The New Telecom Oligarchs
Coming in as a new FCC commissioner in 2001, I was on fire to protect consumers and advance the public interest. But I quickly discovered that I would be spending much of my time listening to a seemingly endless stream of big telecom and media types walking me through the supposed blessings and bountiful efficiencies of their latest merger-and-acquisition plans. The acquiring CEO always did most of the talking, while the head honcho of the company that was about to be swallowed limited himself (there aren’t many “herselves” running these mega-companies) to a couple of assuring nods of the head and perhaps an occasional “amen” thrown in. More often than not, the latter was on the way out, albeit financially assured of living happily ever after.
Before they picked up their briefcases to leave, my visitors would assure me that this transaction would solve all their problems and they would not come back looking for more consolidation later. But they did come back for more. So did their business rivals. Often, as soon as the commission approved one merger, a competitor would march in, shedding crocodile tears that it would be undone by the pending deal and that the only way for them to survive was—you guessed it—to merge with somebody else. That proposal would be allowed too, and the cycle would start all over again. The FCC had morphed into a perpetual-motion machine for merger-and-acquisition approvals. It might have been comical had the results not been so destructive for our entire telecommunications and media ecosystem.
Here, in a nutshell, is what happened before we got to Comcast-NBCU: the bigger Baby Bell companies gobbled up their small wire-line competitors, and then each other, until we found ourselves in an environment eerily reminiscent of Ma Bell. The same contagion swept through the wireless industry, pushing so many M&A deals that any potential for robust competition quickly devolved into monopoly and duopoly control there, too (“Ma Cell,” it’s been called). AT&T and Verizon sit atop the wireless and many wire-line markets. Next was broadband, a technology launched with confidence that its intrinsic openness and dynamism would somehow grant it, and the businesses it spawned, immunity from the consolidation and gatekeeper control that corporate America had visited upon earlier communications technologies. Today we know how misplaced that optimism was: instead of competitive and consumer-friendly markets, we have a telecom-cable cabal that denies high-value broadband to many areas in favor of cherry-picking affluent, high-density—and highly profitable—markets. Up to one-third of US homes lack anything resembling the high-speed, low-priced broadband that consumers in many other countries enjoy.
Vigorous public policy oversight (the FCC’s job) and tough anti-trust enforcement (the Justice Department’s) could have put the brakes on all this. They didn’t. The public sector has been up to its ears in complicity, with regulators encouraging consolidation and blessing just about every merger transaction that came their way. (The thumbs-down on the totally egregious AT&T/T-Mobile merger proposal of 2011 was a welcome—but rare—exception to a pattern that shows no sign of real change.)
This carcinogenic combination of hyper-speculation in the private sector and a mostly compliant FCC, which has been AWOL from its public-interest oversight responsibilities, has left us with a telecom ecosystem bereft of meaningful competition, as well as a media environment in which a handful of huge conglomerates have gobbled up so many previously diverse and once independent outlets, dramatically downsizing their new operations, that the civic dialogue we must nourish to preserve self-government has been dumbed down beyond recognition.
Of course, my Comcast visitors had already vetted their proposal and arranged financing with the captains of Wall Street. They had spun it for the nation’s top business editors. But they still needed the stamp of approval from the regulators. I knew they would not have put this proposal before the commission unless they were confident that they, their lawyers and the Wall Street crowd backing them had crafted a proposition likely to pass muster. They had done their homework on the FCC commissioners too, fine-tuning their presentations to accord with each of our individual interests and holding out the carrot of a few concessions that they might be able to make during the merger-approval process in return for an aye vote. Some “conditions” had been added to sweeten the deal, but nothing that came close to offsetting its public-interest harms or that got materially in the way of Comcast’s original business plan to capture communications markets. When I suggested something substantive that might actually benefit the public—like breathing life back into NBC’s diminished and ailing news operations—they politely refused.
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