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Analysis: CNBCU Conditions Will Stimulate Growth, Not Restrict It

The Federal Communications Commission’s recent approval of Comcast’s purchase of NBCU has come with some major conditions that will limit any potential discriminatory policies the new firm might have engaged in.

The new entity, CNBCU, will become one of the nation’s largest content creation and distribution companies. CNBCU will be in a unique position in that they will not only control the creation of content but also the method in which it is distributed. Unchecked, this vertical integration could lead to monopolistic actions.

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The Federal Communications Commission’s recent approval of Comcast’s merger with NBCU has come with some major conditions that will limit any potential discriminatory policies the new firm might have engaged in.

The new entity, CNBCU, will become one of the nation’s largest content creation and distribution companies. CNBCU will be in a unique position in that they will not only control the creation of content but also the method in which it is distributed. Unchecked, this vertical integration could lead to monopolistic actions.

In his dissent to the merger, Commissioner Michael Copps said, “[this merger] confers too much power in one company’s hands.” However, with the conditions imposed by the commission, CNBCU, while powerful, will be unable to act in a monopolistic manner.

While some critics have called the FCC’s conditions restrictive, they are directed at potential areas where the new firm could do direct consumer harm. The main goal of these policies is to protect consumer welfare once CNBCU becomes a major market force in all of the cable, broadband, and online video markets. The FCC worked with the Department of Justice to include provisions that will ensure that the new firm will not violate anti-trust regulations.

The conditions placed upon the merger will guarantee the consumer welfare is protected while also supporting a vibrant marketplace.

The most prominent anti-discriminatory directives – compliance with the Open Internet Order –  is a major factor in ensuring broadband competitiveness. CNBCU will become one of the nation’s largest internet service providers offering access in over 30 states. The merger agreement mandates that the firm must follow all the provisions of the FCC’s Open Internet Order. Even if the Order is modified or struck down in court, CNBCU must adhere to the rules and regulations within the Order.

Compliance with the Open Internet Order by such a large player in the market will not only affect CNBCU but also its competitors.  To remain competitive with CNBCU’s open network, market pressure will mount for rival ISPs to follow the Open Internet Order as well. Given a choice between the open CNBCU network and a potentially closed or limiting internet service, consumers will likely pick the open network.

Verizon and MetroPCS have already filed suit against the FCC over the Open Internet Order; however, regardless of the outcome it will presumably be adopted by all major ISPs. The market power that CNBCU holds will ensure that its competitors will also follow the same rules to offer a competitive product.

CNBCU will be in a unique position of being a content provider and content maker. It will also be the largest player in the emerging online video distribution market. CNBCU will control nearly 5 percent of the online video distribution market including Hulu, Daily Candy, and NBC.com. Additionally CNBCU has signed a lucrative deal with Netflix to offer a large back catalog of content.

The online video market is growing faster than ever as more consumers “cut the cord” and drop traditional cable in favor of online video. The research firm SNL Kagan, estimates that 741,000 customers dropped their cable subscriptions.

CNBCU will presumably earn more revenue from advertising on its traditional cable properties than its online video properties.  The Commission, recognizing the financial incentive for CNBCU to force consumers to watch their programming over cable versus online video distributors, explicitly forbids the blocking or degrading of online video content. This anticipation shows that the FCC believes this emerging market will soon take off and become a major way in which consumers will access content.

The most prominent of these online video distributers is the popular free website Hulu, in which CNBCU – along with ABC and News Corp. – holds a major stake. The website is a limited alternative to traditional cable access. Since CNBCU competes with Hulu in the cable market, however, the FCC is justified that CNBCU may try to limit Hulu. In fact, the 2010 Comcast v. FCC case sprung from accusations that in 2007, then standing alone, Comcast degraded service to services such as Hulu and Skype, which provided free alternatives to their cable and telephone products.  The merger conditions restrict CNBCU from exercising any operational power over Hulu, but it will be allowed to keep its financial stake in the firm. To ensure that Hulu continues to get content from CNBCU at a fair price the FCC has mandated that CNBCU must maintain its current contract with Hulu and continue to provide the same level of content that its partners provide. By maintaining its financial stake in Hulu CNBCU will presumably want the company to do well and provide it with quality programming.

To prevent any exclusionary deals that would prevent other cable providers from access to its online video, the Commission has mandated that CNBCU must offer its online content to others at a reasonable market rate.

Additionally CNBCU is prohibited from offering to its broadband subscribers specialized online video content that includes only NBC programming. In order to offer an online video service the firm must include programming from outside sources as well. However, with its stake in Hulu it seems unlikely that the firm will launch a new online video service.

The online video conditions may seem unnecessary due to the relative size of the market in comparison to that of cable, but online video is continuously growing. The concern by the FCC over the market indicates that the Commission anticipates it becoming a prominent method of watching television and movies in the near future. If CNBCU blocks access to its content, it will severely hinder the growth of the online video market.

While some may claim that the conditions imposed by the FCC on the merger is strong handed government overreaching by the commission, these conditions actually promise to create new markets while protecting consumers and preventing years of anti-trust litigation.

Rahul Gaitonde has been writing for BroadbandBreakfast.com since the fall of 2009, and in May of 2010 he became Deputy Editor. He was a fellow at George Mason University’s Long Term Governance Project, a researcher at the International Center for Applied Studies in Information Technology and worked at the National Telecommunications and Information Administration. He holds a Masters of Public Policy from George Mason University, where his research focused on the economic and social benefits of broadband expansion. He has written extensively about Universal Service Fund reform, the Broadband Technology Opportunities Program and the Broadband Data Improvement Act

Big Tech

Government’s Reactive Nature Hobbling Tech Regulation, Expert Says

Congress may need another big tech breach to move earnestly on regulation, says consultant.

Samuel Triginelli

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Screenshot of Steve Haro at FiscalNote event

April 12, 2021 – The reactive nature of Congress to data crises means another breach of citizens’ privacy may be needed to spurn the next big legislative move, said a former congressional chief of staff.

“We still have questions to answer how to deal with technology dominance. We are not there yet because, unfortunately, Congress, for the most part, tends to act in response to crisis,” said Steve Haro, who is currently a government affairs consultant and was a former assistant secretary of commerce.

During a discussion sponsored by FiscalNote and CQ Rollcall, experts joined in a conversation on the current state of public policy for the tech industry and how influential Congress and the Biden-Harris admission will be on dealing with big tech.

Among the discussed issues was how the government will deal with intermediary liability provision Section 230.

Lawmakers have wondered whether the provision — which protects platforms from legal liability for posts by their users — offers too much protection to social networks when it comes to content moderation and disinformation. This central premise has spurned calls for a reform of Section 230; a number of Democrats have proposed their own bill to keep much of the protections except for paid posts.

“I do not believe 230 needs change, but that doesn’t mean I don’t have concerns,” Haro said. “I believe there is collective agreement this is still a necessary law, and it has worked. It has allowed the internet to build do what has become, good or bad.”

Haro pointed to the congressional hearings into Facebook’s handling of the Cambridge Analytica scandal three years ago, which saw the scraping of millions of user accounts without their consent. The result did not see substantial progress on regulations. “We might need another crisis to spur Congress into action,” Haro said.

Michael Drobac, principal at the law firm Dentons, said “we are not there, and I would say the thing that has been most present and clear is that in most of these hearings” the members of Congress are still trying to understand the technology to make a meaningful impact.

“The reality is that section 230 is as important today as it was when it was passed,” Haro said.

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Big Tech

Regulatory Commission Needed To Monitor Big Tech Collection Of Consumer Data, Professor Says

Derek Shumway

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Screenshot of Robin Gaster from Henry George School of Social Science

April 8, 2021 — There needs to be a digital regulatory commission created to ensure big tech cannot run wild with consumer data, said Robin Gaster, a George Washington University public policy scholar.

Gaster, who’s also president of Incumetrics, a data and program evaluation consultancy, published a book that was released this month about Amazon’s rise from an online bookstore to everything else.

Gaster sat down with Broadband Breakfast on Wednesday and talked about the e-commerce giant’s reach into industries like healthcare and its rapid collection of more consumer data. The solution, he proposes, is creating a “new digital deal,” which would see a sort-of digital Federal Communications Commission — an entity which has the resources and the person power to match Amazon’s growing force.

Amazon’s reach into health care needs to be met with proper oversight and ethics to ensure it really will protect consumer privacy, he said.

The e-commerce behemoth acquired PillPack, a prescription delivery company, developed the Amazon Halo, a competitor device to Fitbit, and launched Amazon Care, a telehealth app service. Add Amazon’s own Alexa AI platform into the mix and it has a stream of access to valuable data.

“I would absolutely imagine that five years from now, if you sprain your knee, you probably will not go on the Internet and look for things and trying to figure it out. You will say, ‘Alexa,’ I sprained my knee. What should I do?” said Gaster.

Amazon’s breakneck growth into healthcare is concerning because no one knows exactly what could or intends to do with all the data it possesses, Gaster said. With so much aggregated data across its products and services, Amazon needs to be held accountable for its actions so that if something goes wrong, there are ways to fix it that are open and trustworthy.

Gaster said governments and companies alike are playing “privacy theater” – they talk about protecting privacy, but it’s a mere performance put on to make it seem like they care about it, he said.

Alexa takes in all sorts of data from voice-commands and people’s Amazon accounts. It may as well be a virtual doctor someday, but people don’t know how or if they can control their data recorded by Alexa, Gaster said.

The notion that people can control their data is ridiculous, said Gaster. “We are walking across the digital plane naked. We have no clothes!” he said, adding no one can wade through the legalese in the terms and conditions and privacy statements.

Gaster’s book is entitled Behemoth – Amazon Rising: Power and Seduction in the Age of Amazon.

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Courts

Supreme Court Declares Trump First Amendment Case Moot, But Legal Issues For Social Media Coming

Benjamin Kahn

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Photo of Justice Clarence Thomas in April 2017 by Preston Keres in the public domain

April 5, 2021—Despite accepting a petition that avoids the Supreme Court deliberating on whether a president can block social media users, Justice Clarence Thomas on Monday issued a volley that may foreshadow future legal issues surrounding social media in the United States.

On Monday, the Supreme Court sent back to a lower court and ruled as moot a lawsuit over whether former President Donald Trump could block followers on Twitter, after accepting a petition by the federal government to end the case because Trump wasn’t president anymore.

The case dates back to March 2018, when the Knight First Amendment Institute and others brought a case against former president Trump in the Southern District of New York for blocking users based on their political views, arguing the practice is a violation of the first amendment.

The lower court judge agreed, and the decision was upheld by the United States Court of Appeals.

In accepting the petition by the government, Justice Thomas stated that adjudicating legal issues surrounding digital platforms is uniquely difficult. “Applying old doctrines to new digital platforms is rarely straightforward,” he wrote. The case in question hinged on the constitutionality of then-President Trump banning people from interacting with his Twitter account, which the plaintiff argued was a protected public forum.

Thomas stated that while today’s conclusion was able to be vacated, that likely would not be the case in the future. He went on to say that digital platforms exercise “concentrated control of so much speech in the hands of a few private parties.”

He continued: “We will soon have no choice but to address how our legal doctrines apply to highly concentrated, privately owned information infrastructure such as digital platforms.”

Even though Facebook and Google were not the platforms in question in this case, Thomas pointed to them as “dominant digital platforms” and stated that they have “enormous control over speech.” He stated that Google, Facebook, and Twitter have the capabilities to suppress information and speech at will, and referenced the “cataclysmic consequences” for authors that Amazon disagrees with.

Thomas also rejected the notion that other options exist.

“A person always could choose to avoid the toll bridge or train and instead swim the Charles River or hike the Oregon Trail. But in assessing whether a company exercises substantial market power, what matters is whether the alternatives are comparable.”

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