Tech Policy

Comcast's policy chief David Cohen says he hasn't heard any "rational, knowledgeable voices" objecting to the $45 billion merger

Comcast’s proposed $45 billion purchase of Time Warner Cable won’t violate U.S. antitrust laws or federal public interest rules, a senior Comcast executive said over the weekend. On the contrary, a merger between the two largest cable companies in the country will be great for consumers, Comcast executive vice president David L. Cohen said in an interview with C-SPAN.

Cohen made his comments as opposition to the deal continues to grow from public interest groups, lawmakers, and industry observers. Critics of the deal say the merger would concentrate too much market power in the hands of a single media and entertainment behemoth, potentially leading to higher prices for consumers. Comcast dismisses such fears and insists that the merger will result in better service for consumers.

The Justice Department is examining the proposed deal to make sure it doesn’t violate antitrust law, along with more than two dozen state attorneys general who have joined a multi-state group reviewing the transaction. The merger also faces scrutiny from the Federal Communications Commission, which is charged with ensuring that the deal serves the public interest.

“This transaction is all about increasing competition and creating more consumer benefit as a result of gaining additional scale,” Cohen told C-SPAN. Comcast says that the deal isn’t anticompetitive because the two companies don’t compete for consumers in the same markets. Over the last few decades, the nation’s largest cable TV companies have divided up the U.S. by region so that the major players now dominate their respective areas.

Comcast rules in Philadelphia, Chicago and Boston. Time Warner Cable dominates in New York City, Dallas and Los Angeles. Cohen says that the combined company would control no more that 30% of the national pay-TV market. (Time Warner Cable was spun off from TIME parent Time Warner in 2009.)

Cable TV represents a shrinking part of the industry. Last year, cable providers lost nearly 2 million video subscriptions, the first full-year decline on record, according to a recent study by research group SNL Kagan. It’s the latest sign that consumers are increasingly “cutting the cord” and gravitating toward Internet-based entertainment options like Netflix and Hulu.

(MORE: Netflix vs. Comcast ‘Net Neutrality’ Spat Erupts After Traffic Deal)

As the Internet has become a crucial tool for commerce, communications and entertainment, companies like Comcast and Time Warner Cable are increasingly becoming broadband companies. The old distinctions between cable TV, Internet, and phone service are starting to collapse. Millions of Americans now subscribe to bundled packages that combine all three services through a single pipe coming into their homes.

If Comcast buys Time Warner Cable, the company would have nearly 40% of the high-speed wireline broadband Internet market in the U.S., according to industry estimates. Critics of the deal say that would give Comcast an alarming amount of power over the 21st century’s signature communications medium.

Cohen acknowledges that the deal’s implications for the broadband market are “appropriate to think about and discuss,” but argues that it’s “not a very scary story,” due to increasing competition from wireless broadband. “I think it’s indisputable today that wireless is certainly beginning to be an effective competitor and substitute for at least many uses of broadband,” Cohen said. (Harvard Law School professor Susan Crawford, a fierce critic of the deal, disputes that assertion. Wireless broadband service “will not substitute” for high-speed wired access, she told TIME last year.)

Comcast argues that bigger is better. “Sometimes big is a bad thing,” said Cohen. “I acknowledge that. But sometimes big is really important, really necessary and really good. And that would tend to be in high capital expenditure industries, in industries where innovation is fast moving and where you need a lot of investment in R&D and innovation to keep pace. And that is our industry.” He added: “The rationale for this transaction is all about scale. We are going to get bigger.”

(MORE: Susan Crawford. Is Broadband Internet Access a Public Utility?)

Cohen dismissed opponents of the proposed merger as “the same group of people” who have opposed media and telecom consolidation over the last two decades. Their “sky is going to fall” predictions have been “discredited and disproven,” Cohen said. “I have been struck by the absence of rational, knowledgeable voices in this space coming out in opposition or even raising serious questions about the transaction,” Cohen added.

Last month, editors at The Economist magazine wrote a sharply-worded editorial against the deal, urging U.S. officials to “reject a merger that would reduce competition, provide no benefit to consumers and sap the incentive to innovate.” A former FCC commissioner has called the deal “an affront to the public interest.” The New York Times editorial board raised substantive concerns about the deal, as did columnists at The New Yorker and The Washington Post. Harvard Law professor Susan Crawford, perhaps the deal’s most persuasive critic, argues that broadband Internet access should be viewed as a public utility.

Netflix and Comcast are battling over whether "paid peering" deals should be considered a net neutrality issue. The FCC will soon decide

Netflix CEO Reed Hastings lashed out at the top U.S. Internet service providers on Thursday for charging an “arbitrary tax” on the popular online video company for ensuring that users receive good service. Hastings made his comments in a blog post one month after Netflix struck a deal with Comcast to connect their networks directly to improve service for consumers.

Hastings’ comments are the latest salvo in the multi-year battle over “net neutrality,” the idea enshrined in the now-defunct U.S. Open Internet rules that prohibited major Internet service providers like Comcast, Verizon, and AT&T from favoring some online services at the expense of rivals. Hastings’ blog post provoked a quick response from Comcast, which declared that no company has had a “stronger commitment to openness of the Internet than Comcast.”

Here’s the question: Should paid peering agreements between Internet content companies, bandwidth providers and broadband service providers be covered by net neutrality rules? In its 2010 Open Internet order, which was struck down by a federal judge in January, the Federal Communications Commission made clear that wasn’t the case. The timing of Hastings’ post is not arbitrary: Friday is the deadline for filing comments in the FCC’s Open Internet docket, which is designed to remedy the recent court defeat.

The FCC’s order, which only applies to the “last mile” connection into consumers’ homes, specifically exempted “existing arrangements for network interconnection, including existing paid peering arrangements,” which means that the interconnection deal struck by Comcast and Netflix last month is not covered by the rules. Still, some net neutrality advocates want to make paid peering deals a net neutrality issue, and Hastings appears to be appealing to that constituency.

In his blog post, Hastings drew a contrast between what he called “weak” net neutrality, which is how he described the FCC’s recently overturned rules, and “strong” net neutrality,” which he said would prevent ISPs from “charging a toll for interconnection to services like Netflix, YouTube, or Skype, or intermediaries such as Cogent, Akamai or Level 3, to deliver the services and data requested by ISP residential subscribers.”

Internet service providers, Hastings asserted, “must provide sufficient access to their network without charge.” That proposition is anathema to the nation’s largest ISPs, which for years have expressed displeasure that they are obliged to deliver high bandwidth content — which often competes with their own video offerings — over the infrastructure they’ve spent billions of dollars to build. By suggesting that the nation’s largest Internet service providers connect Netflix to consumers “without charge,” the online video service is asking for special treatment, the ISPs say.

In his blog post, Hastings did not identify a policy solution to his company’s problem. One option would be for the FCC to reclassify broadband as a “telecommunications” service, which would allow it to establish “common carrier” regulations prohibiting the broadband giants from discriminating against rival services. It’s unclear whether this so-called “Title II” reclassification is what Hastings had in mind when he referred to “strong” net neutrality. A Netflix spokesperson did not immediately return a request for comment from TIME seeking clarification.

Hastings did say that Netflix is willing to pay ISPs for better service for consumers. Neither Netflix nor Comcast will disclose the financial details of their interconnection agreement, but Netflix has said that the amount is not “material” to its bottom line. But that’s just for Comcast. Netflix is concerned that now that it’s struck that deal, other ISPs like AT&T and Verizon will demand a similar amount, which could add up quickly. It’s no wonder Netflix CEO Reed Hastings has buyer’s remorse.

Despite the fact that paid peering agreements have been a standard feature of the Internet’s behind-the-scenes architecture for many years — and were explicitly allowed by the FCC — Netflix now wants to frame such deals in terms of net neutrality. “Some big ISPs are extracting a toll because they can — they effectively control access to millions of consumers and are willing to sacrifice the interests of their own customers to press Netflix and others to pay,” Hastings wrote. “Netflix believes strong net neutrality is critical, but in the near term we will in cases pay the toll to the powerful ISPs to protect our consumer experience.”

For its part, Comcast bristled at the suggestion that it was extracting an unjust “tax” from Netflix. “The Open Internet rules never were designed to deal with peering and Internet interconnection, which have been an essential part of the growth of the Internet for two decades,” David Cohen, Comcast’s executive vice president, said in a statement. “Providers like Netflix have always paid for their interconnection to the Internet and have always had ample options to ensure that their customers receive an optimal performance through all ISPs at a fair price.”

Netflix’s net neutrality outburst comes as federal and state regulators are scrutinizing Comcast’s proposed $45 billion deal to buy Time Warner Cable, which would create a broadband titan with unprecedented market power. (Time Warner Cable was spun off from TIME parent Time Warner in 2009.) As part of the proposed Time Warner Cable deal, Comcast will extend the commitment it made during its NBCUniversal review to abide by open Internet principles until 2018.

The latest flare-up between Netflix and Comcast underscores the ongoing shift in the commercial architecture of the Internet as consumers use increasing amounts of bandwidth. It also highlights the growing leverage held by broadband giants like Comcast in negotiations with content companies like Netflix. After the FCC’s Open Internet rules were struck down, the nation’s largest Internet companies were plunged into a period of uncertainty. It’s now up to the FCC to decide how it wants to proceed, and whether paid peering deals like the one struck by Comcast and Netflix will be covered by its rules.

Every big American Internet company is angling for the same thing, more or less: global domination. But the one country where they have the most potential for growth also has some of the most entrenched competition and thorniest human rights issues. (more…)

Prison phone rates have decreased by 25% to 50% overnight thanks to new U.S. rules

Hundreds of thousands of U.S. prison inmates and their families will now be able to make interstate phone calls at much lower prices thanks to new federal rules that went into effect on Tuesday. The new rules were crafted by the FCC and are designed to crack down on what prison inmate advocates call abusive and predatory practices by phone companies.

For over a decade, many prison inmates in both state and federal facilities have paid significantly higher rates to make interstate phone calls than people outside of correctional facilities. According to the FCC, some prison inmates have had to pay as much as $17 for a 15 minute phone call.

The new rate caps, which were passed by the agency last fall under the leadership of acting FCC Chair Mignon Clyburn, impose a limit of 25 cents per minute for debit calling and 21 cents per minute for collect calling. At those levels, the cost of a 15-minute call would be reduced by as much 80% to $3.15.

“This is a huge victory for justice for ordinary people at an agency that is usually more attuned to private interests,” says Cheryl A. Leanza, policy director at the United Church of Christ. “Increasing the connections between families and inmates helps all of us. Strong family connections improve the likelihood that when inmates are released, they will not become repeat offenders, and that makes our society safer. We are very grateful to Commissioner Clyburn.”

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The new rules come a decade after Martha Wright, a Washington, D.C. grandmother, petitioned the FCC for relief from inmate calling rates. Since then, the FCC says that tens of thousands of people have urged the FCC to make it easier — and in some cases even possible — for them to stay in touch with loved ones in jail. On Tuesday, the new rules, which apply to interstate calls made from federal, state, and local correctional facilities, went into effect.

“This means that many families will no longer have to choose between talking to their loved ones in prison and paying their utility bills. It means that society will benefit from the decreased rates of recidivism that family contact brings,” FCC Chairman Tom Wheeler, Commissioner Jessica Rosenworcel, and Commissioner Clyburn said in a statement. “These families can now afford to keep in touch because the era of unreasonable and unjust phones rates has ended.”

Richard Smith, President and CEO of Dallas-based Securus, the nation’s second largest provider of prison phone call services, told TIME in phone interview that as of Tuesday, his company had implemented the new rates, leading to an immediate reduction of 25% to 50% in the price of prison phone calls. But he said that his company would continue to contest the new rates, which he pointed out, are still interim, while the FCC conducts further research.

“We think some of the new rates are below our cost,” says Smith. He said that his company, which has a 28% market share of the prison phone call market and was purchased by Boston-based private equity firm ABRY Partners in April of 2013, handles 120 million calls per year at an average rate of $3.50 per call. Smith acknowledged that some calls may have cost as much $17 for a few inmates, but said those calls were “outliers” cited by inmate advocates pushing an agenda. He said that his company handles many calls at rates cheaper than the $3.50 average.

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“This is a public policy issue,” Smith says, adding that prison calling rates are determined by a variety of factors, including the number of inmates and whether a correctional facility is located in an urban or rural setting. He pointed out that prisons and jails select a phone service provider based, in part, on so-called “commissions” that are used to supplement cash-strapped correctional budgets and help pay for inmate and victim services.

If phone rates go down, private phone vendors won’t be able to pay as much in these commissions, so correctional institutions will be forced to make up the difference, according to Smith. He says this means that “taxes are going to go up” in many jurisdictions as a result of the FCC’s new rate caps. Leanza, of the United Church of Christ, said these commissions amount to “legalized kickbacks” where the highest bidder wins, in contrast to traditional competitive bidding where the lowest bidder wins. “This is not the free market at work,” Leanza says.

Asked why it took more than a decade for prison call reform to occur, Leanza pointed out that phone companies are very powerful in Washington, D.C. “It was always very easy for the phone companies to push the issue down the road,” says Leanza. “Prisoners usually don’t have a strong voice on many issues.”