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Sunday, Nov 8, 2009
Comcast Corp. is a modern marvel of Washington's deregulatory ways. The company, which has expanded through shrewd acquisitions since its founding -- in Tupelo, Miss., in 1963 -- is a direct beneficiary of the last few decades' loosening telecom rules. Comcast's last purchase, the 2002 buyout of AT&T's massive cable system, might not even have been possible if it hadn't been for the business-friendly ways of the Bush administration's FCC appointees, who had let languish an old rule that prevented one cable firm from owning too many of the nation's cable lines. Now, the company is counting on those commissioners to give it a green light on Disney.
To illustrate Comcast's closeness with regulators, Jeffrey Chester, the director of the Center for Digital Democracy, a Washington group that favors stringent communications regulations, tells the story of the firm's maneuverings in 2002, during its takeover of AT&T's cable lines.
At the time, consumer advocates were agitating against the purchase; they worried that if Comcast bought AT&T, the combined firm would increase cable television rates and perhaps even limit how customers could use their broadband Internet connections. To mollify those critics, Comcast entered into several deals with rival Internet service providers, granting those ISPs the right to sell their services over Comcast's lines; Comcast hoped that its moves would show regulators that it would play fair on its broadband lines.
The problem was, some of those deals were secret, and Comcast's rivals wondered if the contracts contained terms that were extremely favorable to Comcast. Cable-industry trade newspapers reported, for instance, that Comcast allowed America Online to sell high-speed Internet service over Comcast's lines only after AOL agreed not to offer streaming video subscription plans that directly competed with Comcast's cable TV shows. EarthLink and consumer advocates chafed at the thought of such restrictions -- they seemed to prove that Comcast intended to wield enormous influence over what customers could do online. The critics demanded that the FCC command Comcast to fully disclose its secret deals with ISPs.
That's when Brian Roberts, Comcast's CEO, placed a telephone call to Michael Powell, the chairman of the FCC. According to documents Comcast submitted to regulators, Roberts told the chairman that all of his company's deals with other firms should be kept private; the FCC had no right to look at those deals as part of the merger. Roberts must have been persuasive, because two weeks after his telephone chat with Powell, despite the outcry of consumer groups, the FCC chairman granted the CEO's request. Powell and his two fellow Republicans on the commission approved the merger.
Roberts' interaction with the FCC chairman provides a good guide to what might happen when the firm embarks on its attempt to swallow up Disney. Comcast is a firm accustomed to getting what it wants. Disney has rejected Comcast's takeover bid, but many analysts say Disney's current management troubles leave Comcast well positioned to pursue the merger and eventually become the world's largest media conglomerate. And when the merger comes to the FCC for approval, it looks as though Powell -- and probably the other Republicans on the commission -- would side with the cable giant once again.
In a speech given Feb. 8 at the University of Colorado School of Law, in Boulder, Powell characterized the broadband industry as a growing and robust business, one that would do best without "unnecessary regulation that might distort or slow its growth." While he criticized broadband providers for imposing some restrictions on Wi-Fi and other applications -- singling out Comcast in particular for refusing to provide customers with "enough guidance regarding the bandwidth limits of their service plans," the problem that tripped up George -- Powell said that based on what he knows now, there's no need to impose rules preventing firms like Comcast from giving preference to some content on the Internet over others.
Powell seemed to be coming down against a proposed regulatory scheme known as "network neutrality," which Lessig and others have favored as a way to make sure that large broadband companies don't wield unfair influence in the development of new online applications and content. Comcast has been the leading opponent of such an idea. The firm maintains there is no evidence that cable firms wield too much power in deciding what's online, that customers are generally free to do what they want on Comcast's broadband Internet service, its terms of service notwithstanding.
Lessig and other advocates of network neutrality disagree. They point to restrictions like Comcast's as the first step in a possible slew of new restrictions to come, and they warn that if Comcast merges with Disney, things could get much worse. That's because, Lessig notes, Disney has been one of the leading advocates of network neutrality. "Disney has been the best silent ally we've had in this battle for the last five years," Lessig says -- and if Comcast buys Disney, proponents of a "neutral" network will see that silent ally become a vocal foe.
