Comcast/GE Head to the Hill

Tomorrow is a big day for Brian Roberts and Jeff Zucker as they head back to Washington to appear at two back-to-back hearings. In the morning they are slated for the House Communications and Internet Subcommittee, while the afternoon is the Senate Judiciary Antitrust Subcommittee. Also slated to testify at both hearings is Colleen Abdoulah President and CEO of WOW (Wide Open West) and Mark Cooper of the Consumer Federation of America. It will be interesting to see if those opposed to the merger get beyond the standard “big is bad” rhetoric that is the standard backbone of their opposition to explain exactly what their issues are.

In a world where the big keep getting bigger in order to “gain scale”, there is no question that it has become increasingly difficult for the small guys to compete. Comcast has been quite public in stating that the reason they are doing the merger is to gain scale in the programming realm. Content is still king, and those who own the content and access to it are in a position to reap the greatest profits.

Perhaps of greatest concern to WOW and other competitors like RCN and Knology, not to mention Dish Network and DirecTV, is how Comcast sets the rates for its own content in terms of the rates that their programming arm charges their cable arm. It is no secret that MFNs for the largest players in the distribution game often dictate higher rates for smaller operators, including competitors. This often leaves smaller companies feeling like they are subsidizing the larger players. A scenario where a programming entity setting their rates based on what their affiliated distribution company (which, by the way, is the largest in the market) agrees pays for that content justifiably raises concerns about the unfairness of an “out of one pocket in into another” arrangement. There is sure to be even more concern now that retransmission consent is involved.

Curiously absent from list of witnesses at tomorrow’s hearings is anyone from the satellite or telephone company community. The NBC broadcast affiliate group has already suggested strings, and there is no doubt that other parties will be joining in as the regulatory approval process proceeds. There may be little doubt that the merger will ultimately be approved. However, the larger question may well be what strings will be attached and, if one is to look at the merged Comcast/GE as Jonathon Swift’s Gulliver, whether the strings will be strong enough to hold the new media giant down for long.