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UnChartered Cronyism: The FCC's Attempts to Block Cable Merger

When you hear about “crony capitalism,” what comes to mind? The Export-Import Bank? The ethanol mandate? Fannie Mae and Freddie Mac? Tax credits and loan guarantees for “green energy”? These are all prime examples of government intervention enriching narrow yet politically savvy corporate interests at the expense of taxpayers and consumers. But many other pernicious forms of crony capitalism slide under the radar. A case in point: the Federal Communications Commission’s (FCC) vetting of media and telecom mergers, a highly politicized process that empowers a few unelected bureaucrats to shape the future of entire markets.

Almost a year ago, the cable company Charter made a deal to purchase another cable company, Bright House Networks. Then, after the FCC decided to block another cable deal—Comcast’s attempted acquisition of Time Warner Cable (TWC)—Charter announced that it would buy TWC, in addition to Bright House. Now, nine months later, the FCC still hasn’t decided whether to let the Charter-TWC-Bright House merger go forward. Meanwhile, the satellite television carrier Dish Network, which competes against cable companies across the nation, has mounted a big push to persuade regulators to nix the Charter transactions.

On March 2, when the Senate Commerce Committee holds an FCC oversight hearing, all five of the agency’s Commissioners will testify. Lawmakers should ask the FCC Chairman some tough questions about the Charter deal, among many other issues.

It’s not surprising that ideologically driven groups like Free Press want the FCC to block the Charter deal, but why is Dish opposed? The company claims consumers will suffer if Charter, TWC, and Bright House are allowed to join forces. Dish and other opponents of the Charter acquisitions call themselves “Stop Mega Cable,” an alliance between some businesses and a panoply of nonprofit activist groups that take a dim view of mergers (and, for that matter, free enterprise in general). Is the satellite carrier involved in this fight to champion a fragmented media marketplace in which no one firm has any real leverage over market prices?

Perhaps, but there’s a better explanation for why Dish wants to stop Charter—namely, that Dish thinks its bottom line will suffer if its rivals in the television business have more resources to invest in improving customer service and developing better products. Among Dish’s rivals, its chief competitor is arguably Comcast, which also has the largest footprint of any U.S. cable company. Comcast also offers the most advanced platform for watching television: its Xfinity X1 service, which lets subscribers stream or download their high-definition television recordings to smartphones, tablets, and personal computers.

If the Charter merger goes through, the “New Charter” will be able to spread the costs of developing new services and building a better network over a larger customer base, which is good news for consumers who want more ways to watch television on their terms. And as the New Charter upgrades broadband speeds, it will make it easier for Dish to convince consumers with home Internet service to “cut the cord” and access television through Dish’s Internet-based Sling TV service.

Singling out Dish’s efforts to get the FCC to block the Charter deal may seem unfair. After all, don’t most large companies with a permanent presence in the nation’s capital seek to manipulate the system when the opportunity presents itself? When businesses want to weaken their rivals without competing on the merits, turning to the government is tempting—especially when seemingly every sector of the economy is regulated by one or more federal agencies staffed with eager bureaucrats who would much rather make headlines than sit back and let markets evolve. Under current leadership, the FCC has signaled that it’s open for business when it comes to hearing out self-interested arguments in favor of regulation and intervention.