Comcast tells FCC OK, maybe it isn't so easy to compete against us

24 September 2014 by Steve Blum
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If you want to go head to head with Comcast, you better have deep pockets. That’s the gist of Comcast’s response to a question from the FCC regarding the barriers faced by new Internet service providers: “describe the minimum viable scale necessary for entry, including…the number of subscribers and advertisers needed to break-even”.

I’m still slogging through the filing – it runs more than 250 pages – but Ars Technica has a good overview (h/t to the Baller-Herbst list for the pointer). It’s part of the FCC’s review of the proposed Time-Warner merger and even with Comcast’s endless evasion, it paints a bleak competitive picture.

For the most part Comcast answered, in effect, we don’t know, but did finally admit the primary difficulty a new competitor would have…

It is expected that a new service will take a number of years to break even; the number of years required will in turn depend on the service’s costs. These costs in turn depend on a variety of factors…To the extent an Internet access service provider offers other services over the same network as its Internet services – e.g., multichannel video programming, voice, technology solutions and equipment – as many of them currently do, revenue from those other services will help defray costs and accelerate the time it takes the provider to break even.

In other words, scale matters, both in terms of how much cash you can afford to burn through before hitting break even and how many extra services you can load onto a subscriber’s monthly bill. Comcast refused to be drawn on how big that is, which is not surprising since the answer – really big – refutes its core claim that merging with Time-Warner and swapping markets with Charter will have zero competitive impact on would-be competitors.

Allowing Comcast to get bigger and thicker also raises the bar for others, making it more likely that current competitors will exit the market than new ones enter it. No matter how Comcast tries to spin it, this proposed mega-deal is as anti-competitive as it gets.