Posted on: Sunday, February 15, 2004
Comcast takeover bid raises eyebrows
By Jonathan Krim
Washington Post
The potential takeover of Walt Disney Co. by Comcast Corp. would likely survive antitrust or other legal challenges, but the prospect is stoking bipartisan rethinking of whether a small number of media titans are acquiring a hammerlock on what information and entertainment people can see, and on how they can receive it.
Democrats and Republicans on Capitol Hill promised close scrutiny of the proposed takeover, as did Federal Communications Commission Chairman Michael Powell.
Like other mega-mergers of media companies, the Comcast-Disney deal "may well pose a risk to competition in the marketplace of ideas and the diversity of news, information and entertainment available to the American public," Sens. Mike DeWine, R-Ohio, and Herb Kohl, D-Wis., said in a joint statement. The two men head the Senate Judiciary subcommittee on antitrust.
Ripples of Comcast's bold move will be felt beyond this deal, whether it happens or not. The potential combination touches virtually every aspect of a rapidly converging media and Internet landscape, from range and control of programming to cable-television rates to online services to concerns about indecent content.
By acquiring Disney's ABC network, Comcast, with 22 million television subscribers, would in several U.S. cities operate the only cable system and one or possibly two of the local over-the-air broadcast stations. The FCC once barred firms from operating cable and broadcast facilities in the same market, but those rules were thrown out by a federal court in 2002 and the commission decided not to rewrite them.
Like Rupert Murdoch's News Corp.'s recent deal for satellite-provider DirecTV, and Viacom Inc.'s ownership of CBS, the Comcast deal brings together the owners of programming — Disney studios, ESPN and ABC — with the owners of the pipe or stations it travels through.
Consumer advocates and many in Congress fear that such continuing consolidation will result in four or five companies gaining the ability to keep out competition and diversity while stifling localism.
Mark Cooper, research director of the Consumer Federation of America, said it is inevitable that media companies will race to get as big as possible as they are freed from ownership limits and rules that force them to share their networks. "This is the merger that the industrial policy of the (Bush) administration wanted," he said. "You get outrageous sameness" of programming.
Cooper and others say that cable rates have risen as much as 50 percent in the past 10 years and that Comcast's market power would only increase.
FCC Commissioner Michael Copps, while not commenting specifically on the proposed merger, said the relationship between indecent programming and media concentration also should be considered.
The Justice Department raised no antitrust concerns with the Viacom-CBS deal in 2000 and recently approved the Murdoch-DirecTV deal, which provides a huge U.S. satellite distribution channel for Fox news, sports and entertainment, leading analysts to believe it would view the Comcast-Disney deal in a similar light.
"DirecTV was less dominant in its market than Comcast," said Rebecca Arbogast, a telecommunications analyst with the financial services firm Legg Mason Wood Walker Inc. "But I don't think at the end of the day it leads to a different result."
Regulators did attach several conditions to the DirecTV acquisition, including requiring News Corp. to provide local channels in DirecTV's top 210 markets by 2008. News Corp. also would have to submit to arbitration in disputes over how much it can charge rival networks for its Fox programming.
Arbogast said she expects similar conditions to be put on Comcast.
To some, the more ominous consequence of the Comcast deal would be in controlling Internet service.
Comcast is the country's largest provider of high-speed Internet service via cable, with 5.3 million subscribers.
Increasingly, consumer groups and many technology heavyweights, such as Microsoft Corp., Apple Computer Inc. and Amazon.com Inc., have urged the FCC to ensure that the few major Internet service providers not be able to keep certain Internet content off their systems. Suppose, for example, that Time Warner's cable Internet service decided to make it hard to get non-Time Warner movies online.
Until now, Disney, which does not have its own Internet channel, actively supported the push for keeping Internet networks neutral.
"As a content company, it (Disney) was a powerful force in favor of keeping the net neutral — so it could compete equally with other content companies to sell its content," said Stanford University law professor Lawrence Lessig. "But why compete when you've got control over the pipes?"
Internet service companies have repeatedly said they have no interest in content discrimination, saying it would only drive customers to seek alternatives.
Powell, who has championed deregulating the media and Internet industries, has resisted seeking network-neutrality rules. But in a speech recently, he for the first time sent a message to industry that "net freedom" is an important principle and that the FCC will be watching for violations.
"As we continue to promote competition among high-speed platforms, we must preserve the freedom of use broadband consumers have come to expect," Powell said.
