And Then There Were Five, Part 2

This post will discuss the implications of the Comcast purchase of Time Warner for the internet. But first, please read Part 1, which focuses on cable television.

The Comcast-Time Warner merger is particularly troubling for those of us who get a lot of our news and information from the internet. The internet was developed at taxpayer expense through government-sponsored research and development, but was given away to private interests in one of the largest examples of corporate welfare in US history. Because of their near monopoly status, internet service providers (ISPs) have no real incentive to upgrade their transmission lines. The result is similar to that of our dysfunctional health care system. We pay the highest prices, yet we are one of the most backward of the developed countries. In a 2013 study of 16 countries by Open Signal, our average download time was faster than only the Philippines. Yet the New America Foundation found that the average cost of “triple play” (phone, TV and internet) service in nine US cities in 2013 was $90, compared to an average of $35 for faster service in 15 cities in Europe and Asia.

In January, the US Court of Appeals struck down the FCC's net neutrality policy, stating that it did not have the constitutional authority to regulate an information service. Net neutrality is the policy that requires internet service providers to transmit all signals at the same speed and for the same price. Without net neutrality, ISPs can slow down the service of competitors and other disfavored sources, then charge them a fee if they want faster service, the cost of which would be passed on to consumers. According to Craig Aaron of Free Press, “(T)heir long-term plan is to take a free and open internet and turn it into something like cable TV, where they pick the channels and they speed them up and slow them down based on who pays the most.”

Comcast is formally committed to net neutrality until the end of 2017 as a condition of the NBC purchase, but not after that. However, both Comcast and Verizon have already been charged with slowing down some internet services, such as Netflix. But this is difficult to prove because the connections through which internet traffic flows, so-called “peering” links, are considered proprietary information and are kept secret.

To add to the confusion, it was announced on February 23 that Comcast and Netflix have reached an agreement in which Netflix will pay an unspecified amount for faster internet service. This violates the principle of net neutrality and would appear to be a tacit admission that Comcast has been slowing down Netflix's signal. In fact, it suggests that Comcast has been deliberately creating customer dissatisfaction in order to use it as a bargaining chip to extort money from Netflix. It also implies that Comcast has not lived up to the agreement it made with the Justice Department when it purchased NBC. But, hey, what's a little cheating between golfing buddies, right?

After the Court of Appeals rejected the FCC's attempt to enforce net neutrality, the FCC announced it would not appeal the court's decision, but proposed a new net neutrality rule that differs from the old one only in that it cites a different paragraph of the Communications Act as its authority. However, critics pointed out that the Court had already implied that the new rule is unconstitutional when it said that they don't have the authority to regulate an information service. The fact that the FCC appears to be ignoring the text of the Court ruling suggests to some that they may only want to give the appearance of defending net neutrality.

The problem, according to internet experts, is that the Bush-era FCC classified broadband as an “information service” rather than a “telecommunications service.” The FCC only has the authority to impose neutrality on a telecommunications service, or common carrier, the best example of which is the telephone. In other words, to preserve net neutrality, they must reclassify the internet as a telecommunications service (as advocated by this petition).

Classifying the internet as a common carrier would appear to make sense. Back in the '90s, the internet was referred to as the “information superhighway,” a metaphor than has fallen out of favor. But access to the internet may be as important to society as access to the George Washington Bridge. Unlike television, the internet could be argued to be essential to participation in society, as it is often necessary to interact with businesses, the government and other citizens. However, reclassifying the internet as a vital resource is considered a radical step for the FCC to take. It might require an act of Congress, which seems hopeless given the political power of Comcast and the other ISPs.

Even more troubling than violations of net neutrality is the potential power of ISPs to block access to certain messages altogether. Internet censorship is the ultimate violation of net neutrality. The alleged threat of pornography was used to justify internet censorship,until the Communications Decency Act was struck down by the Supreme Court in 1997. (This battle is still being fought in Britain, which has an opt-in “porn filter.”) The Edward Snowden revelations have been suggested as an excuse for government to require ISPs to censor the internet in the name of national security—a slippery slope given the government's runaway tendency to classify documents as “top secret.” Given the extent to which ISPs have cooperated with the NSA, is it far-fetched to suppose that they might voluntarily comply with government requests to block certain websites or content categories?

The Comcast-Time Warner merger reminds us of how easily our access to news and entertainment can be manipulated or taken away. One of the major fault lines in media research is the debate over how much people's attitudes are influenced by media exposure. Are we active audiences who counterargue against media messages with which we disagree, or are we mindless consumers of media propaganda? In fact, we are both. The problem is that talking back to the media requires a level of attention and effort that is difficult to sustain, especially when we were expecting to relax and be entertained.

The problem is complicated by a well-established cognitive bias, the third person effect—the tendency for people to believe that they are personally less affected by media messages than other people are. For example, in a room of 50 people, everyone thinks that he or she is less influenced by advertising than the other 49. This virtually guarantees that we will underestimate how much the media affect our thoughts. More troublesome is the fact that, although we don't have to believe what the media tell us, most of us can't know, and therefore can't think about, what they don't tell us. (What are they telling us, for example, about the Comcast-Time Warner merger?)

What is at stake here could be nothing less than the contents of our consciousness.

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And Then There Were Five, Part 1

Stuart Hall (1932-2014)

And Then There Were Five, Part 1

I've been trying to finish this post for over a week, but I keep finding new information that forces me to revise it. Maybe I can make some progress by breaking it into two parts. Let's start by moving the chart on media ownership from it's prior location in my piece about Stuart Hall to here.

You'll notice the chart is slightly out of date. In 2011, Comcast moved to the top of the leftmost pyramid when the Obama administration, in spite of public pressure, gave its approval to Comcast's purchase of NBC-Universal from General Electric. As of 2013, GE is no longer involved with either Comcast or NBC-Universal.

On February 13, Comcast, the nation's largest cable TV and broadband provider, announced its intention to buy Time Warner, the second largest cable company, for $45.2 billion. This will reduce the number of conglomerates that control over 90% of the country's supply of news and entertainment from six to five.

If the deal is approved, Comcast stands to control 38% of the cable TV market. However, Comcast is promising to divest itself of three million subscribers in order to bring their share below 30%. Even so, it will have a near monopoly in 19 of the largest 20 metropolitan areas. More than half of cable users are “triple play” customers, purchasing television, telephone and internet service as a bundle. The new Comcast would control 40% of the internet market with 32 million customers, compared to 16 million for AT&T and 9 million for Verizon.

The new company is expected to generate $1.5 billion in cost savings through “efficiencies,” that is, largely through layoffs. (“All of our operators are busy right now . . .“) The FCC reports that, in the last two decades, cable TV rates have increased at four times the rate of inflation (6% per year vs. 1.5%). Both Comcast and Time-Warner are regularly voted by consumers as among the most hated corporations in America due to their high fees and poor customer service. It seems likely that both of those problems will get worse under the new Comcast.

Opposition to the merger, at least as portrayed by the corporate media, has focused on the potential for cable and broadband rate increases. But Comcast and Time Warner already have monopolies in almost all the areas they service. This has allowed Comcast to argue that the merger will not reduce competition, since the two companies “do not currently compete to serve customers in any zip code in America.” But this is just a smokescreen. The real incentive for this merger is the unprecedented market power it would give the new Comcast over both the price and content of television programs.

• Since Comcast already owns the NBC family of channels, as well as cable networks like Bravo and USA, they don't have to pay them for content. It benefits them to keep competitors off the cable lineup.
• A bigger Comcast will give them more leverage to negotiate lower rates for networks they don't own. Other cable networks may have to merge in order to negotiate successfully with them, which could lead to further undesirable consolidation among existing networks.
• A more subtle form of discrimination against competitors or disfavored networks is to give them poorer channel locations. The most desirable locations are low numbers and locations proximate to other channels that appeal to the same audience. It is also desirable for networks to be bundled for pricing purposes with other more popular networks. Comcast has already been accused these types of discrimination, i.e., their dispute with Bloomberg News.
• The combination of Comcast's market power and its desire to promote its own product poses a formidable challenge to future startup networks, thus discouraging innovation. 
• More importantly, Comcast will be free to exclude or make life difficult for any networks whose programming they find objectionable. Both Al Gore's now-defunct Current TV and al Jazeera America have had difficulty finding appropriate cable niches. Liberals should be grateful that MSNBC was already grandfathered into the cable TV lineup before it switched to more progressive programming.

One of the biggest threats to the future of the cable TV giants is so-called “cord cutters”—people who have dropped their cable TV service and are purchasing films and TV from online streaming services like Hulu and Netflix. But the new Comcast's dominance over broadband access will help to defeat that strategy, by allowing them to raise their internet only service to only a few dollars per month less than their internet-plus-TV package.

There is little reason to expect any serious opposition to the merger from either the FCC or the Justice Department, as indicated by their assent to Comcast's purchase of NBC Universal, and more recently, the Justice Department's approval of American Airlines' purchase of US Airways. Last year, Comcast was the seventh-largest lobbyist in the country, spending an estimated $18.8 million. Of the 97 Congresspeople who signed a letter endorsing the NBC purchase, 91 of them received contributions from Comcast during the previous election cycle. Comcast CEO Brian Roberts, who received $30 million in salary and other compensation in 2012, is a golfing partner of President Obama. Last year, Roberts entertained Obama and Attorney General Eric Holder at his Martha's Vineyard estate. Comcast's chief lobbyist David L. Cohen is a major Democratic Party fund-raiser.

Economist Paul Krugman asks the question: When and why did we stop worrying about monopoly power? The when, he says, was during the Reagan era. The reasons given for allowing concentration included encouraging innovation and competing in the international marketplace. But oligopolies can discourage innovation by tacitly agreeing not to compete with one another, and Americans can't purchase cable services from foreign companies. In the last few decades, the argument that near-monopolies charge higher prices and provide poorer service has proven to be no match for the power of lobbying and campaign contributions in a political system that can best be characterized as legalized bribery.

John Nichols reminds us that the original purpose of the freedom of the press clause in the First Amendment was to have a diversity of viewpoints in order to encourage dissent and debate.  It's hard to see how this merger serves the public interest.

Part 2 will discuss the implications of the Comcast-Time Warner merger for the internet.

You may also be interested in reading:

Stuart Hall (1932-2014)

Who Care What THEY Think?

The Job Killers, Part 1