On a gray day in February 2010, Brian Roberts sat facing the U.S. Senate Judiciary Committee’s antitrust subcommittee. The panel was holding its first hearing on a proposed merger between two of the country’s most powerful media companies, the cable distribution giant Comcast Corp. and the entertainment conglomerate NBC Universal.
Roberts, the chief executive officer of Comcast, was a calm and friendly witness. If the Justice Department’s Antitrust Division and the Federal Communications Commission approved the merger, Comcast’s future as the largest distributor of information in the country would be assured.
Comcast had been gaining strength as a monopoly provider of wired high-speed Internet access in its territories, while the U.S. was lagging behind other countries when it came to the prices charged for and the speed and capability of this basic communications tool. At the same time, the Internet was becoming the common global medium. With high-speed Internet access, a farmer in Missouri can access weather conditions and crop prices; American Indians on a remote reservation can have their eyes checked by a distant doctor; entrepreneurs and small businesses in California, New York and all the states between can find inexpensive entry points into global markets.
A decade earlier, the U.S. had led the world in Internet access, but by the time of the hearing, in most of Comcast’s markets, the company was the only provider selling services at speeds sufficient to satisfy Americans’ requirements.
The access Comcast sold was less useful than it could have been, however, because the network was designed to be contested among users in the same neighborhood, making speeds unreliable. It also favored passive downloads far more than active uploads. Meanwhile, in most parts of the U.S., the Internet access that all Americans would need within five years -- fiber-optic lines capable of speeds from 100 megabits to gigabits per second -- could not be purchased at all.
With the merger, Comcast would become even more powerful. Any new high-speed Internet provider in Comcast territory would have to enter the market for content at the same time it incurred the heavy upfront costs needed to wire a network. Indeed, by the time the Comcast-NBC Universal merger was announced at the end of 2009, Verizon Communications Inc., the only nationwide company installing fiber-optic lines, had already signaled that it was planning to stop doing so. It was just too hard to compete with Comcast.
In turn, Comcast had no incentive to make its Internet access affordable or available to everyone within its territories. Nor did it have any incentive to upgrade its networks to fiber optics.
In seeking to have business ties to much of the content it provided, too, Comcast was setting itself up to be the unchallenged provider of everything -- all data, all information, all entertainment -- flowing over the wires in its markets. The company would have every incentive to squeeze online services that were unwilling to pay the freight to Comcast.
By February 2010, the accepted wisdom in Washington was that the deal would go through. And it showed Americans their Internet future. Even though there are several large cable companies nationwide, each dominates its own regions and can raise prices without fear of being undercut.
Wireless access, dominated by AT&T Inc. and Verizon, is, for its part, too slow to compete with the cable industry’s offerings; mobile wireless services are, rather, complementary. Verizon Wireless’s joint marketing agreement with Comcast, announced in December 2011, made that clear: Competitors don’t offer to sell each other’s products.
It doesn’t have to be this way. Other developed countries have a watchdog to ensure that all their citizens are connected at cheap rates to fiber-optic networks. In South Korea, more than half of households are already connected to fiber lines, and those in Japan and Hong Kong are close behind. In the U.S., only about 7 percent of households have access to fiber, and it costs six times as much as in Hong Kong.
Rather than try to ensure that the U.S. will lead the world in the information age, American politicians have removed all regulation of high-speed Internet access and have allowed steep market consolidation. The cable industry has done its best to foil municipal efforts to provide publicly overseen fiber Internet access. Now, the U.S. has neither a competitive marketplace nor government oversight.
In the subcommittee hearing, Roberts never faltered, and his performance was judged a success. In the end, the Antitrust Division allowed the merger, and the FCC followed suit.
Compared with people in other countries, Americans are paying more for less and leaving many of their fellow citizens behind. Perhaps they will start to care when they see that the U.S. is unable to compete with nations whose industrial policy has been more forward-thinking.
But even if those schools do move at some point, that does not mean that the Big Ten will slam the brakes on expansion. As we’ve discussed in previous pieces, leagues are making money off of their brand names and their content. The more good games to sell (content), the more television money to be made. For that reason, we firmly believe the rumblings we’ve heard about the Big Ten having an interest in Duke and North Carolina. Currently, the Big Ten’s schools are all located in contiguous states.
If Georgia Tech is a target for the Big Ten and if form holds, the league will need to somehow connect the state of Virginia to the state of Georgia. We don’t expect an SEC school — Vanderbilt — to be on the Big Ten’s list of invitees, so that leaves the state of North Carolina as the other option. It just so happens that the crown jewels of the ACC in terms of name brands are located in the Tarheel State. While the Big Ten is rumored to be eyeballing Virginia and Georgia Tech, don’t be surprised if Delany and company don’t attempt to add four more schools, all from the ACC — Virginia, Georgia Tech, North Carolina and Duke.
All are AAU members. The addition of all four would bring the league’s total number of schools to 18 and greatly increase the Big Ten’s area of influence. The Big Ten Network would stretch from Nebraska, Iowa and Minnesota all the way into New York and then down the Eastern seaboard and into the SEC’s biggest natural TV market: Atlanta. In addition, the more ACC schools the Big Ten goes after at once, the easier the sell might be for each school as it exits its old conference. The administrators and fans of Virginia, Georgia Tech, North Carolina and Duke might be more likely to move if they knew they’d still be seeing plenty of familiar faces in their new home. And Maryland would already be waiting for them.
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