Charlie Ergen has never been the kind to mince words. In meetings last week with commissioners, bureau chiefs, and other staff of the Federal Communications Commission, the CEO of Dish Network was characteristically blunt. He told the FCC that it should overrule the proposed merger between Comcast and Time Warner Cable, stating that the deal presents “serious competitive concerns”.
Comcast and TWC have argued that combining their operations will make it easier for them to compete effectively with Dish and with other Pay TV and internet providers with national presence. The two companies currently operate in different cities, with very little overlap in their video markets. Since they seldom compete against each other now, Comcast has argued before Congress and the FCC that the proposed merger couldn’t possibly reduce competition. Ergen dismisses this argument, saying “there do not appear to be any conditions that would remedy the harms that would result from the merger”. The combined company, he said, would enjoy far too much leverage over “the lifeblood of over-the-top video”- high-capacity broadband infrastructure.
Ergen said that Comcast/TWC would be able to exert excessive pressure on three “choke points” in the video service market. He said that these choke points are “the last mile public internet channel to the consumer, the interconnection point, and any managed or specialized service channels, which can act as high-speed lanes and squeeze the capacity of the public internet portion of the pipe”.
What could the combined company do with this leverage? Ergen said, “It will be able to extract lower prices from programmers, which in turn will force programmers to extract even higher rates from smaller pay TV providers like Dish in order to compensate programmers for lost revenue. And a combined Comcast/TWC will have the incentive and the ability to restrict programmers’ ability to grant digital rights to competing pay TV and OTT video providers. Each choke point provides the ability for the combined company to foreclose the video offerings of its competitors.”
Ergen also asked the FCC to deny approval for the AT&T/DirecTV merger, saying that those two companies “will be able to combine their marketing power to leverage programming content, to the potential detriment of consumers”.
Comcast responded to Ergen’s remarks, saying “as our filings show, every market we operate is is highly competitive. Dish has long been one of our most vigorous competitors, and unlike us has a national footprint available in tens of millions more homes than a combined Comcast/Time Warner Cable. Dish not wanting stronger competitors isn’t surprising and isn’t new.”
Under the terms of the proposed Comcast/TWC, the combined company would have about 30 million subscribers, about 50% more than DirecTV’s 20 million, and and more than twice Dish Network’s 14 million.