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Posted at 12:00 PM ET, 12/ 8/2010

Q&A: Earthlink's take on Comcast-NBC merger, broadband prices could go up

By Cecilia Kang


Critics of Comcast’s proposed merger with NBC Universal say one way the merger could hurt consumers is by raising broadband prices. Earthlink has made that case, saying Comcast would do so to keep people in bundled packages for cable television, phone and Internet services. That would keep would-be Internet TV viewers from canceling their cable TV subscriptions, Earthlink has argued in filings and meetings with the Federal Communications Commission.

Comcast disputes those claims, saying criticism in a filing late last month that the firm “fails to take into account the pro-consumer benefits associated with the transaction’s significant cost efficiencies, which create incentives for Comcast to lower prices for certain services,”

On Tuesday, Rep. Ed Markey (D-Mass.) urged FCC Chairman to put a condition on the merger that requires Comcast to unbundle access services from its broadband offering so companies like Earthlink can provide more competition and lower prices.

Here’s an interview with Earthlink counsel, Sam DeSimone on their case:

Q: Why does Earthlink care about the merger?
A: At a high level, we do think there is a problem with broadband in this country. The U.S. is ranked average in developed countries as far as speed, quality and adoption of broadband services. The Department of Justice found that consumers may have only a single broadband service provider – their cable company. With the merger, and Comcast being the largest cable company, we don’t think that is good for consumers. We compete as an Internet service provider and we aren’t able to do that in Comcast territories.

Q: Why would the FCC consider your condition?
A: Because it has done it before in the past. We have an outstanding relationship with Time Warner Cable because we provide Internet service for them, a condition that arose from the AOL-Time Warner merger of Nov. 2000.

Q: How are you so sure Comcast would raise prices? They say they wouldn’t have that incentive.
A: We hired Simon Wilkie (executive director of the University of Southern California’s Center for Communications Law and Policy) to produce a study. He found that a vertically integrated Comcast with NBCU programming will have increased incentives to increase prices of Comcast’s stand-alone broadband service. They do that to force consumers to purchase Comcast TV, telephone and broadband bundles.

Q: So as a consumer, I may like the bundle -- cheaper overall for several services.
A: This is partly about cord cutting. As a consumer you woudn’t get Netflix as a substitute for cable TV, for example, because it would be too much to pay for stand-alone broadband.
Comcast can do certain things to discriminate against Netflix but consumers don’t have a choice. We have no incentive to block or degrade or discriminate against Netflix or other competitors to cable. We would encourage consumers to watch more online video.

By Cecilia Kang  | December 8, 2010; 12:00 PM ET
Categories:  Comcast, DOJ, FCC  
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