Why Dish’s opposition to Comcast’s massive merger is so important

July 10, 2014
Obsession
Glass
July 10, 2014

The problem with Comcast-Time Warner Cable’s merger, in the eyes of its critics, is that a new cable colossus will hurt competition and mean higher prices or worse internet and television access for consumers.

But so far, most of the company’s ostensible competitors have kept their lips sealed, declining to speak out against the deal as US regulators weigh whether it is in the public interest. That changed Monday, when Charlie Ergen, chairman of the satellite TV provider Dish Networks, told Federal Communications Commission Chairman Tom Wheeler that his company opposed the tie-up, no ifs, ands or buts about it.

For regulators, proving that a deal would create a monopoly isn’t always easy—and squealing from content providers, television programmers, fledgling TV networks and especially other broadband or cable networks would be the biggest signal to the FCC and the Department of Justice that the deal will be anti-competitive. So why have so many of those players stayed silent?

In a nutshell: The reality is that if this merger goes through, Comcast will be the dominant player in the industry, and one with a long memory—and if deal is squashed, it’ll still be a dominant player.

Television companies and those who create content to run on Comcast’s massive network know they have to keep doing business with Comcast regardless of the outcome of this case. Internet content companies, led by the pugnacious Netflix, have weighed in against the merger, with the Computer & Communications Industry Association, which represents companies like Facebook, Google, and Microsoft in Washington, saying regulators should block the deal.

These are Comcast’s customers and partners—what about Comcast’s direct competitors in the cable industry? They may not like the idea of competing with Comcast-TWC, but as all kinds of content converges on the internet, consolidation becomes the relentless logic of the industry—so many companies hope for their own advantageous mergers someday, too.

There’s Charter, its smaller rival, which has struck a deal with Comcast to swap control of certain markets in an effort to dilute some of Comcast’s television market share. Why would Charter agree to a spin-off deal that has it losing some of its most lucrative territories? Because that scenario would be better than competing against a combined Comcast-Time Warner Cable if the deal does go through—and if regulators block it, Charter has a chance to load up on debt in pursuit of its own merger with Time Warner Cable.

Sprint, which is proposing its own anti-trust-skirting merger with T-Mobile, has floated a plan for wireless broadband that could benefit both itself and Comcast by highlighting the diminishing difference between wireless and cable internet: If Comcast can claim that wireless internet is a direct competitor with fixed-line, it can argue that within the bigger market, its has a smaller share and isn’t a threat to competition—and Sprint can make the same argument.

Then there’s AT&T’s more recently proposed combination with the satellite TV provider DirectTV, which is itself under review. Neither company is likely to voice any concerns about competition as they seek to finalize their link-up. With consolidation the name of the game, no firm wants to be on record calling foul on others’ anti-trust moves.

That leaves Dish Network. Left out of the merger round-up (this time around) it has more freedom to be outspoken about strong new competitors that could hurt its business. The company is planning a subscription online-video service, and it has reason to worry that the same problems Netflix faces—the need to pay extra to internet service providers to ensure good service to its customers—will affect its own service, especially if Comcast gains control of 40% of the US wireline broadband market.

Ergen and Dish are also aware that one merger in an industry can beget others as the pressure to maintain market share through consolidation grows. It’s the same argument that public interest critics of the merger have made:

“There’s potential for one merger to justify the next merger, like a domino affect,” Chris Lewis, the top lobbyist at the non-profit Public Knowledge, says. “It already happened with AT&T and DirectTV. We already see this rhetoric coming out of Softbank [which owns Sprint]. It’s really important to stop the first one that’s bad—once you let that one get through, it gets harder and harder to block each subsequent one.”

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