Study: Comcast-NBC Universal Merger Will Cost Consumers $2.4 Billion

The American Cable Association estimates the deal will “send monthly cable bills higher by billions of dollars” and “cripple effective competition in the pay-TV distribution market"

NEW YORK - The American Cable Association unveiled an economic study Monday that argues that consumers over the next nine years will pay at least $2.4 billion more for pay TV services if regulators don't place conditions on the planned Comcast-NBC Universal deal to curb the combined entertainment giant's pricing power.

The organization, which represents small cable operators and has opposed the proposed merger - at least without conditions, said Monday that $204 million in estimated financial benefits from the deal claimed by the merger partners will be outweighed by "consumer harm" of the transaction of $2.566 billion.

Comcast in a statement called the analysis flawed and said the issues raised in the report have been examined by the FCC in  previous transactions. The commission "in each case rejected imposition of a condition on national cable networks," it said. "There is no reason for the FCC to treat Comcast and NBCU worse than it treated Fox, DirecTV and Liberty [Media] in those recent deals."

The ACA study, conducted by Dr. William Rogerson, professor of economics at Northwestern University, who served as the FCC's chief economist 1998-1999, estimates vertical harm of the deal at $1.43 billion and the horizontal harm at $1.14 billion over the next nine years.

Vertical harm stems from the combination of programming assets and distribution, which will permit Comcast-NBC Uni to raise the fees it charges for programming to other distributors, including ACA members, such as RCN and WOW!
The horizontal effect stems from the merged firm's control of key programming assets from both companies, which will allow it to negotiate prices for a broader portfolio, the group said.
"It is clear that the Comcast-NBCU deal will send monthly cable bills higher by billions of dollars over the next decade, underscoring ACA's view that regulators must protect consumers and competition from a transaction whose benefits are vastly outweighed by its harms," said ACA president and CEO Matthew Polka. "Without meaningful and cost effective conditions on the Comcast-NBCU transaction, regulators also run the risk of crippling effective competition in the pay-TV distribution market."

Rogerson argues that the combination will raise fees for NBC Uni national cable networks by $1.6 billion, Comcast regional sports networks by $651.2 million and NBC TV stations by $355.6 million. Markets hit the hardest will be those where Comcast has a significant cable presence and owns an RSN in addition to the NBC station, such as in Philadelphia, Chicago, San Francisco, Washington, D.C. and Hartford, Conn.

ACA has called for such merger conditions as the right for all distributors that can't reach a programming agreement with Comcast-NBC Uni to submit a dispute to binding baseball-style commercial arbitration.

For smaller operators who can't afford binding baseball-style commercial arbitration, Comcast-NBC Uni "shall be prohibited from requiring any pay-TV provider with 125,000 video subscribers or fewer locally to pay a fee for an NBC station or RSN that is 5% greater than the lowest fee paid by any other local pay-TV distributor for that market's NBC station or the area's RSN," another one of its proposed conditions states.

“Once again, ACA has submitted flawed economic analysis," Comcast said in a statement. "It relies on assumptions and calculations that are unsupported, directly contradicted by available data, and contrary to previous FCC rulings."

It said that after having more than nine months to make its case, "ACA is making an obvious attempt to further delay the approval of the Comcast NBCU transaction," the Comcast statement said. "ACA’s efforts should be rejected by the FCC on both substantive and procedural grounds."