May you live in
times,” goes the
old Chinese proverb.
For FCC Chairman Tom
Wheeler, the events of
the past month give that
phrase a whole new
meaning. Cable consolidation,
spectrum availability, take your pick… all
these and more will make for a hectic 2014
and beyond for the new chairman.
Let’s start with cable consolidation. Although
it was no surprise that Time Warner
Cable, the country’s second-largest
cable provider, was looking for a merger
partner, most observers expected it to be
Charter, a deal that would most likely have
been approved with few objections. But
when Comcast announced its $45 billion
acquisition of TWC, the scenario suddenly
changed. The merger of the nation’s two
largest cable companies would result in a
cable and broadband giant serving more
30 million customers over 42 states, making
it more than seven times larger than its
closest competitor, Cox.
Opponents to the merger reacted swiftly,
mostly over how it would affect competition
in the market. “If Comcast takes
over Time Warner Cable, it would yield
unprecedented gatekeeper power in several
important markets,” said Public Knowledge.
“It is already the nation’s largest ISP,
the nation’s largest video provider, and the
nation’s largest home phone provider. It also controls a movie studio, broadcast network,
and many popular cable channels.
An enlarged Comcast would be the bully
in the schoolyard, able to dictate terms
to content creators, Internet companies,
other communications networks that must
interconnect with it and distributors who
must access its content.”
Nonsense, replied Comcast, which touts
that neither company overlaps in its coverage
(not too surprising, given the traditional
franchise setups in most communities),
and that other broadband/pay-TV providers
such as DirecTV and Verizon have become
much more competitive in recent
years. “Previous antitrust concerns are
truly antiquated in light of today’s marketplace
realities,” a Comcast executive said in
response to the criticism.
While cable programming is certainly
a concern, the proposed merger also
highlights the notion that broadband access
has overtaken video as a primary
service for cable companies. A combined
Comcast-Time Warner would serve more
than 33 million broadband customers; in
2013, the two companies logged more
than $18 billion in broadband revenues.
And while that is still less than 2013 video
revenues of $31 billion for both companies
in 2013, the rate of revenue growth is
in broadband’s favor, which is expected to
increase 25 percent over the next several
years, compared to a less than 10 percent
growth rate for video.
As if this isn’t enough to keep the FCC
busy, along comes a court decision striking down net neutrality, a topic that Chairman
Wheeler has indicated will be one of the
core issues of his term. Less than a week
after the merger announcement, Wheeler
proposed net neutrality rules that would
enforce and enhance transparency, prevent
broadband providers from blocking
content and enforce non-discrimination.
And just days later, Comcast and Netflix announced
a “landmark” agreement to guarantee
streaming bandwidth, a move that is
more likely to increase calls for net neutrality
action from the FCC, not less.
And of course no tech drama in 2014
would be complete without a cameo role
by Google, which that same week announced
that it was “exploring” the possibility
of expanding its 1 Gig fiber-optic
broadband service to nine metro markets
and up to 34 cities by the end of the year,
bringing Internet speeds of up to 1 Gbps
to millions of new customers. Google Fiber
(which also offers a TV service), is not
regulated by the FCC and its speeds dwarf
those of existing providers, so the only
obstacles appear to be the speed and cost
of deployment and community cooperation.
How all of these fast-moving events will
affect the future of net neutrality, cord-cutting,
retrans, revision of the Communications
Act, as well as one of the industry’s
largest ever mergers is yet to be seen, but
they are all intertwined.
“Today we find ourselves at a crossroads,”
Wheeler told an audience at Ohio University
last fall. How prescient he was.