A little background is in order: Comcast, the nation’s largest cable television company, wants to acquire Time Warner, the nation’s second largest cable television company, and create one immense service provider that dwarfs the competition. However, because the merger will create such a huge, powerful entity, it must be approved by the federal government and by each of the states in which it does business.
It may take a state as large as California to stand up to the cable behemoth.
The Golden State’s Public Utility Commission says it will approve the acquisition, but has proposed some conditions that leave Comcast officials frowning. The company charged that California’s demands “create a more intrusive regulatory regime.”
Comcast Executive VP David Cohen, the public face of the company’s Internet Essentials program, was quick to speak out against the proposed conditions:
“We are reviewing the proposed decision and conditions closely and look forward to engaging with the full California Public Utilities Commission (CPUC) as it completes its review of the transaction,” Cohen said in a statement. “While we have just received the recommended decision, it appears that a number of the conditions are ones that will benefit consumers and the company can work with. Some of the suggested conditions, however, could potentially prevent the full benefits of this transaction being realized by Californians, and create a more intrusive regulatory regime where innovative services could be hampered rather than helped. In addition, at least some of the suggested conditions simply lie outside the authority of the CPUC or are unrealistic.”
What does that mean? As with most statements from government regulators and corporate spokespeople, the real meaning is shrouded in a haze of words, but Cohen did reveal some specific requirements to which the corporation objects:
- Comcast must increase the pace at which it brings broadband to underserved populations
- Comcast must make more people eligible for its Internet Essentials program, which delivers internet to the poor for just $10 per month
- Comcast must also offer Internet Essentials throughout Time Warner’s territory
- Comcast must double download speeds to 10Mbps
- Comcast must provide free Wi-Fi routers to all Internet Essentials customers
- Comcast must connect schools and libraries in underserved areas
- Comcast must sign up at least 45% of eligible households within two years
- Comcast must submit specific plans and reveal how it intends to sign up more low-income subscribers, reduce wait times, and make the application process simpler
Are California’s requirements impossible to fulfill?
Cohen’s statement argues Comcast’s case against some California PUC’s proposed requirements:
“[S]ome of the penetration rates and time frames suggested by the conditions are simply unattainable under market conditions, especially with populations that have been slowest to adopt broadband,” Cohen wrote. “Deeper broadband penetration among all populations is a goal we share, and one we’ve worked very hard on for the nearly two decades we’ve been marketing broadband. Nationally, across our footprint though we only have a penetration rate of 40 percent of homes we pass taking our broadband service. In California, it’s about the same. And that’s after we’ve spent billions marketing and advertising those services.”
Our reading of the PUC’s demands seems to show that Comcast and Cohen has a little wiggle room.
As ArsTechnica.com explained, “The California proposal does give Comcast leeway on the 45 percent number. If Comcast can show that its penetration rate is less than 45 percent among potential customers with incomes too high for Internet Essentials, then it can target that lower number rather than 45 percent. (Note that the 40 percent figure offered by Cohen included all homes regardless of income, and thus isn’t relevant to the proposed condition.)”
Putting Comcast on notice
We could go on and on analyzing the various demands made by the California PUC, but there is one that is of particular interest to our readers — Comcast must agree not to work against municipalities that want to build their own broadband networks.
We have often editorialized against the abuse of power of the cable television industry’s powerful team of lobbyists who go into action to block the construction and operation of municipalities that want to serve their citizens by building their own high speed fiber networks.
One of the most interesting demands foisted on Comcast by the Public Utilities Commission says:
“Comcast shall for a period of five years following the effective date of the parent company merger neither oppose, directly or indirectly, nor fund opposition to, any municipal broadband development plan in California.”
We are huge supporters of Comcast’s Internet Essentials program. It already brings high speed internet service to millions of Americans and the Comcast-Time Warner merger will surely assure that it brings the same (or even better) service to millions of additional needy Americans. We are almost able to support the merger for that reason alone.
However, we agree with the California PUC’s demand that Comcast abstain from working against municipalities that want to bring reliable, high-speed, low-priced internet services to their citizens.
On the other hand, the cable television industry is certain to face substantial technological headwinds in the next few years. Although Comcast and Time Warner are sure to generate substantial profits for the next few years and can probably “afford” to deliver everything requested by the PUC, there is no guarantee that they will be able to afford them in the long term.
That is why we urge the California PUC to tread carefully. Consider the merger carefully and get as much as you can for California’s economically-challenged citizens. But don’t make demands that will kill the goose that lays the golden egg.