The Comcast Media Pac-Man

by Ron Kaufman

Here comes Comcast Corporation, gobbling up everything standing in it's path in the media maze. Comcast is a hungry Pac-Man in the middle of feeding time. Based in Philadelphia, Comcast now boasts being the cable television and broadband communications service provider for 21 million homes in 41 states. The company states it has a strong foothold in 17 of the top 20 U.S. markets which accounts for 70% of its subscribers. Comcast is a majority owner of cable channels QVC, E! Entertainment Television, Style, The Golf Channel, and the Outdoor Life Network. Comcast also owns the Philadelphia Flyers and Phantoms hockey teams and the Philadelphia 76ers basketball team. Comcast also has Comcast Spectacor and Comcast SportsNet affiliates in many major cities (including Philadelphia and Chicago).

Founded in 1963, Comcast has a tradition of eating up smaller companies and expanding its market and subscriber base. In 1988 it purchased Storer Communications and American Cellular Network Corporation. In 1994 it acquired Maclean Hunter's U.S. cable operations and the next year bought E.W. Scripps cable systems. In 1998, with the help of a $1 billion investment by Microsoft, Comcast acquired Prime Communications and Jones Intercable, Inc.

Comcast left the cellular business in 1999, to free up resources to purchase Greater Philadelphia Cablevision, Inc. and merge with MediaOne. In 2000, the company grabbed Lenfest Communications, Inc. and gained subscribers from Adelphia cable systems. Also in 2001, Comcast struck a licensing deal with Walt Disney Co. to carry its ABC and ESPN networks.

In 2000 and 2001, Comcast purchased select cable systems run by AT&T in six states. Then in 2002, Comcast and AT&T Broadband completed a $47.5 billion merger to serve 21 million video customers in 41 states, with 6.3 million digital cable subscribers, 3.3 million high-speed Internet customers, and 1.3 million cable phone subscribers.

Comcast made another power play in December 2003, when the company completed another licensing deal, this time with Viacom Inc. With this deal, the largest cable operator and largest media company in the country have agreed to broadcast each other's networks. Viacom is owner of CBS, MTV, VH1, Nickelodeon, Spike TV, Comedy Central, BET and others. Comcast has its own channels that Viacom will promote along with the Comcast G4 Media entertainment system (online chatting and gaming).

Within the next year, Comcast Corporation will try to reach out to more than 24 million subscribers making it the largest pay-television provider in the United States. The company has announced that it expects cash flow in 2004 to reach $2 billion. According to the company, its improved income is due to a 15-17% growth in cable operating cash flow and "significantly reduced cable capital expenditures" of $3.3-3.4 billion (which means the company has completed many of it's digital cable system upgrades). Comcast has also invested billions in the other megacorp media companies and expects $1.5 billion from its AOL/Time Warner stock, $1.3 billion from its Liberty Media stock and an additional $1.7 billion from other assets including a 21% interest in Time Warner Cable and interests in other cable partnerships. All this is further fueling the "Mergermania" of large media conglomerates.

So what happens when media companies become huge megacorp monopolies? Do they become kinder and more benevolent? Do the companies treat their workers better and spread a feeling of happiness and job security? Do huge monopolies usually give better customer service and lower prices? And does the U.S. government oversight mechanism, in this case the Federal Communications Commission (FCC), keep a close eye on these powerful media forces so the American public is not scammed? Let's see . . . .

First, is Comcast a benevolent and generous company? The Comcast web site boasts many "community partnerships" that promote public service and volunteerism. Volunteer efforts include "City Year" and "Comcast Cares Volunteer Day." Comcast also boasts having "raised thousands of dollars to support [the] United Way’s programs and agencies nationwide." Once again, Comcast will partner with the United Way to "bring more visibility to their mission, assist in driving additional volunteers." For a company with $2 billion in cash do they actually spend any money or just try to find volunteers? Comcast does give out some grants and has a number of programs tied into their cable and sports businesses that give thousands to community and educational programs. However, their charity is "thousands" of dollars -- and note that Comcast CEO Brian Roberts made $7.7 million in 2002 along with $2.2 million in stock and his father Ralph Roberts made $13.1 million and $33.5 million in stock. In fairness to Comcast, it does support "Cable In The Classroom" and has provided 1,200 schools with cable modems so classrooms can receive selected channels.

Second, do Comcast's mergers and acquisitions lead to better employee relations? When Comcast merged with AT&T Broadband in 2002 it eliminated 7,000 positions by a combination of layoffs and attrition. During this same period, the company's revenue more than doubled to $5.7 billion from $2.7 billion because of the acquisition. In many cities, Comcast workers have voted to join the Communication Workers of America. Comcast has routinely opposed the union's efforts to fight for higher wages. According to CWA, the average Comcast worker makes $27,000 per year. The CWA says that Comcast is carrying on the anti-union practices started in the 1980s by Tele-Communications Inc. (TCI) which then became AT&T Broadband which is now Comcast. "Comcast stands out as a prime example among the hundreds of corporations that systematically use intimidation, coercion and misinformation to discourage workers from choosing union representation," states the AFL-CIO affiliate. The CWA sites many examples of Comcast's efforts to prevent the union from representation.

"Comcast has repeatedly violated labor law," said Marge Krueger, a staff member of CWA District 13 in Pittsburgh. "We filed 14 ULPs (Unfair Labor Practice) and the NLRB (National Labor Relations Board) agreed with us. They forced Comcast to correct the violations and agree to stop breaking the law." District 13 is trying to negotiate a contract with Comcast on behalf of 1,000 workers. "We've had 38 tentative agreements," she said. "They've switched lawyers seven times, each time wanting to start over again."

"If a company is successful enough to put its chief stockholder on the Forbes 400 list, then it is successful enough to pay a living wage, bargain reasonable benefits and working conditions and to sign a contract," stated Pittsburgh labor union leader Ed Mooney.

Third, do megacorp monopolies give better service and lower prices? According to U.S. Public Interest Research Group, in a report titled "The Failure Of Cable Deregulation," a J.D. Power and Associates' survey placed Comcast's customer satisfaction rating near the bottom of all cable providers in the country. "Cable’s customer service remains abysmal," states the report. "The May 2002 American Customer Satisfaction Index (ACSI) – an annual survey by the University of Michigan Business School – found that three of the then nation’s largest cable companies – AT&T Broadband, Comcast and Charter – now rank among the worst rated businesses in the history of the ACSI."

"Comcast (down 2%) and Charter Communications (up 4%) both score 55, which is lower than the Internal Revenue Service," stated the ACSI report. "That doesn’t mean that people enjoy paying taxes more than they do watching cable TV, but in the context of what these organizations do, the [IRS] offers more satisfactory assistance than the [cable companies]."

The U.S. PIRG report noted the reason for such low scores was that “cable operators frequently break installation and repair appointments, subject customers to frequent service interruptions, fail to answer customer calls or place customers on hold for extended periods, and ignore or are slow to respond to customer billing inquiries.”

How much does Comcast cost? At random, I looked at Comcast's offerings to the residents of Hartford, Connecticut. Comcast offers cable, digital cable, high-speed Internet and Comcast digital phone services to Hartford. Standard Cable Television is $42.65 per month. For those who wish to upgrade to digital cable to receive "premium" channels such as HBO, Showtime, Cinemax, etc.. the price goes from the low end of Digital Plus for $57.60 per month to Digital Platinum for $95.95 per month. High-Speed Internet service from Comcast in Hartford will cost an additional $42.95 per month for cable customers and $57.95 for non-cable subscribers. Digital Phone packagers run from $26.95 to $48.95 per month depending on the options.

So just for fun I plugged in some choices. To be a Comcast subscriber in Hartford, with standard cable plus HBO for two television sets and High-Speed Internet access with a monthly leased cable modem (rather than paying the one-time fee of $139.00) the monthly bill would be $130.65. This is without any extras such as a second "premium" channel or HDTV or additional converter boxes more TVs. This price is also without including the applicable local taxes, franchise or installation fees. Prices differ slightly for other cities, but only by a few dollars. This is around $1,600 per year to watch television.

And prices are set to go up! Rates have increased dramatically since the passage of the Telecommunications Act of 1996 which deregulated the industry. Comcast has raised the cable TV and Internet rates in nearly every city it serves. In February 2004 Comcast is set to raise its rates again by 6% (overall, cable rates went up in 2003 by 8.2%). All this, while the rate of inflation in the United States was 1.5%. "This means that cable rates increased an unbelievable 51/2 times faster than inflation. The cable industry has risen to new heights in their apparent willingness and ability to gouge the American Consumer," said Senator John McCain from Arizona.

In October 2003, the U.S. Congress General Accounting Office completed a report regarding cable TV rates. The report, "Issues Related to Competition and Subscriber Rates in the Cable Television Industry" (GAO-04-8), stated that "competition leads to lower cable rates and improved quality. However, where available, cable rates are substantially lower (by 15 percent) than in markets without this competition." Overall, the GAO report noted that from 1997 to 2002 cable TV rates rose 40% when the general rate of inflation over this time period was 12%.

In addition, the GAO report complained that the FCC’s cable rate report "does not appear to provide a reliable source of information on the cost factors underlying cable rate increases or on the effects of competition." The GAO found that cable providers and networks did not respond to the survey completely and "that 84 of the 100 franchises it surveyed did not provide a complete or accurate accounting of their cost changes for the year."

The reason for this is that the FCC does not care. The FCC, which is supposed to protect the American consumer from monopolies, instead supports the unregulated expansion of huge media companies. When Comcast wanted to merge with AT&T Broadband in 2002, the FCC cheerfully rubber stamped the deal. At the time, FCC Chairman Michael Powell made a brief off-the-cuff comment that "the benefits of this transaction are considerable; the potential harms negligible. We therefore conclude that the merger serves the public interest, convenience, and necessity."

FCC Commissioner Michael Copps, however, disagreed. "Any public interest benefits that may potentially issue from this huge consolidation of commercial power are vastly outweighed by the potential for significant harm to consumers, the industry, and the country," said Copps. He argued that Comcast and AT&T admitted that "consumers should not anticipate lower cable prices as a result of the merger, but only that the expected size of cable price increases would be reduced by the merger."

Copps continued that Comcast Corp.'s "expanded control over the channels of program distribution could afford it the ability not only to influence but perhaps to determine on its own what programming will be produced and offered to the consuming public, and at what cost.

"That is just too much raw commercial power."

Comcast is gonna to keep on munching.

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