PITTSBURGH, February 4, 2010 — Speaking for her company and nearly 900 small cable operators, Colleen Abdoulah, President and CEO of WOW! Internet, Cable & Phone, warned in congressional testimony that the planned merger between Comcast Corp. and NBC Universal would push up cable prices for consumers and threaten vibrantly competitive multichannel video and Internet content markets if regulators failed to impose meaningful conditions on this unprecedented media combination.
"Regulators must understand that the Comcast-NBC Universal merger will harm consumers and competition because a company like WOW! will be forced to pay discriminatory prices for an array of content owned by a dominant provider like Comcast-NBCU, depriving us of critical financial resources needed to add network capacity to meet the demands of broadband subscribers," said Abdoulah, a veteran cable industry executive highly regarded by her peers. "Make no mistake about it: Comcast-NBCU will have the incentive to treat WOW! unfairly in the pricing of cable, broadcast and broadband content because we compete head-to-head with Comcast for cable, phone and broadband subscribers."
Abdoulah, an American Cable Association board member, appeared before the House Subcommittee on Communications, Technology, and the Internet in the morning and the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights in the afternoon. Members of both committees, who can play an influential role in the merger-review process, are free to reach out to the Federal Communications Commission and the Department of Justice to seek the application of conditions tailored to specific harms identified with a particular transaction.
Abdoulah's testimony also marked yet another milestone in ACA's effort that began late last year to alert regulators that they should focus on the fact that the Comcast-NBCU deal is anything but a run-of-the-mill transaction that will benefit consumers and competitors.
"As Colleen Abdoulah clearly demonstrated in her testimony, seeking fair competition with Comcast-NBCU is all about protecting consumers," ACA President and CEO Matthew M. Polka said. "No merger should be allowed to threaten the government's long-standing interest in promoting a competitive pay-television market and preserving an open Internet where consumers are not burdened by such things as paying wholesale content charges hidden in their bills."
Abdoulah's company is an award-winning cable provider serving in the Midwest, recognized this year as the #1 cable company by Consumer Reports and for 10 years by J.D. Power and Associates for outstanding consumer service in surveys ranking WOW! far above some of the largest communications companies in the country.
WOW! serves approximately 465,000 customers in Illinois, Indiana, Michigan and Ohio. In Chicago and Detroit, WOW! competes directly with Comcast’s cable systems in an area covering approximately 1 million households. A 2004 report by the U.S. Government Accountability Office found that customers pay 15% less for cable in markets where companies like WOW! take on established incumbents.
The Comcast-NBCU deal is the most significant media transaction in a decade. Comcast would take control of the NBC broadcast network, 10 local NBC TV stations and 16 TV stations owned by the Spanish-language Telemundo network, and the Universal movie studio. The deal would put Comcast in charge of NBCU's widely popular cable programming assets, including USA, Syfy, CNBC, MSNBC, Bravo, and Weather Channel. Comcast -- already the largest cable TV and residential broadband access provider -- would combine NBCU cable programming assets with its own cable network properties, including Golf Channel, E! Entertainment Television, Style Network, and VERSUS. Comcast also owns 10 regional sports networks, considered "must have" programming by the FCC.
"In the post-combination world, Comcast will have so much power that it can create its own economic reality and make one plus one equal five," Abdoulah said. "This makes all distributors quake as they will be forced to pay more for the content so essential to their businesses. Further, it means that American consumers will pay more as well. This is the antithesis of a pro-competitive deal."
In Chicago today, WOW! carries 19 networks from Comcast and NBCU, including both Comcast’s regional sports network and NBC’s owned-and-operated television station. Whatever limited maneuverability WOW! has today will go away entirely after the merger, forcing WOW! to cope with just one company offering a financially onerous “take-it or leave-it” deal that WOW! must except to stay viable in the market.
In her remarks, Abdoulah stressed that Comcast already uses its power to exploit the vulnerabilities of smaller cable operators to gain an unfair advantage in the marketplace and that the problem would only get worse if regulators let Comcast combine with NBCU without meaningful conditions. Even though appearing before congressional committees, Abdoulah was required to articulate her concerns in a general way because she was forbidden to be specific under confidentiality clauses in agreements between WOW! and programming vendors.
On programming issues, Abdoulah said small cable operators are denied access to broadcast stations unless they agree to carry affiliated cable channels that consumers need to buy but don't plan to watch. She said this tactic is replicated on the cable side, with popular cable networks tied to distribution of infrequently viewed cable networks. The impact, she said, is that channel capacity can’t be used to launch innovative independent networks or improve broadband download speeds for consumers. Abdoulah also expressed concern about the ability of WOW! to gain access to Comcast’s online programming service, Fancast Xfinity TV, for distribution to her broadband subscribers.
In terms of remedies, Abdoulah said WOW! and ACA are committed to addressing problems with behavioral relief and devising enhanced measures. Among the many remedies under consideration are:
• Non-Discriminatory Rates and Terms. All Comcast-NBCU content (whether broadcast, satellite, terrestrial or online) would be available on a non-discriminatory
basis, with rates based on a Most Favored Nation or other benchmark.
• Prohibitions on Content Tying, Bundling and Similar Practices. Comcast-NBC Universal would be prevented from tying and bundling its services, from requiring carriage of content on a particular tier or level of service, and from penetration or buy-through requirements that disadvantage one provider compared to another.
• Program Access Arbitration Reforms. The current retransmission consent and program access complaint procedures do not provide significant help to cable operators and consumers. As a result, program access rules should be rewritten to prohibit non-cost-based price discrimination and to shift the burden of proof to programmers to show that such price discrimination would be justified. While a program access complaint is pending, pay-TV providers unaffiliated with Comcast would be permitted to continue to carry the programming under the terms and conditions of the existing or expired agreement. Moreover, Comcast-NBCU should make programming contracts available to the FCC for ongoing inspection and accountability.
About the American Cable AssociationBased in Pittsburgh, the American Cable Association is a trade organization representing nearly 900 smaller and medium-sized, independent cable companies who provide broadband services for more than 7 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit http://www.americancable.org/
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