Comcast-NBC Universal Deal Could Cost Consumers Billions

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The plan by Comcast (CMCSA) to take a majority interest in NBC Universal (GE) could cost consumers $2.4 billion over the next nine years -- at least that is what the American Cable Association says. The organization represents hundreds of small cable companies.

The reason for the additional costs is that the new combined firm would have tremendous pricing power as it marries its cable carrier operations with its content-producing business. The ACA opposes Federal Communications Commission and Justice Department approval of the transaction unless a number of restrictions are added.

"It is clear that the Comcast-NBCU deal will send monthly cable bills higher by billions of dollars over the next decade, underscoring ACA's view that regulators must protect consumers and competition from a transaction whose benefits are vastly outweighed by its harms. Without meaningful and cost effective conditions on the Comcast-NBCU transaction, regulators also run the risk of crippling effective competition in the pay-TV distribution market," ACA President and CEO Matthew M. Polka said.

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ACA's study was conducted by William Rogerson, professor of economics at Northwestern University, who once served as the FCC's chief economist. The work claims that if the two companies remain separate, cable subscribers would pay less for service over the next decade. Rogerson's analysis shows that by not imposing conditions on NBCU's national cable networks, the government would leave nearly two-thirds of the transaction's harms unaddressed, the ACA reported.

The ACA goes on to suggest a series of restrictions on the Comcast-NBCU deal. These include a proposal that "All pay television providers, including bargaining agents, that cannot reach a mutual agreement with Comcast-NBCU for any of its programming may submit a dispute to binding baseball-style commercial arbitration."

While the study is not tainted, it may be biased by the fact that small cable networks acting in concert are attempting to block a deal that involves a much larger cable entity. It appears the NBCU deal will receive government approval, so their requests will likely go unheeded.

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