Earlier this week, news broke that Comcast—the nation’s largest internet service provider (ISP) and video distributor intends to buy Time Warner Cable for 45.2 billion dollars. Comcast is also the biggest name in “triple play,” offering packaged internet, phone and cable television service at around 52 percent of the market.
This move, coupled with Comcast’s earlier takeover of NBC-Universal, would give the cable giant tremendous leverage over how communications and media content is delivered.
Should regulators roll over for another major merger from a company that has already gobbled up so much of the market? Is this a wise move at a time when the Federal Communications Commission has no immediate means to prevent ISPs from discriminating against their rivals’ content, websites and applications? Anyone who creates content is likely to be affected in some way, shape or form by this deal.
Comcast is already agreeing to concessions meant to address the concerns of public interest groups who are inclined to see this merger as bad news for competition and potentially harmful to consumers already paying high prices for legendarily poor service. The company claims it is “prepared to divest” systems that serve 3 million of its customers—but which systems and which customers? They also seem OK with extending at least some of the concessions from their previous deal to purchase NBCU.
All the concessions in the world won’t make a difference unless they can be enforced. And history says that’s a longshot—just look at recent consolidation in cable alone. We can talk about potential harms all damn day—higher prices, anti-competitive behavior, content discrimination, capped innovation—but that doesn’t get to the heart of the question, which to me is why do regulators tasked with upholding a basic public interest so often fail in their duties.
It is true that certain industries lend themselves to monopoly due to the high costs of entering a market after the first mover establishes the infrastructure. This is what’s called a “natural monopoly,” and sometimes government actually encourages them due to efficiencies.
Take AT&T in its first century. The company’s steward, Theodore Vail, was by all accounts a dyed-in-the-wool monopolist. Yet he consented to regulation due to an understanding of telephony and the public interest. The company still made gobs of money, although the monopoly did result in several instances where innovation was killed in the crib.
Today’s captains of industry don’t seem as enlightened as Vail. Nor do regulators seem as capable of maintaining a balance between social, civic and economic benefit.
Some question the role of government in markets, period. Why do they meddle in business at all? Well, consider that a “corporation” is essentially a legal fiction—an organization of capital and labor that depends on laws established by government. Corporations also depend on government to defend and uphold their entitlements. After all, it is government that allows for a corporate “personhood” that transcends individual limits of time and space.
You’ll hear arguments about government “coercion.” Well, it is government’s monopoly on force that safeguards the vast swath of legal code that enables corporate functioning. So it’s not crazy that a capitalist government would have metrics to determine competition in a market as a means to spur more corporations to create more wealth. Wars have been fought to preserve this dynamic. Lots of poor people have died in them.
There’s nothing wrong with the profit motivation as the core reason for folks to enter a market and innovate. But what enables competition in a market inherently prohibitive to new entrants? Or one where the dominant players leverage restrictions against public (or public-private) alternatives, as is the case with Comcast and other incumbent ISPs?
Today’s mergers look different than those of yesteryear. Many are approved in part because the legacy statutes that inform antitrust efforts are ill-equipped to evaluate so-called “verticals,” or aspects of business where core functions aren’t in direct competition.
The Clayton and Sherman Acts are extremely useful, but they’re also extremely old. These laws, established at the turn of the last century, may not be the perfect lens for contemporary scrutiny. Today’s markets are dynamic, fast-paced and highly integrated. The regulatory apparatus must evolve to meet the new challenges.
Ineffective regulation should not be conflated with an unwillingness to regulate. The latter is merely a response to decades of political pressure. There’s an element of self-loathing in leadership these days—many elected representatives relentlessly point to government impotency as justification for less government, the very definition of circular reasoning. This is bad for markets and bad for the public.
In a nutshell, governments define markets by establishing the laws that allow corporations to come into to being. Capitalist governments evaluate how these markets function to ensure that competition and innovation are byproducts of the profit motivation.
Or at least that’s what they’re supposed to do, but companies like Comcast aren’t having it. What about you?