Re. the Comcast-TWC deal, Paul Krugman asks: "When and why did we stop worrying about monopoly power?"

"Comcast perfectly fits the old notion of monopolists as robber barons, so-called by analogy with medieval warlords who perched in their castles overlooking the Rhine, extracting tolls from all who passed. The Time Warner deal would in effect let Comcast strengthen its fortifications, which has to be a bad idea."

-- Paul Krugman, in his NYT column today,
"Barons of Broadband"

by Ken

Both Howie and yours truly have registered horror at the prospect that Comcast and Time Warner Cable can actually get away with the plan they hatched -- remarkably stealthily, in this day and age -- for Comcast to swallow up TWC, thereby combining the counry's top two cable-TV and Internet-service providers, which also includes the entire Universal-NBC entertainment and TV complex, extensive phone holdings, and goodness knows what other media froufrous.

I was especially charmed by Comcast CEO Brian Roberts's hilarious assertion that the deal is "pro-consumer, pro-competitive, and strongly in the public interest," when a backward sixth-grader could see that it's designed to be in every way humanly possible anti-consumer, anti-competitive, and profoundly against the public interest.

I suppose our Brian's hilarious cliam falls squarely in the modern-day right-wing comic tradition of dubbing things the exact opposite of what they are. You know, like Fox Noise's side-splitting claim to fair-and-balanced-ness, when its aim and practice, indeed its reason to exist and as a fake-news entity, is to exclude any element (except occasional meaningless window dressing) which even inadvertently hints of any real fairness or balance.

But I'm still thrown by what threw me when I first heard the news reports about the Comcast-TWC deal: that it was made at all, given what I would have taken to be the flat-out impossibility of its passing any of the regulatory hurdles. Nevertheless, given how much the companies have already invested in taking the deal this far, one has to suppose they think approval is not only possible but likely. Um, howzzat?

Paul Krugman to the rescue. I'm relieved to find our Paul sounding kind of flabbergasted himself, as reflected in the first of the two questions he asks about the deal in his NYT column today, "Barons of Broadband":

"First, why would we even think about letting it go through?"

"Broadband Internet and cable TV," Paul points out,

are already highly concentrated industries, with a handful of corporations accounting for most of the customers. Once upon a time antitrust authorities, looking at this situation, would probably have been trying to cut Comcast down to size. Letting it expand would have been unthinkable.

While he's at it, Paul explains the claim advanced by CEO Brian, which on quick hearing sounds sort of reasonable, that his company and TWC aren't competitors, is "transparently disingenuous."

Comcast's chief executive says not to worry: "It will not reduce competition in any relevant market because our companies do not overlap or compete with each other. In fact, we do not operate in any of the same ZIP codes." This is, however, transparently disingenuous. The big concern about making Comcast even bigger isn't reduced competition for customers in local markets -- for one thing, there's hardly any effective competition at that level anyway. It is that Comcast would have even more power than it already does to dictate terms to the providers of content for its digital pipes -- and that its ability to drive tough deals upstream would make it even harder for potential downstream rivals to challenge its local monopolies.

"The point is," says Paul,

that Comcast perfectly fits the old notion of monopolists as robber barons, so-called by analogy with medieval warlords who perched in their castles overlooking the Rhine, extracting tolls from all who passed. The Time Warner deal would in effect let Comcast strengthen its fortifications, which has to be a bad idea.

(Paul also finds it interesting that a standard boilerplate cliché usually advanced to promote megadeals like this, that they advance innovation, has been conspicuously absent from the merger rhetoric. He points out that "a number of experts . . . have argued that the power of giant telecommunication companies has stifled innovation, putting the United States increasingly behind other advanced countries.")

"There are good reasons to believe," says Paul, "that this isn't a story about just telecommunications, that monopoly power has become a significant drag on the U.S. economy as a whole." Which brings us to his other question:

"Second, when and why did we stop worrying about monopoly power?"

There used to be a bipartisan consensus in favor of tough antitrust enforcement. During the Reagan years, however, antitrust policy went into eclipse, and ever since measures of monopoly power, like the extent to which sales in any given industry are concentrated in the hands of a few big companies, have been rising fast.

At first, arguments against policing monopoly power pointed to the alleged benefits of mergers in terms of economic efficiency. Later, it became common to assert that the world had changed in ways that made all those old-fashioned concerns about monopoly irrelevant. Aren't we living in an era of global competition? Doesn't the creative destruction of new technology constantly tear down old industry giants and create new ones?

The truth, however, is that many goods and especially services aren't subject to international competition: New Jersey families can't subscribe to Korean broadband. Meanwhile, creative destruction has been oversold: Microsoft may be an empire in decline, but it's still enormously profitable thanks to the monopoly position it established decades ago.

Moreover, there's good reason to believe that monopoly is itself a barrier to innovation. [Susan] Crawford [of Benjamin N. Cardozo School of Law, author of the recent book Captive Audience] argues persuasively that the unchecked power of telecom giants has removed incentives for progress: why upgrade your network or provide better services when your customers have nowhere to go?

And having the economy structured this way, suggests Paul, "may be playing an important role in holding back the economy as a whole."

One puzzle about recent U.S. experience has been the disconnect between profits and investment. Profits are at a record high as a share of G.D.P., yet corporations aren't reinvesting their returns in their businesses. Instead, they're buying back shares, or accumulating huge piles of cash. This is exactly what you'd expect to see if a lot of those record profits represent monopoly rents.

This is, I think, a vastly more helpful response to the news of the Comcast-TWC deal than my own Rip Van Winkle-ish assumption that they can't do that, can they? All that's left is the traditional Krugman Klincher:

It's time, in other words, to go back to worrying about monopoly power, which we should have been doing all along. And the first step on the road back from our grand detour on this issue is obvious: Say no to Comcast.

I guess we'll have to see whether they can do that. I'm just relieved to find that I'm not the only one who just assumes that not so long ago there wouldn't have been any question that they couldn't.

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