Jonathan Sallet, Nov 11, 2015
The FCC’s actions on big mergers and acquisitions have attracted a lot of comment and I’m proud of what we’ve achieved. But why did we come to the views that we’ve held? What were our theories and our core concerns? What forms of analysis did we employ? Some of that is in the public record, some is not. Let me address how we came to take the actions we did.
In the time that Tom Wheeler has been Chairman at the FCC, the Commission has faced the possibility of three telecommunications mergers that I’d like to discuss: First, the suggested Sprint-T-Mobile merger; second, the proposed acquisition of Time Warner Cable by Comcast; and, third, the acquisition of DIRECTV by AT&T. The first was not pursued, the second was abandoned, and the third was approved, with important, pro-competition conditions.
Let’s start with the most important lesson. Chairman Wheeler has recited his basic mantra over and over again: “Competition. Competition. Competition.” (And I know that the TPRC itself beginning in the 1970s may deserve some of the credit for this way of thinking at regulatory agencies). At the FCC, in every transaction review, the burden is on the applicants to demonstrate that a transaction will further the public interest, and that starts with competition. A central question always is: Will a deal bring more competition for the benefit of American consumers?
Of the three proposed transactions, it is not surprising that the one that was approved is the one that was brought more competitive choices to a highly concentrated market. But that is not the only test. The public interest standard, for example, considers whether a firm will bring better products, other new innovations, or wider deployment to consumers. And it is concerned with more than just standard economic analysis. Diversity, multiple avenues for expression, the importance of broadband access for all parts of society—all of these can be important.
The Commission’s charge is broad, but not limitless. In some quarters, the belief exists that political connections or viewpoints are important to our review. In fact, they are not relevant. Others may believe that we are passing judgment on the past practices and customer reputation of firms. We are not; our perspective is entirely prospective: We look to the future to decide whether the outcomes of a transaction will—or will not—advance the public interest.
Finally, the Commission’s recent reviews have taken place against the backdrop of changing industries. I will discuss some of those dynamics below; for example, the rise of new forms of online video delivery. But one stands out apart from the rest. 2014 was the first year in which cable companies had more broadband customers than video customers. In other words, the term “cable” industry” is a bit of a misnomer—these are companies who supply more consumers with the ability to connect to the internet than with the ability to watch proprietary Pay TV. This proved to be of importance to both the Comcast/Time Warner and the AT&T/DIRECTV reviews.
Below, I would like to offer personal views as to why these three merger outcomes establish a set of important principles, while dispelling myths as to how the Federal Communications Commission operates in this sphere.
