Nearpoints

Craig Mathias

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Comcast and NBC - No Merger, No Way

Separating content from transport is even more important than separating church and state. There's a lesson in here for wireless as well...

By Craig Mathias on Tue, 08/31/10 - 9:54am.

As you've probably heard, Comcast, the cable-TV/broadband giant, is buying NBC Universal, a/k/a NBC television. Let me cut to the chase - there's absolutely no way this should be allowed by the regulators, a/k/a the government. Such a merger is flat-out dangerous to the public interest although it will of course generate great gobs of money for Comcast and its real customers, advertisers. And guess where that money comes from - you and me. But there's a much larger issue at stake here, one with implications for what is becoming the most important media channel of all - wireless.

My fundamental objection to this merger is that businesses that provide the transport of media should not be allowed to own the content that travels over their channels. This is in keeping with my fundamental beliefs that network neutrality (requiring carriers to in fact carry any legal traffic without any right of censorship) and open access (requiring any technologically-compatible subscriber unit to be used on any given network) are both central to a functioning democracy and in getting the consumer the best deal, a fundamental tenet and objective of capitalism. Say what you will about what passes for capitalism today, but this albeit imperfect system offers the widest variety of goods and services possible, with the best quality and price, thanks to the competition absent in competing economic disciplines.

But to the point at hand, my model of the media world includes three key elements: content, transport and delivery. Content is what we need the other two for, and ultimately we use the other two for the sole purpose of access to this one. Transport is how content is moved from the content supplier to the consumer, primarily via networks, but also of course on static (today mostly optical) media. And delivery is the vehicle whereby the consumer consumes the content - subscriber units and the amazing range of end-user devices. We must have open interfaces at the boundaries of these three elements - if we allow a transport supplier (carrier) to own content, it will be only natural that the owner of the content will attempt to use their transport capabilities to maximize the return on investment from their content. Ditto, by the way, for delivery-vehicle manufacturers monopolizing content as well - this means you, Apple.

But let me illustrate with just a couple of examples why this doesn't really work for society as a whole. OK, Comcast, if this deal goes through, you'll own CNBC. But you also have Fox Business and Bloomberg on your network, at least where I live. They would become your competitors. Since you have established that it's your First Amendment right to carry whatever you want (although why we allow corporations to have Constitutional rights is beyond me), why not just cut to the chase and dump the competitors? Perhaps you could do this subtly, by putting them in a separately-priced tier, as you so incomprehensibly do today with so many other channels. Regardless, market diversity, economic growth, and dare I say it - jobs - are put in jeopardy by allowing a transporter to own content. And the second example: would Comcast management put up with CNBC analyst Jim Cramer saying anything even slightly negative about the company? Granted, Cramer has this problem with his current employer as well, but once the transporters own the content, the diversity of content and opinion will, I believe, shrink. Debate is curtailed. Variety is diminished. And thus one of the key tenets of capitalism, as is noted above, is thwarted.

Can you say conflict of interest? Can you say yellow journalism? Can you say bad deal for customers and consumers? This isn't "just business". It's about squeezing every last dime possible out of customers, irrespective of the value delivered. Ultimately, such behavior is self-limiting; in the interim, however, the costs are potentially enormous. Since I do a couple of M&A deals a year, I understand the motivations, and investment bankers have kids that gotta eat, too. But what's best for the economy overall? Certainly not monopoly. Again, this is ultimately self-limiting; consumers are smart. But keeping the transport mechanisms open is critical, critical, critical to so many aspects of life today.

The implications for wireless are identical, and even more ominous, as information needs when out and about can be even more urgent if not absolutely critical. Since I think I made my point, we can leave it at that for now. But until open access and net neutrality are codified in law, we really can't rest easy.

Look, I know that carriers don't want to be big, dumb pipes; we've heard that over and over again. All business want to be in high-growth, high-profit spaces, and will go to almost any lengths - even irritating their customers and stretching the antitrust laws - to achieve that end. Banks and airlines slap you with fees that would have been embarrassing (to them) just a decade ago. As customers we are indeed irritated, but as investors, well, that's another story. As is the case with government screwing up the economy, we are ultimately to blame here.

Regardless - someone has to be the big, dumb pipe. Perhaps, dare I say it, the time has come for (gulp) the government to assume responsibility for basic services where competitive returns for investors can only be achieved by screwing customers - telecommunications, banking, healthcare, utilities, and a few more. It's sad to see honest value disappearing for those who pay the bills, and the ethos of customer as prey essentially codified in practice.

By the way, if you want to read the counterargument to what I have present above, from a group I often agree with (in principle, anyway), see here. I want to be fair, but I find this piece completely nonsensical.