Comcast, the Great Equivocator

I'm not sure where to begin today. Comcast has been speaking out both sides of its mouth and for some reason it has left me thinking of Shakespeare. So as preface to this most long winded of posts...

Knock, knock! Who's there, in the other devil's name? Faith, here's an equivocator, that could swear in both the scales against either scale; who committed treason enough for God's sake, yet could not equivocate to heaven.

Macbeth, Act 2, Scene 3.

Phillyville has known Comcast was evil. But we here thought its evil was just limited to crappy customer service, union busting, dangerous work environments, exorbitant subscriber fees and unfairly depriving the citizen's of Philadelphia of their right to watch the broadcast of their local sports teams.

Evidently encouraged by the satanic undertones of today's date, Comcast decided to add to its resume of evil - the good old fashioned sin of equivocation.

First up, evidently Comcast feels a little threatened by the campaign being waged against it to allow its competitors access to the broadcasts of Phillies, Sixers and Flyers games.

Not content to bask in the glow of Comcast's apparent victory in securing the last piece of Philadelphia not within its gnarled grasp, Jeff Alexander, Comcast EquivocatorSpokesman, jumped on a soapbox and announced that we've got it all wrong. In fact, its Comcast who's getting unfairly discriminated against. Jeff mouthed off in today's Philadelphia Business Journal and sang the following little ditty:

"We (referring to Comcast) have not heard a persuasive reason why a satellite company should be allowed to have access to exclusive programming but a cable company should not."

Mighty old testament of Comcast, wouldn't you say? A bit of the old eye for an eye? Guess your executives should not be so surprised if Jeff and his co-workers finds themselves staring face to face with Porter at the gates of hell.

Apparently, Jeff's little ditty has a beat you can dance to and found at least one voice to hum along. Anonymous left this little gem as a comment earlier today:

Where's all the whining and crying about DirecTV? They pay for exclusive rights with the Sunday Ticket, and they dont share. Where's the outrage, petitions, blogs, banners, hairy hippie chicks, etc out there arguing against this lost cause? I'd love Sunday Ticket almost as much as I'd love to see every Flyers game.

-Anonymous Commenter to my post "Comcast is Evil, the Phillies are Stupid and the Eagles are Run by a Bunch of Lucky Morons".

Dude, either Anonymous is Jeff Alexander or he's on Jeff's Buddy List.

Okay, I am calling out Jeff and Anonymous here.

The analogy between NFL Sunday ticket and the broadcast of Phillies games relies on a logical fallacy. The comparison is one of apples and oranges - in other words it is a false analogy. DirecTV controls the out-of-town NFL broadcasts via NFL Sunday Ticket and Comcast controls the local broadcasts of sports events. The out-of-town broadcast versus local broadcast constitutes a material difference because only the local broadcast implicates the rights of the public to access to a public good.

"Public good" is a quality of "local broadcasts" just as "red" is a quality of "apples." "Public good" is not a quality of "out-of-town broadcasts" just as "red" is not a quality of "oranges." By making the analogy without acknowledging the public good issue, Jeff's argument is fallacious. His argument relies on the comparison of "apples" to "oranges."

First, let's do some definitions. NFL Sunday Ticket is a programming package available from DirecTV that allows its subscribers to watch every football game each week. Important to note, games that are available locally are blacked out to subscribers in that market. The baseball equivalent is the MLB Extra Innings package which, like the Sunday ticket, is a package of programming limited to the out-of-town broadcast of baseball games. If Jeff and Anonymous wanted to compare apples to apples, the analogy would lie between NFL Sunday Ticket and MLB Extra Innings.

Now let's examine my beef with Comcast and apparently what is making Jeff and Anonymous feel very defensive.

Not only is Jeff's analogy false because it compares materially different products - out-of-town broadcasts versus local broadcast, Jeff's analogy is also false because NFL Sunday Ticket does not prohibit local viewers from watching local broadcasts of their local football team, whereas Comcast's monopoly does restrict local viewers from watching local broadcasts of their local baseball team.

Comcast owns a local monopoly over the broadcast of Flyers, Sixers and about 80% of Phils games - the remaining 20% I maintain to be irrelevant because they are games aired at times no sensible person would ever want to watch a baseball broadcast. Because of the terrestrial loophole, Comcast does not have to share its broadcast of these games with its competitors, including DirecTV. If you are a resident of Philadelphia and you want to watch Philadelphia sports other than football, you must be a Comcast subscriber and you must pay their exorbitant subscriber fees.

Another interesting feature of Comcast's local monopoly is its interplay with blackout rules. MLB Extra Innings includes the opponent's broadcast of Phillies games. If the Phils are playing Florida, the game will appear on the ticket but you'll be watching the Florida broadcast. You'll never hear Harry the K cause the Philly feed is not available to MLB Extra Innings because of that good old terrestrial loop hole. However, Phillies games viewable on MLB Extra Innings are blacked out in the Philadelphia market.

Even if you subscribe to MLB Extra Innings, DirecTV Sports Pack or any other package that would carry Phils games in any market other than Philadelphia, those games will be blacked out for subscriber's residing in or around Philly. Because of blackout rules, consumers cannot even obtain the local broadcast from sources that otherwise make such broadcasts available. Unless you've got Comcast, you're shit outta luck.

And it is Comcast's ability to block access to local broadcasts to local viewers that makes them so damn evil.

I don't quite have the economic background to see this all the way through, but I did get an A+ in Industrial Organization from Don Waldman, and he wrote the damn textbook, so I've got that going for me. Also, let it be known I'm sticking with the Phillies example because I don't really follow the Sixers or Flyers.

The Phillies exist in their present form because of a $229M investment by the Commonwealth of Pennsylvania and the City of Philadelphia. Presumably our politicians allocated this money to the Phillies and voters approved of it because, like fireworks on the 4th of July or SEPTA buses, the Phillies are a public good. As explained by Wikipedia,

This means: consumption of the good by one individual does not reduce the amount of the good available for consumption by others. Thus, if one individual eats a cake, there is no cake left for anyone else; but breathing air or drinking water from a stream does not significantly reduce the amount of air or water available to others.

The government is often forced to step in and protect public goods because of a problem with free ridership. In the case of the Phillies, the free ridership problem meant that without an infusion of public investment the owners of the Phillies would be still stuck in the Vet and at an economic disadvantage to their peers.

Now, I'd like to drop a footnote here but last I checked, blogger don't got no footnotes. I recognize that local sports are not necessarily a public good per se. However, our government and voters already recognize local sports as a public good by choosing to provide subsidies. The subsidies provided and the justifications for are no different than subsidies provided for clean air, public transportation or 4th of July fireworks. Not one to argue with the vox populi, I will defer and accept the status of local sports as a public good.

Like a local sports team, public transportation is funded by both public and private funds. Does the private component, e.g. fares paid by riders, render public transportation any less of a public good? No.

PA and Philadelphia paid 50% of the cost to build Citizens Bank Park. Similarly, the private component of the funding of the Philadelphia Phillies, e.g. tickets bought by spectators and payments for broadcast rights, does not render the Philadelphia Phillies any less of a public good than SEPTA.

With that groundwork laid, I'm ready to attack the north face of Comcast's eye-for-an-eye business practices.

Public goods should be available to the public. No single individual entity should be able to claim rights to a public good that entitle it to exclude others from the enjoyment of the public good. Everyone has a right to free air, clean water and a common defense. That's what the Declaration of Independence is all about. These are the fundamentals all governments are built upon.

Therefore, until as a society we choose to allocate to a single company the right to distribute clean water only to those wealthy enough to afford the services of the company or allow some of our less well-healed cities fall to attack from our enemies, allowing Comcast to charge for access to a public good is anathema to not only the very values that underlie our Democracy, but the fundamental principles that underlie human collective organization.

Comcast with the helpcomplicity of Phillies ownership is taking advantage of Philadelphia's investment in the Phillies sports franchise and allowing Comcast to extract monopoly rents based upon its illicit role as gatekeeper to a public good.

Returning to the apples-to-oranges analysis, DirecTV's NFL Sunday Ticket does not present the same public good problem because it does not restrict access to a public good. Just like resident of Cleveland have no interest in the availability of public transportation to Philadelphians, Cleveland residents have no interest in watching the local broadcast of a Phillies games (presumably because they are busy riding their own buses and watching the broadcasts of their own sports teams). In the context of Cleveland, the local Phillies broadcast and SEPTA buses are no longer public goods.

Public transportation and local sports broadcasts are local public goods because the attributes of SEPTA and the local Phillies broadcast that endow them with status as public goods are peculiar to the residents of the Philadelphia region.

Because the attributes creating public good status are peculiar to the local market, out-of-town broadcast are not public goods. By limiting access to NFL Sunday Ticket to only its subscribers, DirecTV is not inappropriately restricting access to a product that should be enjoyed by all. DirecTV is not improperly appropriating the public good by maintaining the exclusivity of NFL Sunday Ticket because the public good, the local football broadcast, remains completely available for consumption by those persons for whom the product is a public good.

The comparison between NFL Sunday Ticket and Comcast SportsNet is a false analogy because it compares two materially different products. NFL Sunday Ticket is a product composed of out-of-town broadcasts whereas Comcast SportsNet is a product composed of local broadcasts. The out-of-town versus local distinction is material because the fact that only a local broadcast can be considered a public good.

I'll be submitting this post to peer review so I reserve the right to make changes. That said, I believe we can safely call Jeff and Anonymous's argument debunked. At the very least, I'd say that Jeff now has the "persuasive reason" for which he was clamoring. More importantly, the public good argument should give City Council members more than enough reason to impose as a condition on Comcast's taking of Time Warner's franchise that local sports broadcasts are made available to all residents of Philadelphia, regardless of who sends them a cable or satellite bill.

Michael Nutter - get to it!!!

But wait, I'm not done with Comcast. Next up on the Phillyville soapbox, whoah - it's Comcast again!

Also in today's Inquirer was the following summary of Comcast's opposition to the pending State Franchising Bill that would allow Verizon to provide video over its telephone lines:

Cable companies oppose the legislation because they say it lets Verizon and other potential competitors roll out their services without going through the same town-to-town negotiations for access.

Apparently, in addition to having its panties in a bunch about being denied access to NFL Sunday ticket, Comcast is also all worked up about Verizon being able to provide cable over its phone lines without first seeking approval from local municipalities. Comcast protests of Pennsylvania's "Legislation to quicken the entry of competitors to cable companies across the state is coming with a truckload of predictions: Lower cable bills, more jobs and bigger revenues flowing into municipal budgets, among them" are truly empty. Comcast argues the legislation is unfair because it does not require Verizon and other telephone companies to seek permission from local municipalities to provide cable to their residents.

Now Comcast is really being disingenuous here. Verizon doesn't need approval from local municipalities because it already has approval!!!

Let's use yesterday's hearing as an example.

Yesterday, the City Council Committee on Public Property and Public Works considered an ordinance transferring the west/northwest Philadelphia cable franchise from Time Warner to Comcast. Apparently, the hearing went swimmingly for Comcast as our elected officials showed no inclination to block Comcast securing its last piece of the puzzle to its monopoly of Philadelphia cable.

Some of you may wonder why City Council has any jurisdiction over this issue. Why can't Time Warner just sell its franchise to Comcast like any other business asset?

Well, the answer is surprisingly simple - in fact it's all in a name.

"Cable"

Unlike cell phones or DirecTV, cable requires cable and lots of it. And unlike telephone and power lines which are already strung up all over the place, to provide its product Comcast had to snake a cable from its offices to every last one of its subscribers. And considering Comcast would be trespassing on public and private land if they just willy-nilly unspooled whole bunches of cable all over Philadelphia, Comcast had to get approval from the government to trespass on all the land that its cables are now located.

And therein lies the second of the day's false analogies.

Verizon already has permission to trespass all over public and private land. Verizon does not need to go to City Council and ask its permission to tear up city sidewalks in order to snake cable to every household in the city. Verizon got permission to do that almost 100 years ago and already has its lines in place.

Comcast basically wants Pennsylvania to condition Verizon's entry into the cable television market on Verizon obtaining permission to do what Verizon already has the legal right to do.

Comcast is asking Pennsylvania to create an artificial and wholly unnecessary barrier to entry. Forcing Verizon to negotiate with individual municipalities will greatly increase Verizon's cost to enter the cable television market. Such costs will not necessarily block Verizon's eventual entry to the market but they will end up forcing Verizon to charge more for its cable services. And thereby insulate Comcast's from having to lower its rates to meet Verizon's potentially lower prices.

The consumer will end up paying more and Comcast's monopoly will be protected.

And in case you're still not convinced Comcast is evil, here's a few fun facts from Reclaim the Media:

Since cable rates became deregulated in 1999, consumer cable prices have risen at three times the rate of inflation and even faster for basic and expanded basic service—the choice of the overwhelming majority of cable subscribers. According to the American Customer Satisfaction Index (ACSI), Comcast has the worst customer satisfaction rating of any other company or government agency measured, with nearly half of all cable customers having registered complaints.

considering the power of unions in Philadelphia, the following was very surprising:

Comcast has a particularly poor record of showing fairness towards its own local employees. Comcast employees across the country describe low morale, high turnover, poor safety, management corruption, and union busting in many of the 4,000 places where the cable company now operates. The company has made opposing union representation a national priority, and has reportedly threatened and even fired employees who have tried to unionize and refused to take part in negotiations. In disregarding the rights of its employees, Comcast shows a lack of concern for the human base on which the whole company depends, as well as the families and communities of which they are a part. Fair treatment for local employees must be an enforceable standard addressed in Seattle's franchise agreement with Comcast.

Cost to build Citizens Bank park was $458M. The cost was split evenly between the team and the City/Commonwealth. Total cost to Philadelphia and its taxpayers $114.5M; total cost to Pennsylvania and its taxpayers $114.5.

Pennsylvania taxpayers are estimated to contribute $43M to the building of the Comcast Tower. That is $43M that will go to pay for lower rents paid by Comcast subsidized by other Philadelphia businesses that remain in the non-subsidized space.

And then there are our the Philadelphia cable franchises that have been handed over to Comcast at some of the most favorable terms in the country. As noted in today's Inquirer, although promised to Philadelphia when Comcast first secured a cable franchise in the city, the company has never delivered a community access channel, a feature that is standard on most cable systems.

As noted by, by Michael Currie Schaffer "[C]ity officials estimate would cost $2.7 million to set up and which in other cities costs $500,000 to $2.7 million annually to run. Philadelphia is one of the only major cities without public-access TV."

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• Comcast