Video Mergers Might Challenge FCC Horizontal Concentration Policy

Regulators in the U.S. market might soon find they need to take one more look how to determine when the U.S. communication markets are too concentrated, or might become too concentrated.

The reason is the growing possibility that some possible merger or acquisition efforts in the U.S. market will test formal and informal rules about market concentration in the cable TV, satellite TV, voice and broadband services markets, both directly and indirectly.

Though the Federal Communications Commission and U.S. Department of Justice determined that AT&T would become too big if it acquired T-Mobile USA, negatively affecting competition in the U.S. mobile market, new tests likely are coming in the fixed network and satellite businesses.

The latest rumors either involve Charter Communications making a bid for Time Warner Cable, or perhaps even Comcast trying to buy Time Warner Cable. Then there is new talk about a potential merger between DirecTV and Dish Network, the only two U.S. video entertainment providers.

DirecTV and Dish Network tried to merge in 1992, but that merger was blocked by antitrust authorities, because of reduced competition concerns. Whether the markets now are sufficiently changed, with telcos now providing video entertainment, is the question.

The possibility that Comcast, the largest U.S. cable TV provider, might add Time Warner Cable’s assets might also challenge FCC rules about maximum market share in the cable TV business, which had been set at a maximum of 30 percent share of customers in “cable TV” business.

But that concentration rule was overturned by an appeals court in 2009. Over time the original rule that no single cable operator could pass more than 30 percent of homes was modified to mean that no single cable operator could have more than 30 percent of actual subscribers in the broader market, including satellite and telco providers.

Some would note that Comcast at present already has perhaps 43 percent share of video customers in the cable TV business, but only about 23 percent share of U.S. video entertainment subscribers, when the whole market, including satellite and telco providers, is examined.

A combined Comcast with Time Warner Cable would serve about 35 percent of U.S. video market customers.

Were DirecTV and Dish Network to merge, the new company would have 36 percent share of the traditional U.S. video entertainment business. That would also pose a challenge to the current rule that no single provider can serve more than 30 percent of total subscribers in the broader market.

At least so far, over the top services such as Netflix have not been considered part of the multichannel video subscription business, though that could change at some point in the future, especially if Netflix were to secure broad rights to distribute full versions of channels, if providers such as Comcast or Viacom were to acquire rights to sell, over the top, the same content they now sell as packaged services on their owned networks, or if the entire business shifts to new forms of delivery broadly disconnected from traditional delivery by access providers.