Treasure this past week in Washington.
It’s not often — no, it never happens — that that consumers get a
multitude of good tidings from Washington. Is it too much to hope
that this is the start of a trend? Of course. The FCC then approved AT&T’s purchase of Qualcomm spectrum without strong interoperability (and poor media ownership rules, to boot.)
Think of it. In one week, AT&T
dropped its ill-fated takeover of T-Mobile after spending dozens of
millions of dollars. The U.S. Department of Justice, which provided
the leadership in scuttling AT&T’s anti-consumer strategy, also
said it would look at Verizon’s new spectrum/marketing deal with
leading cable companies, including Comcast. And on a smaller scale,
an administrative law judge at the FCC smacked Comcast for
anti-competitive behavior through its banishment of the Tennis
Channel to a higher, pricier tier while favoring Comcast’s home-owned
channels.
Does one see a common thread here? Or
a more unlikely series of events?
The AT&T takeover was certainly
most audacious of the three events. It was nothing less than a
direct assault on the concept of antitrust — the second largest
wireless carrier buying out the fourth largest. The result would
have totally altered the wireless landscape. AT&T did what it
always does, and usually does successfully. It marshalled all the
economic resources it could buy. It marshalled all of the political
resources it had bought in Congress and in state houses around the
country. It put its captive union in harness to make sure
recalcitrant and/or uninformed Democrats went along. And, for good
measure, it started a massive TV advertising campaign full of hopeful
notes for a better tomorrow, rural deployment and, in the face of all
logic, lots of new jobs . Of course Wall Street, which sees only
deals and profits (and competition is bad for profits) assumed it was
a done deal, adding to the chorus of inevitability.
And on the other side? A bunch of
public-interest and consumer groups, many of them outraged consumers
(many of them T-Mobile customers) and one company — Sprint. In the
currency of Washington, it’s the companies that count. Based on past
history, no one had any faith that the institutions of government
which are supposed to prevent deals like thi,s, the Justice
Department’s Antitrust Division and the Federal Communications
Commission, would actually do their jobs.
And yet they did. Whether it was
Occupy Wall Street (and other places) or election-year populism, or
the public outcry or just the plain facts of this deal, DoJ sued to
stop the takeover. The FCC conducted an intense staff inquiry and
then released that scathing document when AT&T tried to use a
procedural trick to squash it. Then a Federal judge indicated she
wasn’t pleased with the whole matter.
Even AT&T reaches its limits,
although not often and not so quickly. The $4 billion break-up fee
should help T-Mobile, as should access to more spectrum.
Now that the DoJ has flexed its
muscles, it’s time for the next challenge — Verizon. That company
played it cooler than AT&T, trying to sneak under the radar by
buying $3.6 billion worth of spectrum from Comcast and other cable
companies, and planning joint marketing agreements.The revitalized Antitrust Division and
the FCC will take a look at this deal, although it may be harder to
block outright than AT&T’s. The harms would be just as serious
— the quashing of broadband competition that has already been
already squeezed to near nothing by deregulation. It would be
acceptable if the spectrum deal went through but the joint marketing
was stopped. Verizon and the cable companies are, in some areas,
competitors as broadband providers, particularly in those privileged
places where Verizon has built out its fiber optic FiOS network. In
other areas, there is ostensible competition, although the basic DSL
offering really isn’t as good as cable’s broadband network. Cable
and telephone should be competitors for consumer dollars. DoJ and
the FCC should check very closely the details of the joint marketing
plans, and shouldn’t approve anything without them. If there are to
be those hard-to-enforce “conditions” then the conditions
should ban some practices and make resolution of complaints easy to
accomplish. Usually, complaints on conditions take a long time and a
lot of money to resolve.
If either agency needs more
inspiration, it should look no farther than the FCC’s administrative
law judge, Richard Sippel, who wrote a scathing opinion giving Tennis
Channel a significant boost over Comcast. Tennis Channel had
complained it was banished to the outer courts of Comcast’s lineup
when Golf and Versus, channels owned by Comcast providing similar
content to similar audiences, were given favored placement on the
show courts of the lineup.
In a hearing of the type which are
rarely held, evidence is introduced and testimony taken. Sippel‘s
opinion is a great example of what the “paper hearings”
composed of comments and replies are missing. When he cited
testimony by Michael Egan, Comcast’s programming expert as “just
not credible” when the Comcast exec tried to say the channels
were different, Sippel set the tone for a type of opinion that should
have been issued long ago in the cable industry. He cited evidence
showing Comcast gives better distribution to programming networks it
owns, noting, for example, that Comcast had planned to give a Major
League Baseball network a spot on the paid sports tier, until it got
a piece of the action. Then it got a better spot in the lineup.
Comcast Cable “has taken an active role in ensuring that its
affiliated networks obtain favorable channel placement,” Sippel
found.
The fine he proposed, $375,000, is far
too modest, although he limited by law. It’s smaller than the $500,000 fine the DoJ wants to
impose on Comcast Chmn./CEO Brian Roberts for not reporting stock
purchases. More significantly, it strikes a first blow for
independent programmers trying to get distribution on dominant
distribution networks, a model that has hampered new programming for
decades.
If a new day is dawning, there’s lots
of work to be done. The FCC could approve Sippel’s order quickly.
It could make sure Verizon and Comcast actually compete. It could
make certain that wireless operators AT&T and Verizon don’t
section off parts of the spectrum for their own use, while
eliminating the interoperable features that were supposed to take
place.
It’s a lot to contemplate. But it’s
easier to do now rather than a few months back.