THE BLOG
05/10/2010 12:10 pm ET | Updated May 25, 2011

Will Your ISP Become Your TV? The Comcast NBCU Merger

Comcast and NBCU's report filed with the FCC, "The Comcast/NBCU Transaction and Online Video Distribution" fails to acknowledge one of the central concerns raised by critics of the merger: One company will own the sole pipeline that millions of people will rely upon for access to all content - traditional linear television (via cable, mostly), cable-style video on demand, and Internet - and at the same time will be a major producer of that content. The report focuses on each aspect of the merged company's business independently, but of course those businesses will not operate independently; otherwise there would be no reason for the merger.

In today's world, consumers pay one price to one company for television and internet access (and for telephone access). Thus that company is the gatekeeper for all content to the consumer's home. The same company, in this case, would also own a major provider of content (NBCU). The economic incentive for this company to favor the content it produces is self-evident.

To try to explain this away, the Comcast/NBCU report suggests that online video viewing is complementary to traditional, linear television viewing, so the merged company would have an incentive to promote as much online content as possible; more online viewers means more ISP customers and does not mean fewer television viewers. Win win, perhaps. Assuming this is true, NBCU is a content producer. Thus, if increasing the amount of content available online benefits Comcast as an ISP, that benefit is multiplied if Comcast also creates the content.

Advertisers pay for eyeballs. A company that can aggregate as many viewers as possible can attract the most ad dollars. If Comcast can maximize the number of eyeballs watching its own productions, it can maximize its advertising revenue. Clearly this is an incentive to favor Comcast's own content. Pushing eyeballs to Comcast/NBCU programs maximizes the revenues generated for Comcast/NBCU. The same economic logic applies to the subscription model, of course. The more people subscribe to Comcast/NBCU's sites or channels, the more revenue for Comcast/NBCU. Again, this is an incentive to direct people to Comcast/NBCU's sites and channels and aware from others'.

Thus, the new animal to be created by the Comcast/NBCU merger - a company that controls the entire chain from content creation through distribution on both cable television and the internet - benefits most when consumers favor that company's programs.

True, there is at least one ostensible competitor in many markets: telecom companies that also offer television and internet services in one package. We are unaware of any telecom that proposes to purchase a major broadcast-and-cable television company. And if there were, this would give consumers in most areas a choice between two content provider-distributors. That hardly constitutes robust competition.