know how far that will
go.

A Brave Streamer Brings A Challenge

One
other group with the fearlessness to challenge Comcast is Project Concord, a
small Boston company that wants to enter the streaming business and carry NBC
programming, as it is theoretically allowed to do under the merger deal.  This hardy, if secretive, brand has managed to crack open the business side of Comcast's practices in dealing with
independent programmers.  Under the merger agreement, there are supposedly tight terms for exchanging the highly sensitive information about programming agreements -- who in which company gets to see what.  Comcast decided on its own that more of its people should see Project Concord's data. 

Project Concord objected.  So did CBS, Fox, Sony, Time Warner, Viacom and Disney.  They wrote,

"Expansive disclosure of the type anticipated in the Request would
have a chilling effect on future online distribution deals, and skew the
competitive landscape by allowing one entity to possess detailed nonpublic
information about its competitors' business dealings -- which would appear to be
counter to relevant competition laws."

Making yet another joke of
the regulatory process, the Media Bureau rolled over, and put out a notice
asking if the confidential exchange of information under the takeover needs to
be "clarified."

To put Comcast's request
for additional information into the larger context, this is the company that as
part of its side deals with Verizon is steadfastly refusing to let anyone look
at the particulars of how it will sell Verizon's wireless service and how
Verizon Wireless will sell Comcast (and other big cable companies) high-speed
Internet service.

Tennis Channel's Challenge

One person at the FCC who
hasn't rolled over for Comcast is the one person who has actually conducted a
trial of their business practices. 
Administrative Law Judge Richard Sippel found that Comcast had
discriminated against the Tennis Channel in an issue of channel placement, when
it discriminated in favor of the Golf Channel and Versus, which Comcast
owns.  Those channels are on a basic tier, widely available to subscribers, while Tennis Channel was on a
higher, extra-pay tier.  This case
isn't part of the conditions of the merger, but the issues are the same. 

Sippel ruled last December that Comcast
had "engaged in discrimination" against the Tennis Channel, with
channel placement simply based on who owned it. Sippel even fined Comcast
$375,000, which is lunch money for Comcast, but it's the thought that counts.  Unusually, the usually compliant Media
Bureau made the same call, as did the FCC's Enforcement Bureau. Of course,
Comcast is fighting back and the issue is far from a final legal resolution and
that case, like the others, will continue to drag on as the FCC dithers.

Broadband Conditions Met?

Of course, Comcast is more
than a huge entertainment company. 
They are the largest supplier of high-speed Internet in the
country.  With the Verizon deal
done, they will be an absolute lock on the wired side of the equation.  Verizon will stick to its little FiOS
enclaves around the country, while ceding the rest of their territory to
Comcast and the rest of the cable industry for true high-speed data.

There were conditions on
the broadband side also, including that Comcast "make available to
approximately 2.5 million low-income households: (i) high-speed Internet access
service for less than $10 per month," as well as higher priced services at higher speeds.

Comcast got a fair bit of
publicity last September when it announced its "Internet Essentials"
program.  Genachowski even had some
glowing words of praise for the program. 
The reality is the program offered a $9.95 monthly fee for 1.5 mbps
service but with terms and conditions that immediately limited its effectiveness.  In its original state, the program was
to last three years, was limited to households which have at least one child
receiving free, but not reduced-price, school lunches, under the National
School Lunch Program.  They
couldn't have previously had Comcast services. There are other requirements for
supplying documentation. 
Applications are handled by mail.

Of course, the program leaves
out
childless couples, elderly or even single people. This is the program of
which Genachowski said: "I want to take this opportunity to applaud
Comcast for their work on Digital Essentials."   As of February, there are 463 Philadelphia families
signed up.  Local advocates noted that rate is 0.3 percent adoption.

The condition is being followed in letter.  But the FCC praise for such a
problematic program is again raising the question of what happens when the
stakes get even larger.

Comcast will do what it can to get by.  Its commitment to closing the digital
divide is guided, as with all businesses, by the bottom line.  And yet, the company at times seems to
go out of its way in the other direction. 
Steve Pierce, founder of Wireless Ypsi in Ypsilanti, Mich., said in an
interview that one change to a Terms of Service agreement could wipe out months
of progress in bringing service to a vastly under-served population.  Before the merger, Comcast's Business
Class service allowed for sharing of the service.  Pierce used that provision to put Comcast connections in
public housing and low-income neighborhoods, increasing Comcast's business in
places where it wouldn't otherwise be. 
After the merger, that sharing was severely restricted, so that Pierce
couldn't offer his service, which helped to wire up much of the downtown areas.
Public Wi-Fi, coffee houses using Wi-Fi and other businesses that want to offer
Wi-Fi to customers would be hamstrung by new conditions, including having each
user have an individual sign in and password.  That type of activity won't close the "broadband
adoption gap" that Genachowski so dearly would like closed.

Most of the smart money is on the FCC and Justice Department approving the Verizon-cable cartel. There's some battle fatigue after blocking the AT&T takeover of T-Mobile and this case, while as dangerous to the economy, isn't to some as clear cut a call.  If it is approved, with conditions, those conditions have to be crystal clear in letter and intent and enforced swiftly to protect the public interest.

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