On Friday, Commissioner Michael Florio of the California Public Utilities Commission issued a proposed decision rejecting Comcast’s attempted merger with Time Warner Cable—an important step towards blocking further consolidation in the broadband market. Commissioner Florio’s decision is particularly significant, as the CPUC was close to voting on an alternate proposed decision approving the merger with minimal conditions. That Commissioner Florio felt compelled to write a decision rejecting the merger speaks to how problematic it would be for California’s broadband future.
In his proposed decision, Florio writes: “There are a number of concerns about post-merger scenarios, ranging from possible to the probable or certain, that lead us to conclude that this transaction is not in the public interest. These include (but are not limited to) the potential lowering of quality of service and customer service standards to a lower common denominator, an increasing monoculture in the fixed broadband market in California, concerns about privacy, less competition in the special access market, and—most importantly—less competition in the broadband market, both the retail segment of that market and the segment that allows edge or content providers to reach retail subscribers.”
Commissioner Florio expresses specific concerns about the impact of the potential merger on California’s broadband market and it’s larger tech economy. He writes: “Were the post-merger Comcast to exploit its bottleneck position between its retail subscribers and edge providers, as it has shown the inclination to do, it would likely make broadband less attractive to a mass audience, make the investment in and provision of online services (VoIP competitors) and content (Netflix, Amazon, etc) less attractive to edge providers, and dampen the ‘virtuous cycle’ of innovation, investment, and broadband deployment.”
The proposed decision also addresses the economic harm that occurs when edge providers have fewer pathways to reach customers: “In more concrete terms, the proposed merger between Comcast and Time Warner reduces the possibilities for content providers to reach the California broadband market. Many of these content providers are located in California, and a reduction in their ability to reach their intended markets would likely to have a negative impact on the California economy. Such a negative effect on the economy is, itself, likely to discourage the deployment of broadband.”
These concerns echo many of the points raised by Engine and other organizations that support the growth of startups and entrepreneurship. As the decision explains, a post-merger Comcast would be the sole provider of 25 Mbps speed Internet access for 78% of California census blocks and would face only one competitor in the remaining areas. Putting such vast control over broadband connectivity in the hands of one company—particularly one voted the “worst company in America”—would diminish Comcast’s incentives to invest in expanding and improving its broadband infrastructure. The consolidation of mega-ISPs in a market already starved for competitive offerings will only make it less and less likely that California and the U.S more generally will catch up to international peers in terms of Internet speed and affordability. The next generation of innovative startups that depend on high-speed, low-cost Internet access to attract customers and develop innovative services will face a much more difficult competitive landscape if Comcast is allowed to swallow up all potential competitors.
Commissioner Florio concludes that the proposed merger would cause myriad competitive harms that cannot be mitigated through conditions, and therefore, the merger is antithetical to the public interest. “In sum, we find that placing conditions on the merger, even assuming that those conditions could address all of the potential harms associated with the merger, is unlikely to succeed in doing so. And based on our review, it is not clear that any conditions, however well designed, well intended, well enforced and fully implemented, could mitigate the harms associated with the merger.”
This proposed decision is big news, and not just for residents on California. Since much of the merger’s value to Comcast lies in acquiring Time Warner’s California customers, a CPUC rejection would likely kill the merger nationwide. But while Commissioner Florio’s proposal offers hope, it does not by itself spell the end of the Comcast merger. The full CPUC still has to vote, which could happen as early as May 21.
Anyone concerned about our nation’s broadband infrastructure needs to make their voices heard. The CPUC will be accepting comments on the proposed merger until April 30. If you believe that America’s broadband future is too important to be left in Comcast’s hands, send your comments to the CPUC Public Advisor at public.advisor@cpuc.ca.gov and encourage them to reject a merger that would pose an incalculable risk to innovators everywhere.
