Tales of the Sausage Factory

The Adelphia Day of Judgment Comes

For over a year now, I’ve intermitently tracked the transaction between Comcast and Time Warner for the bankrupt Adelphia systems. At tomorrow’s open meeting (assuming no last minute delays for further negotiations), the FCC will issue its decision.

How we got here, what happens, and why you should care below.

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Tales of the Sausage Factory

Much Better Senate Draft from Democrats

The Democrats of the Senate Commerce Committee have begun circulating this draft revision of the wretched Communications, Consumer Choice, and Broadband Deployment Act of 2006 (aka “The Stevens Bill). Not only is the Democrat draft a lot shorter (a big plus), it:

(a) Eliminates the really bad munibroadband provision in the Stevens Bill with good language similar to the McCain-Lautenberg Community Broadband Act.

(b) Eliminates the excruciatingly awful net neutrality provision in the Stevens Bill and replaces it with the good language from the Internet Freedom Preservation Act sponsored by Snowe, Dorgan, and Inouye.

Happily, the Democratic Draft also contains the good stuff from the Stevens Bill: opening up the broadcast spectrum ”white spaces” and limiting cable market power over regional sports programming. (Although the Democratic draft is not quite as strong there as in the Stevens bill. Ah well.) Sadly, the Democratic draft also contains a broadcast flag provision.

It’s still a draft, of course. But it shows how the momentum on critical issues continues to shift in the right direction now that the public has started tuning in and speaking up. Last month, the telcos and the cable cos were enjoying a victory march reminiscent of Sherman’s march to the sea. Now, the telco/cable push to get Net Neutrality eliminated by Congress is looking a lot more like Napoleon’s march on, and subsequent retreat from, Moscow.

Stay tuned . . . .

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Tales of the Sausage Factory

Cable Market Power For Dummies

Most folks outside of Washington DC still find their cable company an obnoxious monopoly, despite the presence of competitors like DirecTV, Dish Network, and the occassional overbuilder like RCN. But, despite the fact that customers express far more satisfaction with satellite and overbuilder service, most folks remain subscribed to cable. What gives? And how does cable get away with raising prices and favoring affiliated programming in the face of this “vigorous competition.” Needless to say, the cable folks respond with a host of fancy economic papers that they file with the FCC and present to members of Congress.

My own impression, having spoken with a number of economists, is that the Cable Cos use economics the same way Creationists use intelligent design. The point isn’t to engage in real scientific inquiry. The point is to throw enough scientific sounding stuff out there to confuse the issue and make people believe there are two equally valid sides to the debate. My problem is that the FCC and Congress usually end up playing the the Dover School District Board rather than Judge Jones.

Anyway, in an attempt to cut through some of the nonesense, MAP released a white paper of my authorship yesterday: “The Switching Equation” and Its Impact on the Video Proramming Market and MVPD Pricing. As you can tell by the title, even an attempt to write a simple, plain language version of this ends up more complicated than I’d like. (Sad fact is, economics is hard.)

So here’s the short version — most people find it such a pain in the butt to switch from one service to another that they will put up with higher prices, worse programming, and worse customer service rather than kill two days futzing with unsubscribing to cable and resubscribing to someone else. As long as cable doesn’t stink too badly, they can keep enough market power to make it even harder for competitors by cutting exclusive deals for regional sports programming and jacking up the price of video on demand to competitors (Comcast and Time Warner own 78% of iN Demand, the leading supplier of VoD). If we want real competition, we need to have rules that actually address market power and make it easier for people to switch to competitors. Otherwise, we get a lot of empty rhetoric about “level playing field” and “free market” and blah blah, and we still pay ridiculously high prices for cable and broadband service that still suck.

You want proof? Go read the paper.

Stay tuned . . .

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Tales of the Sausage Factory

Is the Comcast/Time Warner/Adelphia Deal In Trouble?

Back some months ago, I wrote about fighting further consoldiation in cable. In particular, I talked about fighting the proposed division of the Adelphia cable systems by Comcast and Time Warner and system swaps between Comcast and Time Warner which would give Comcast and Time Warner dominance in many regions of the country. As usual, back when the parties filed their applications with the FCC in May, the parties predicted a cake walk and the industry analysts agreed.

The smart money is still betting on no major conditions, with the possible exception of requiring Comcast and Time Warner to provide access to their regional sports programming. But a number of recent developments have raised questions. Between that and the political situation, I suggest that, like that remaining piece of Christmas cake at New Year’s, things have gotten a little stiffer and a little stickier than expected. Warning: a lot longer and not nearly as fun as my last cable post, but worth it get a picture of events you won’t get from trade journalists and industry analysts…..

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