Freedom Line Blog

Hopefully this will serve as a deterrent lesson to the U.S. Department of Justice, and the federal government more generally.

Yesterday, Federal Judge Richard Leon delivered his decision rejecting the Justice Department’s misguided lawsuit to prevent AT&T and Time Warner from merging.  The government had no business even bringing the suit, as the merger poses no threat of consumer harm.  To the contrary, as noted in today’s Wall Street Journal by Michael D. Smith and Rahul Telang, it promises more choices and greater market competition for American consumers.  Because the merger was “vertical” in nature, rather than a “horizontal” merger of direct market competitors, federal bureaucrats would only inflict harm by delaying or denying its fruition:

[T]he unique characteristics of digital markets have allowed a small number of internet giants – among them Amazon, Google, Netflix and Facebook – to dominate their industries and forestall entry by competitors.  These companies have put serious money into customer connections, data analytics and back-end systems, and these investments scale very well.  Netflix has penetrated more than half of U.S households.  Google and Facebook control almost three-quarters of online advertising.  Amazon does nearly half of all online retail sales.  These are astonishing numbers.

Now that these tech giants have established their downstream power in the distribution business, they are beginning to amass upstream power by getting into the content-creation business…  Given the dominance of Silicon Valley’s internet giants, it makes no sense to prevent AT&T and Time Warner from merging.  These companies aren’t trying to join forces because they want to take control of a dying industry;  they want to be allowed to compete in a new one.”

The American economy has accelerated since President Trump’s election as a consequence of his deregulatory and tax-cutting agenda, and that same logic should apply to the realm of market mergers between mutually bargaining parties.

As one example, Comcast recently announced a bid for certain assets of 21st Century Fox.  In the same way as described above regarding the AT&T/Time Warner merger, Comcast’s acquisition would greatly benefit consumers.  The film and television businesses have never been more competitive, dynamic or creatively rich, and consumers possess more entertainment choices than ever before.  Free markets work, and federal bureaucrats have zero business interfering in this matter.

As Judge Leon noted in his decision, federal government decisions to interfere come at great cost:

The government has had this merger on hold now since October of 2016 when it launched its investigation.  In that 18-plus month period, the companies have twice extended the break-up date to accommodate the government’s litigation of this case.  During that same period, the video programming and distribution industry has continued to evolve at a breakneck pace.  The cost to the defendants and the government to investigate, litigate and try this case has undoubtedly been staggering – easily in the tens of millions of dollars.”

That same logic applies to Comcast’s proposed acquisition.  Let’s not be forced to repeat yesterday’s harsh lesson to the Justice Department, after needless waste of time and taxpayer resources in meritless litigation that only serves to harm American consumers and competitive marketplaces.

Throughout the Obama Era, his Federal Communications Commission (FCC) has destructively imposed regulation after regulation upon a tech and telecommunications market that was not broken.  Indeed, that sector has thrived like no other in the modern American economy.

An announcement today from Comcast provided just the latest evidence of that thriving market.

Specifically, Executive Vice President of Consumer Services Marcien Jenckes announced an Internet data trial that will introduce a terabyte data plan to its offerings.  Beginning June 1, data plans in trial markets will upgrade from 300 gigabytes to one terabyte, regardless of speed.

To place that in perspective, their average customer reportedly uses only 60 gigabytes per month – 940 gigabytes short of a terabyte.  A terabyte allows streaming of 700 hours of high-definition video, 12,000 hours of online gaming and 60,000 high-resolution photo downloads in a month.  Fewer than 1% of its customers even approach a terabyte in monthly usage, and even they will be free under the new plan to receive unlimited data for merely $50 more per month or individual increments of 50 gigabytes for $10.

In other words, the market is working without FCC “solutions” to non-existent problems.  This announcement offers merely the latest proof.

In this week’s Freedom Minute, CFIF’s Renee Giachino discusses the irrational antitrust hysteria by critics of Comcast’s proposed purchase of Time Warner Cable and explains why their concerns are baseless in fact and reality.

The tech policy arena in recent days has understandably been dominated by two issues in the news – the proposed Comcast/Time-Warner Cable merger and the refusal of Net “Neutrality” proponents to allow that pernicious campaign to finally die a justified death.

Regarding the Comcast/Time-Warner  Cable merger, the Heritage Foundation’s James Gattuso offers one of the better primers.  He rightly criticizes the anti-merger hyperbole, and notes that the agreement is actually a sign of increased competition, not diminishing competition:

To begin with, these companies do not compete with each other.  Comcast and Time-Warner Cable (not to be confused with Time-Warner, the media firm from which TWC was hived off in 2009) operate in geographically distinct cable TV franchises around the country.  They do not overlap.

Moreover, while they are the largest and second-largest cable TV firms nationally, that metric is largely meaningless.  The paid television marketplace includes many other competitors, ranging from telecommunications firms such as Verizon and AT&T to satellite providers such as DIRECTV, to a growing band of Internet TV providers such as Netflix and Apple TV.  It’s a diverse marketplace, in which Comcast and TWC together serve barely 30 percent of subscribers. (In fact, Comcast has pledged to divest cable systems to keep the share below that figure). “

The Wall Street Journal provided the same reassurance, confirming that “a merged Comcast and TWC still has plenty of competition”:

[U]nlike the markets for beer, air travel and wireless, cable companies don’t compete with each other.  They have local franchises and compete against telephone, wireless and satellite companies.  So there’s no market overlap between systems owned by Comcast and those of Time Warner Cable.  Comcast, which is dominant in Philadelphia, will get millions of new customers in New York and Los Angeles.  But how can dominance in one geographic region give Comcast new pricing power in a different area?”

And the following day, the  Journal’s Holman Jenkins takes a nice swipe at the toxic un-dead specter of Net “Neutrality” as it relates to the proposed merger:

But standing in the way is the tired concept of ‘net neutrality,’ beloved by regulators and mau-mau groups but never enacted by Congress and frequently questioned by the courts. Yet now, thanks to America’s deranged merger approval process, Time Warner and Comcast risk having just such rules imposed on them (and no one else) as extortion for regulators approving their deal.”

With federal overregulation already exacerbating what has been the most sluggish economic recovery in recorded U.S. history, and with the American public listing big government as the nation’s foremost threat, the bottom line is that bureaucratic interference via Net “Neutrality” or in the private proposed merger of Comcast and Time-Warner remains a bad idea.

On a different and more optimistic note to end the week, however, Notre Dame philosophy professor Don Howard and the Manhattan Institute’s Mark Mills anticipate the upcoming arrival of self-driving automobiles, so long as overactive government regulators referenced above don’t spoil the party:

The self-driving-car solution is clear.  Congress should pre-empt Nhtsa and the trial lawyers and pass a National Autonomous Vehicle Injury Act.  The Fords and Nissans and Googles and Qualcomms should voluntarily create an Autonomous Vehicle Event Reporting System.  And industry players should also create a National Autonomous Vehicle Compensation System.  (Vaccine compensation is funded with a de minimis tax on each dose.)  Last November, Nhtsa Administrator David Strickland told Congress that ‘in addition to the devastation” that “crashes cause to families, the economic costs to society reach into the hundreds of billions of dollars.  Automated vehicles can potentially help reduce these numbers significantly.’

That potential has already been realized, whether regulators understand it or not.  If the human toll from highway accidents were a disease and we knew there was a cure, it would be immoral not to marshal every corner of government and industry to deploy it.”

So allow the private sector to move forward, whether through voluntary mergers or technological innovation, beyond the interference of overzealous government regulators.  What a novel concept.

While federal bureaucrats dither, the ever-evolving telecom market continues to move at warp speed.  As Holman Jenkins of The Wall Street Journal observed, “The half life of regulatory know-it-allism gets shorter and shorter.”

Under an agreement announced last week to rave reviews, Verizon will pay $3.6 billion for 20 MHz of  unutilized spectrum on which Comcast, Time Warner and Bright House Networks – collectively part of the SpectrumCo joint venture – were sitting.  As part of the agreement, Verizon will also offer cable television services for those entities while they can in turn resell Verizon’s wireless service.  But here’s the takeaway point of it all.  Spectrum is the critical conduit by which wireless technology operates, and this cooperative accord will more promptly make idle spectrum available for consumer use via such cutting-edge devices as tablets and smartphones.  By way of contrast, it would take years under even the rosiest scenarios before Congress and federal regulators got around to making desperately-needed spectrum available for consumer use.

With consumer demand continually placing greater demands upon finite capacity, this deal will increase wireless breathing room.  In so doing, it will thereby ensure better customer service and open more doors to foreseeable and unforeseeable innovations.  It’s a win for consumers, and it once again illustrates the possibilities that markets provide when we allow them to operate more freely and cooperatively.