Cable Lobbying Group Claims More Competition Would Hurt Consumers

from the insult-to-injury dept

The FCC recently voted 4-1 to approve Charter’s $79 billion acquisition of Time Warner Cable and Bright House Networks. The agency just released its full order (pdf) pertaining to the deal, outlining the various conditions the FCC hopes to enforce to keep Charter from simply becoming another Comcast. Among them are a seven-year ban on usage caps, a seven-year ban on charging for direct interconnection (the heart of the telecom industry’s battle with Netflix last year), and a ban on any attempt to pressure broadcasters into refusing deals with streaming video providers.

But the FCC says the merger conditions also require Charter to deploy broadband service to an additional 2 million locations, one million of which need to already be served by another competing provider. The faint threat of competition was enough to upset the American Cable Association (ACA), the lobbying organization for smaller cable providers. According to ACA CEO Matthew Polka, the added competition will actually be a horrible thing for consumers, because, uh, well, just because:

“The requirement on Charter to overbuild competitors will harm consumers in two ways…First, it will harm Charter’s customers by preventing Charter from investing its resources most efficiently, such as by upgrading its networks to higher speeds. Second, it will harm customers of local, small providers when these customers are satisfied with their existing service.”

And here you were thinking competition was a good thing. Of course, if these smaller cable operators don’t want Charter coming to town and taking their milk money, they could simply offer cheaper, faster service themselves. Granted that’s a totally foreign concept in the cable industry, where large and small cable operators alike have grown comfortable with not only local regulatory capture, but a lack of competition in the broadband space entirely.

Any disruption of this paradigm, no matter how minor, results in all manner of histrionics — and a quick onset of amnesia regarding the fact that nobody likes cable companies after a generation of poor service and apathy, and therefore will never, ever feel bad for them.

If history is any indication the ACA really doesn’t need to worry all that much. Traditionally in telecom, FCC conditions requiring that an ISP “expand to X number of additional homes” are usually conditions that the merging companies volunteer themselves. Why? It’s most frequently because that expansion either already happened (and the paperwork hasn’t been filed yet) — or was slated to happen as a matter of course. Or it may not happen at all; such expansion promises are usually never really independently audited by the FCC, which lets companies string the FCC along with an endless flood of expansion promises that more often than not aren’t even real.

In other words, the ACA’s decision to insult the intelligence of an already annoyed customer base by pretending competition would be bad for them — only adds insult to injury. Instead of whining about competition, how about just competing? Better yet, how about competing with Charter using a strange, outdated idea known as better customer service?

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Companies: aca, american cable association, bright house networks, charter, time warner cable

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Comments on “Cable Lobbying Group Claims More Competition Would Hurt Consumers”

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38 Comments
Mason Wheeler (profile) says:

And here you were thinking competition was a good thing. Of course, if these smaller cable operators don’t want Charter coming to town and taking their milk money, they could simply offer cheaper, faster service themselves.

There is at least a certain amount of truth to this. When a behemoth much larger than your own company comes in and starts to compete with a local company, it frequently does cause harm to both your business and the community. Just ask anyone who used to be in retail until a Wal-Mart showed up, used economies of scale to be able to afford to “compete” all the local retailers out of business, then started sucking money out of the local economy and treating its workers abysmally.

Not sure how well that same paradigm translates to the cable industry, but it’s a real problem that does exist in some sectors, at least.

nasch (profile) says:

Re: Re:

Just ask anyone who used to be in retail until a Wal-Mart showed up, used economies of scale to be able to afford to “compete” all the local retailers out of business, then started sucking money out of the local economy and treating its workers abysmally.

I find that ironic since if the people in a town really don’t want Wal-Mart to drive the local businesses under, all they have to do is not shop there. The fact that so many people go to Wal-Mart instead of the local shops indicates that that is what they actually want, so that’s what they get.

Mason Wheeler (profile) says:

Re: Re: Re:

What it indicates is that most people don’t know how to think beyond a single degree of cause and effect to look for long-term harm. (Ugly fact: we’re actually specifically taught not to do this in school: if you say “x will cause y, which will cause z, and therefore you shouldn’t do x because z is bad,” that’s “the slippery slope fallacy” and you’re formally wrong.) So when they see “lower prices,” well, who wouldn’t want that?

John Fenderson (profile) says:

Re: Re: Re:

A big part of the problem is that we have a society that seems to value getting the lowest possible price above all other considerations.

That leads to problems like Wal-Mart. It’s a form of eating your own seed corn: paying lower prices means earning lower wages. That means the in the longer run, those low prices are no longer so low compared to median wages. Which means that what was once a great deal is now a trap: you can no longer afford to shop at a place that would actually help to lift the standard of living for your community.

nasch (profile) says:

Re: Re: Re: Re:

Same thing with airlines. People shopped for the lowest possible fares no matter what for years, and then complained that airlines don’t include anything for free. Yeah of course they don’t, because we all showed them that the single most important consideration of their customers is a low ticket price. Something of a collective action problem. The community would all be better off if nobody shopped at Wal-Mart, but any particular individual is better off shopping there (or so they believe at least).

Avatar28 (profile) says:

Second, it will harm customers of local, small providers when these customers are satisfied with their existing service.

So my little town only has one car dealership that only sells Ford. I’m pretty happy with Ford, it’s what I’ve driven for years. Now a new dealership is opening up, this one sells Chevrolet. Ford is no longer the only option in town. I mean, I don’t HAVE to buy Chevrolet. I know the dealership is there but I don’t have to give them my money. I can keep driving Fords the rest of my life if I want. How is having the OPTION to buy a Chevy hurting me exactly?

MrNoItAll (profile) says:

Re: Re:

This not the same situation. The owner of both the new and old local dealerships are probably local businessmen, just like the owner of the local cable company. Thus the majority of profits from those businesses will stay in the local economy. The owner of Charter is a large corporation. So any profit the company makes from the local economy will immediately leave the local economy and instead go to Charter shareholders throughout the country. While this may not effect a large amount of jobs, it definitely effect the quality of life.

Anonymous Coward says:

Re: Re:

The car analogy stops there.

It is expensive to start an ISP and it is expensive to shape the usage.

What is not expensive is adding more customers. If a small local ISP is providing a service at a low margin, the extra competition is removing customers from the small ISP, costing them upgrade of their network equipment.

When that is said the first comment is a true cowboy fallacy: “There is infinite new land, why don’t you just settle outside my land?”.

In other words: Competition is costly, we want our own monopoly areas. As far as inefficiency goes, it is one of the worst arguments to use in an area where the “new land” is drying up: Either you just cannot compete or you see the future as geographical monopolies.

Neither of those situations are acceptable for the users…

NeghVar (profile) says:

Re: Re: economics 101

More competition creates a healthier market. It drives prices down and gives the consumer more options.

For instance. If there is only one ISP, you are forced to play by their rules. No alternatives. Now say another ISP becomes available. Lower prices, no data cap, higher bandwidth, excellent customer service, but no ESPN. Those who do not need ESPN will likely switch.
ISP 3 moves in. Even lower prices, data caps, lower bandwidth, good customer service. If the customer only surfs the web and emails the grandkids, then that would be a better option.
Add in more ISPs with more options that tailor to a person’s needs, and you have a healthy competitive market. Big ISP with its high prices, data caps, moderate bandwidth and bad customer service will lose customers to the other ISPs. In order for BIG ISP to survive, they must compete with the other ISPs by lowering prices, provide more option to meet each customer’s needs and provide excellent customer service

Now, take this example and apply it to cable boxes. Same results.
That is a competitive market

Anonymous Coward says:

“Second, it will harm customers of local, small providers when these customers are satisfied with their existing service.”

Yes, it will certainly harm customers who are ‘satisfied’ with their ONE choice of service. /s

“Well they have their choice of us or just going without, so they MUST be satisfied with us because we’re marginally better than nothing!”

Gracey (profile) says:

[Charter’s $79 billion acquisition of Time Warner Cable and Bright House Networks.]

That’s a shame. We’ve been using Brighthouse in Florida, and compared to others, they were amazing. Reasonable pricing, good service, decent customer service. Better than the service we have in Canada for almost 3 times the price.

I’d rather like Brighthouse to stay as they are, so I hope that Charter isn’t going to change the service or the pricing.

Avatar28 (profile) says:

Re: Re:

I’ve never been a Charter customer personally, but my parents have them as have some friends. They all seem fairly happy. My dealings with their customer service and support people have all been fairly positive. Their internet connections seem to be a bit slower than Comcast for the most part but better customer service makes up for that imho.

orbitalinsertion (profile) says:

“The requirement on Charter to overbuild competitors will harm consumers in two ways…First, it will harm Charter’s customers by preventing Charter from investing its resources most efficiently, such as by upgrading its networks to higher speeds.

*Magic!*

Second, it will harm customers of local, small providers when these customers are satisfied with their existing service.”

LMFAO. No, we don’t actually eat small providers or drive them out of the market like it’s our after-school hobby or anything. We wouldn’t want that.

Anonymous Coward says:

Second, it will harm customers of local, small providers when these customers are satisfied with their existing service.”

Customer: I’m satisfied with fast, reliable Internet, no throttling or data caps all for a reasonable price. Let’s see…how can I fuck this up?
Charter: We’re coming to town.
Customer: Perfect, sign me up!

Seriously, that’s their argument?

Joel Coehoorn says:

Chains vs Independents = Predatory Practices

I think I need to (soft of) side with the ACA on this one.

Once upon a time, when the automobile industry was young, and not all of the infrastructure was out yet, there were lots and lots of small independent gas stations. And they were profitable. And then what would happen was the more profitable stations would branch off and create chains. And these chains would grow. As a chain grew, it would open a store near a competing independent store, and sell gas at loss. The new store could afford to do this, because it had the profits from all the other stations in the chain to support it. Once it drove the independent store out of business, the chain would raise it’s prices, often to gouging levels.

The same thing can definitely happen here. If Charter has to expand to a million homes that are already served, will it choose to compete with big providers that have their own ability to lobby to keep Charter out, or will it pick on the little guys, where it can move in fairly easy and use predatory pricing so that 10 years down the road any competition goes away?

Here is where the ACA and I part ways. While I believe this is a valid concern, I believe that some hedge against this needs to be part of the merger condition, rather than an excuse to abolish the whole thing.

Anonymous Coward says:

Re: Chains vs Independents = Predatory Practices

Actually that will not happen for a couple of basic reasons.

#1: Building out the Fiber is expensive. In order to compete with small providers, they need to invest alot of money in order to build out to areas with small consumer bases and minimal profit margins. In addition, due to the smaller areas these cover, they have to build more of them. There is little to gain doing this.

#2: Population density, they are capable of reaching their quotas MUCH quicker, and having far greater profit margins and minimal costs when building out in cities, even if they are competing against other incumbents. The potential loss of profit margin due to competition is minimal, and they will instead price match or over temporary discounts.

Less cost, less time, less effort, more money. There’s no reason for them to aim their sights on competing with the little guy and predatory pricing because the roi is simply too low. They’re leaving money on the table for someone ELSE, and it’s not like those people are paying them for this privilege.

nasch (profile) says:

Re: Chains vs Independents = Predatory Practices

As a chain grew, it would open a store near a competing independent store, and sell gas at loss. The new store could afford to do this, because it had the profits from all the other stations in the chain to support it. Once it drove the independent store out of business, the chain would raise it’s prices, often to gouging levels.

That’s illegal now, isn’t it?

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