The late Apple co-founder and CEO Steve Jobs once said, “Why join the Navy if you can be a pirate?” The concept of doing what is most profitable over what is best for society has been a popular and controversial trend in business since the birth of the Union. Traditionally, it is the government’s prerogative […]
The late Apple co-founder and CEO Steve Jobs once said, “Why join the Navy if you can be a pirate?”
The concept of doing what is most profitable over what is best for society has been a popular and controversial trend in business since the birth of the Union. Traditionally, it is the government’s prerogative and obligation to maintain the balance between the well-being of the people and businesses’ right to be profitable.
With the seemingly democratic intention of removing barriers of entry in the telecommunication industry, the Clinton administration drafted the Telecommunications Act of 1996, which struck down limitations established by the Communications Act of 1934 — namely, that a business can only own a single media outlet per market, that a company’s core business must be germane to the media outlet it seeks to purchase, and that the owning company must show a tangible commitment to the market it chooses to operate in.
What the Clinton administration intended to do was to allow regional cable companies to offer local and long-distance telephone service. Likewise, the telephone utilities could start carrying cable television service. The intended effect was to be an increase in competition, a decrease in consumer cost, and an expansion of the national communication network.
It didn’t work out that way
Large multinationals — now free to acquire media properties — moved quickly to pick up whatever companies they could. Disney acquired ABC/Capital Cities. Time Warner merged with AOL. Microsoft acquired shares of USA Networks, Comcast, AT&T and Facebook. Viacom bought CBS, only for the new company to split and to reintroduce CBS and Viacom under new leadership — despite both companies being owned by the same parent company, National Amusements.
The shuffle to grab up any available media property created a de facto oligarchy in the American media market, in which the a few large corporations control and influence the vast majority of the market. New, smaller content producers and distributors find themselves facing remarkably high barriers of entry.
An example of this is former Vice President Al Gore’s foray into mass media, Current TV. Originally designed to be independent, viewer-generated programming, the company was unable to establish a major foothold until it partnered with Yahoo! in 2006 and Comcast and DirecTV bought into the company, permitting the company access to their distribution networks. Despite this, the network didn’t have the support the corporately-subsidized cable channels had.
In January 2013, al-Jazeera purchased Current TV for $500 million after Current attempted a marginally successful format change.
The case against Comcast
When Comcast purchased NBCUniversal this week, it exposed the media market to the potential of abuse from Comcast. In the position paper, “Why the Comcast/NBC Merger Poses a Major Threat to Video Competition that Antitrust Authorities Cannot Ignore,” it is argued that, “A vertically integrated Comcast/NBC would not only control marquee television and movie content, it would also control the primary avenues for distributing that content: a major television broadcast network, a major cable system operator and a major broadband Internet access provider.”
The report continued: “Because the merged entity would control both content and distribution, it would have both the incentive and the market power to limit the access of competing content to the distribution platforms it controls. It would also have the power to enforce anticompetitive bundling and pricing of its own programming, or in some cases, to deny its competitors access to its programming altogether.”
In American media, the Comcast purchasing of NBCUniversal is untested new grounds. While News Corporation does own and operate a group of regional television broadcasters — including Phoenix’s KSAZ and KUTP, Los Angeles’ KTTV and KCOP and Minneapolis’s KMSP and WFTC — there has never been a vertically integrated production-distribution chain in this country the gravity of the current Comcast model.
It should be noted that Time Warner does not own Time Warner Cable. Time Warner Cable is a separate, independent company that licenses the Time Warner name and intellectual properties. To avoid suggestions of corporate impropriety and to dodge antitrust inquiries, Time Warner spun-off its cable operations in 2009.
Comcast — with its 10 production studios (including MGM, United Artists, Universal Pictures, and Focus Features), 20 cable channels, shares of the OnDemand and Hulu video-on-demand infrastructures and control of the largest multichannel video programming distribution network in the country — can not only dictate terms of production of media, but also terms for its distribution. Comcast is now free to show or block whatever it likes to its subscribers without financial consideration.
This is problematic, considering Comcast’s history.
In 2006, Comcast introduced Sandvine hardware to its internet networks. This effectively disrupted peer-to-peer file sharing over its networks. In October 2007, the Associated Press reported on this, saying that Comcast “actively interferes with attempts by some of its high-speed Internet subscribers to share files online, a move that runs counter to the tradition of treating all types of Net traffic equally.”
The tactic Comcast chose to use masked reset (RST) packets sent over the network — which originated from Comcast — as coming from the user on the other end of the peer-to-peer connection. While Comcast allegedly were targeting BitTorrent users, the technology actually attacked groupware applications. Users discovered that Lotus Notes were dropping emails, while others noticed that Google failed to load properly on their computers.
The Federal Communications Commission requested that Comcast corrected its network management policies to address these issues, which Comcast did, in cooperation with BitTorrent. Users, however, still complain to this day that Google and BitTorrent is disrupted periodically when used on Comcast’s networks.
Comcast has regularly spent millions of dollars annually on government relationships and lobbying. From direct political contributions to hiring the spouses and children of local politicians in key markets, Comcast has aggressively worked behind closed doors towards its own ends.
Examples of this are Comcast’s push for “a la carte” legislation that would allow consumers to purchase individual channels rather than tiers of programming and the 2010 overturning of Comcast Corp. v. FCC for Comcast’s aggressive network monitoring practices.
The danger is oligarchical control of the media
In an article by Bloomberg, the realities of Comcast’s new parity were laid bare: “With the merger, Comcast would become even more powerful. Any new high-speed Internet provider in Comcast territory would have to enter the market for content at the same time it incurred the heavy upfront costs needed to wire a network. Indeed, by the time the Comcast-NBC Universal merger was announced at the end of 2009, Verizon Communications Inc., the only nationwide company installing fiber-optic lines, had already signaled that it was planning to stop doing so. It was just too hard to compete with Comcast.”
There is a core fear that the playing field is being controlled by the media conglomerates. As the major players scramble for more and more of the market share, dissenting or diverting voices seeking to set up in this media landscape will not be able to functionally compete, or — if they do manage to gain a reasonable market share — run the risk of being bought out or absorbed by the conglomerates.
“Antitrust authorities should also examine how a Comcast/NBC merger is likely to trigger additional mergers by competitors,” states the position paper, “Why the Comcast/NBC Merger Poses a Major Threat to Video Competition that Antitrust Authorities Cannot Ignore.” “Consolidation does not occur in a vacuum, but rather sets the pace and terms of play for an entire industry. As we have seen repeatedly in the video market, a major merger at the top would trigger a merger wave throughout the top tier, as the remaining players in both the distribution and content markets seek to muscle-up to match the new threat that the vertically integrated giant poses. With diminishing competition and the elimination of competitive rivalry across the distribution-content divide, the likelihood of parallel behavior grows stronger, as does the threat of collusion. Consumer choice would be restricted, and prices would rise while oligopoly control prevents entry by new competitors.”
Jared Nichols is a futurist and strategy consultant and president of The Jared Nichols Group. He is the author of “Leading the 21st Century: The CEO’s Guide to Thriving in a Volatile and Uncertain Future.” In conversation with Mint Press, the Comcast model of vertical integration of content production and distribution is creating a “too big to fail” scenario for the majority of Americans: a handful of businesses is disseminating the news to the majority of the population, who has no access to critical information except from these handful of companies. If they fall, hundreds of millions Americans will be cut off newswise.
This phenomenon was illustrated in the 2012 election when the “low-information voter” — voters that obtain their news and societal information from the media conglomerates, such as Fox News/Fox Business Channel/Sky News, without the benefit of dissenting opinion — made its presence.
There is a true risk in such a monopolized playing field that the content produced by these groups may be filtered, rearranged or crafted in such a way that a bias — intentional or otherwise — may form that colors the media.
However, as has been said before, the news cannot be stopped. While the media landscape is being formed to allow fewer and fewer players to control more of the media market, at the grassroot level, there will always be the YouTube media creator that films the next big meme. There will always be journalists on Twitter breaking the next big story. There will always be the blog, the viral video, the newsgroup feed to offer the divergent opinion.
This, however, does not deny or mitigate the threat the oligarchization of the media market presents. Chris Wyatt is the CEO of Youtoo, an interactive television platform. In conversation with Mint Press, Mr. Wyatt shared his concern: “As an independent programmer, there’s always a concern of increasing the power of the carriers. And there is a concerted effort recently undertaken by the cable industry to push the smaller, independent programmers out of business. Each day, we’re learning of fellow independent channels being dropped due to ‘bandwidth’ issues – which are nothing more than a excuse in today’s technological age.”
“While Comcast has been generous in terms of launching lesser known independent channels, the special services such as Verizon, AT&T, Dish and DirecTV have not been as accommodating,” Wyatt continued. “In fact, we’re currently lobbying right now in Congress to have these ‘special services’ fall under the same FCC regulations as the cable providers. Otherwise, consumer choice will be relegated to a handful of media conglomerates offerings.”