Aside from the straightforward matter of ensuring compliance with FCC licensing provisions and existing rules, the Commission's primary consideration in reviewing mergers should be to assess the overall potential effects on consumer welfare. Principled economic analysis should be employed in determining whether the proposed Comcast/TWC merger would either potentially benefit consumers or likely result in consumer harm.
Our summary review indicates that Comcast/TWC poses a number of likely consumer welfare-enhancing benefits. In particular, the merger has the potential to:
- Accelerate the transition from analog to digital for cable video transmission to more broadband Internet consumers;
- Enable faster deployment of DOCSIS 3.1 to more retail video subscription consumers;
- Improve the competitiveness of the market for broadband services to business enterprise customers, including nationwide and inter-regional business customers; and
- Increase efficiency as well as expand the supply and geographic scope for wireless backhaul infrastructure services needed to transmit wireless data.
It is possible (but not likely) that further economic examination of the proposed merger could uncover potential anticompetitive conduct concerns. But before the Commission should even consider prohibiting a proposed merger or subjecting it to regulatory conditions, the agency should require convincing evidence of actual or likely consumer harm in light of these general considerations:
Indeed, the video services market continues to become increasingly competitive. E
ntry by two nationwide direct broadcast satellite providers (DBS) in the 1990s offered consumers important new competitive outlets and presaged further competitive and technological developments that have enhanced consumer welfare. According to data in the
Fifteenth Video Competition Report, by the end of 2013, cable providers held only 55.7% of MVPD subscribers. Telephone MVPD entrants and DBS providers claimed about 8.4% and 33.6% of MVPD subscribers, respectively. At the end of 2011, 98.6% of subscribers or 130.7 million households had access to at least three MVPDs. And 35.3% or 46.8 million households had access to at least four MVPDs. The number of households with access to three or four MVPDs likely has grown even further since then.
Internet-delivered video and wireless broadband services offer additional alternatives to consumers. More than 90% of the population is also served by at least three wireless broadband providers. Data speed and capacity capabilities enabled by next-generation wireless networks have made mobile TV applications increasingly attractive to a rapidly growing number of consumers.
Moreover, as Commission precedents recognize, "vertical" integration effects often enhance consumer welfare. In this case, even vertical aspects of the merger are minimal and, on their face, do not appear likely to pose prospective harms outweighing prospective benefits.
Time Warner Cable lacks majority ownership of any nationwide cable video programming network or nationwide TV broadcasting network. Comcast's 2012 sale of 17 video networks means that post-merger with Time Warner Cable, Comcast will have fewer affiliated programming networks than it did upon the Commission's approval of its merger with NBC-U in 2011. For that matter, the D.C. Circuit twice has ruled that a 30% cap on MVPD subscribership nationwide is arbitrary and capricious in light of the existing competition in the MVPD marketplace - and MVPD competition has only increased further since those court decisions. In any event, Comcast has committed to divesting assets post-merger, thereby leaving the combined entity serving at or below 30% of MVPD market subscribers. Therefore, there is no convincing basis for concluding that the merged entity's market share threatens consumer welfare. And there is no convincing basis for concluding that video programmers would suffer anticompetitive harm as a result of the merger.
Pursuing a merger review policy based on principled economic analysis has further implications. It means the Commission must disregard pleas for it to reject Comcast/TWC out of hand based on appeals to emotional incredulity or irrelevant "big is bad" sloganeering. The Commission must also stand firm against calls made - under the guise of protecting competition - to impose conditions on the merger in order to protect market rivals from the competitive process. Further, the Commission must reject dragging out its review process and thereby making itself even more susceptible to political pressures having little or nothing to with the potential consumer welfare benefits of the proposed transaction. And finally, the Commission must avoid the imposition of any conditions on the merger unrelated to demonstrable concerns over market power and anticompetitive conduct.
Whatever the Commission's ultimate conclusion regarding its review of the proposed Comcast/TWC merger, the review process should stick to rigorous economic analysis. The Commission should stay focused on the potential consumer welfare-enhancing benefits that the Comcast/TWC merger would bring.
