Federal regulators will shoot down big cable deals because big is bad, says analyst

by Steve Blum • , , ,

By its very existence, big cable is a barrier to new broadband infrastructure investment by potential competitors, according to Nancy Rose, a senior administrator at the federal justice department in charge of economic analysis. In a speech she gave to the American Bar Association last month, and posted on the BTIG Research blog, she said that the buying power of big cable companies gives them an advantage in creating video packages that would-be competitors can’t overcome…

There was certainly some suggestion made to us that broadband investments are less attractive, at least at present, if you can’t also get access to low cost video programming and put together a cable-like package…to offer customers. And that’s in part because it’s a way that many consumers are buying a bundle of cable and broadband from their provider. And so it might even be that by discouraging online video, you’re also discouraging broadband buildout and competition in that market down the road.

That same market power also gives big Internet service providers the ability to act as gatekeepers for new online content providers, according to the blog post’s author Richard Greenfield. He said last year’s Netflix interconnection debacle was the aha moment for regulators…

The interconnection point illustrates how significant a mistake the ISPs made in charging Netflix last summer and how that has now informed anti-trust policy affecting the cable industry.

The bottom line, according to Greenfield, is that Charter Communication’s pending purchase of Time Warner Cable and Bright House Networks – which would give it 30% of the national cable broadband market but 50% of California’s – is in trouble. Although the size is a bit smaller than the defunct Comcast-Time Warner-Charter mash-up, he believes the same problems of scale exist with Charter’s current deal and federal regulators will kill it too.

Read Richard Greenfield’s full blog post here, with a bonus link to the full audio of Rose’s speech. (You’ll have to register to access it).