Comcast/NBCU Merger Will Drive Up Pay-TV Costs, Report Says

PITTSBURGH: The American Cable Association (ACA) says that consumers will pay at least $2.4 billion more for pay-TV services over the next nine years as a result of "unrestrained pricing power" following the merger of Comcast Corporation and NBC Universal.

"It is clear that the Comcast-NBCU deal will send monthly cable bills higher by billions of dollars over the next decade, underscoring ACA’s view that regulators must protect consumers and competition from a transaction whose benefits are vastly outweighed by its harms," said Matthew M. Polka, president and CEO of the ACA. "Without meaningful and cost effective conditions on the Comcast-NBCU transaction, regulators also run the risk of crippling effective competition in the pay-TV distribution market."

The study, conducted by Dr. William Rogerson, professor of economics at Northwestern University and one-time FCC Chief Economist, claims that a combined Comcast-NBCU would be able to raise programming fees "way above levels the two would be able to command as separate and independent companies." These hikes would then be passed on the consumer.  According to Rogerson, "the quantifiable consumer harm of the transaction ($2.566 billion) is more than 10 times greater than the quantifiable consumer benefit ($204 million) claimed by Comcast-NBCU."

The report differentiates between a vertical harm: Comcast-NBCU raising fees it charges rival platforms for NBCU programming assets; and a horizontal harm: raising prices for carriage deals combining NBCU’s cable networks and owned-and-operated stations with Comcast’s regional sports networks. Rogerson calculated the vertical harm at $1.43 billion and the horizontal harm at $1.14 billion over the next nine years. Locations hit the hardest will be those markets where Comcast has a significant cable presence and owns the regional sports network in addition to the NBC stations—Philadelphia, Chicago, San Francisco, Washington, D.C., and Hartford, among others.

Rogerson also asserts that Comcast has "vastly overestimated" the savings that it will realize through joint ownership of NBCU programming assets. The deal is currently pending regulatory approval. ACA, a coalition of small and mid-sized pay-TV operators, has outlined the conditions it believes are needed for the merger to be approved. This includes commercial arbitration during carriage disputes.

Comcast has dismissed the report. Sena Fitzmaurice, a spokeswoman for Comcast, is quoted in wire reports as saying, “After having more than nine months to make its case, and after two prior attempts that we thoroughly rebutted, ACA is making an obvious attempt to further delay the approval of the Comcast NBCU transaction. ACA’s efforts should be rejected by the FCC on both substantive and procedural grounds.”