FCC Chairman Ajit Pai has said that he wants to kill net neutrality because he believes it will somehow create more competition, which would be good for consumers. Let’s take a look at how the two biggest cable companies in America handle competition.
Comcast and Charter have just announced a partnership in which they’ve agreed not to compete against one another in the wireless market for one year. They will also have to get each other’s permission if they want to undergo any mergers or acquisitions in the wireless market. But wouldn’t this be a violation of antitrust laws? According to a statement from Comcast to Ars Technica, they seem to think the answer is no. It reads:
The Comcast-Charter agreement does not violate the antitrust laws. Comcast and Charter are not competitors or even potential competitors in the wireless market. Our agreement to cooperate will help increase our competitive viability in a market controlled by national players and, therefore, promote competition and consumer choice.
Right. So, even though they are technically competitors in the cable TV/ISP market, they aren’t technically in the mobile market yet. Comcast plans to launch its first mobile service, Xfinity Mobile, in a matter of weeks. And Charter is planning to start a separate service in the coming year. And, oh yeah, they’ll both just be running on the Verizon network. It’s brilliant and probably legal!
For Comcast and Charter, this is an opportunity to get their foot in the door of the mobile phone business. By not competing with each other, they feel that they are more likely to find solid ground as they build the business. Entry into the wireless industry is at least in part to incentivize customers to buy package deals. As more people are cutting the cord on cable tv, these companies are hoping to offer cable/internet/phone bundles that will help retain customers. And while you might get a more affordable deal, the competition in the market shrinks along with the companies’ incentives to provide quality service. Honestly, who wants to depend on cell phone service from the most hated company in America?
Remember how we said the two companies are “technically competitors?” That’s because they don’t overlap in any of their markets. They simply stay out of each other’s way and lord over their regional monopolies. And not only is this cooperation between the companies ensuring that they aren’t competing with one another, they could combine forces to eliminate other competitors. The Wall Street Journal suggests that the “agreement could stoke Wall Street speculation among investors and analysts that the two largest US cable companies together could decide to make a play for a carrier like T-Mobile US Inc. or Sprint Corp.”
The corporate world has a bit of merger and acquisition fever at the moment because of a general belief that the Trump regime won’t stand in the way of anything that private business wants to do. And that very well may be true. Makan Delrahim is Trump’s pick to be the chief antitrust cop at the Justice Department. Delrahim is expected to take a much more lax approach to his job than the relatively strict Obama administration. According to the New York Times, his philosophy is, “A monopoly is perfectly legal until it abuses its monopoly power.” It’s like a nuclear bomb—no big deal until it blows up.
Next time someone argues that ending net neutrality will create more competition, just remember that the big telecoms are happy to work with each other and coordinate their business moves. If they all want to throttle certain areas of the web at once, they will. And they’ll just keep merging and merging and merging...