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Too Big to Block? Why Obama Must Stop the Comcast-NBC Merger

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Now that Vivendi and General Electric have struck a deal, cable giant Comcast is expected to to buy a controlling stake in NBC-Universal; marking the biggest proposed media merger in recent memory. Comcast, the largest cable company and the No. 1 residential Internet service provider in the nation, would take over the NBC empire: a television network, Universal Studios, MSNBC, CNBC, USA Network, Telemundo, the Weather Channel, Hulu.com, 27 television stations and a host of other properties.

This train wreck of a deal will hurt all over. It will mean increased costs for cable television service; currently free online NBC content locked behind a pay wall; less opportunity for the distribution of independent media; even fewer choices and less programming diversity. On average, nearly one quarter of all channels offered to cable subscribers will be owned by the bloated Comcast.

News reports about the deal are citing the "conventional wisdom" echoed by industry analysts from Wall Street and Washington: Judicial and agency precedent indicates that the Justice Department and Federal Communications Commission will not be able to stop the merger -- even if they know that the cost to the public interest will be grave. This is the same kind of regulatory precedent that permitted the renegade banking industry to run amok, until the system came crashing down. Our lawmakers should have been reining in these out-of-control corporations long ago. But therein lies the problem: Corporate-friendly judges, appointed by corporate-friendly politicians, elected with contributions from their corporate patrons, have created a body of legal precedent that makes even the most common sense antitrust rulings difficult to impossible.

It was just 18 months ago that candidate Barack Obama said, "I strongly favor diversity of ownership of outlets and protection against the excessive concentration of power in the hands of any one corporation, interest or small group." Five months later, Obama was swept into office promising to bring change to Washington.

If President Obama really wants to change the system that green-lighted the bailout of "too big to fail" banks and would allow the looming crisis of too-big-to-block media mergers, he will have to overhaul federal antitrust laws so that they actually protect the greater good.

Until such change is realized, there are several reasons why current antitrust laws -- albeit weak -- can and should block the Comcast-NBC deal during the review process, which will likely take a year or more:

  1. The merger would eliminate the hard bargaining for distribution and content that normally occurs between distributors (like Comcast) and content producers (like NBC). That competitive bargaining will only intensify as more video is distributed over the Internet in the coming years.
  2. The Comcast-NBC behemoth would control several distribution platforms -- a major television network, the largest cable company and the largest Internet service provider. The merged company will have strong incentives and the market power to discriminate in granting access to its wealth of programming. It will have the incentive and market power to enforce anticompetitive "bundling" and price-gouge other cable companies, especially smaller cable companies.
  3. As the largest cable company and Internet service provider, Comcast will have the motive to move NBC's video content behind a pay wall that will mean higher costs for consumers, and it would stunt the growth of the Internet as an alternative medium for video service. Placing video content behind a pay wall that is only available to Comcast cable customers is a classic example of "anticompetitive bundling." That is, consumers who want Internet access to NBC programming will be forced to buy the bundle of cable and Internet.
  4. Perhaps the most dangerous risk of this deal -- and one we have seen many times in years -past - is that it will trigger a "merger wave" throughout the industry as distribution companies and content companies seek to "muscle up" to match the new threat that the vertically integrated Comcast poses. Consumer choice will be restricted and prices will rise. With diminishing competition, the likelihood of similar behavior by other companies grows stronger, as does the threat of collusion among competitors.

The Comcast-NBC deal is black and white: It would create a company with too much market power, and it would further starve Americans of the diversity already missing from our media marketplace. It raises the most basic antitrust issues for an administration that has declared both the importance of media diversity and an intention to be far more vigilant against anticompetitive conduct and abuses of market power.

President Obama, Congress and federal agencies must acknowledge the serious threat that this merger poses and take the necessary measures to prevent harm to competition and consumers. That means putting the American people first and corporate greed second. It means stopping the merger.