FCC Engineers Some Cable Consolidation

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Earlier this month, just after Comcast dropped its bid for Time Warner Cable in the face of opposition from the FCC and Justice Department, FCC chairman Tom Wheeler separately called TWC CEO Rob Marcus and Charter Communications CEO Tom Rutledge, along with several other senior cable industry executives, to let them know they shouldn’t consider all M&A deals to be off the table just because the agency put the kibosh on Comcast, according to a report in the Wall Street Journal.

Federal Communications Commission (FCC) Chairman Tom Wheeler gestures at the FCC Net Neutrality hearingOn Tuesday, Charter took Wheeler up on that seeming invitation and announced a plan to acquire TWC for $56 billion. Charter also reaffirmed its plan to acquire it smaller rival Bright House Networks for $10.4 billion. Read More »

Bad Sports: ESPN Sues Verizon

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No U.S. television network is more invested in, or has benefited more from the dynamics of the bundle than ESPN. The combination of must-have programming for a key segment of the pay-TV audience, and the must-carry leverage of its sister-broadcast network ABC, has given the Disney-owned sports network the power to command the highest per-subscriber carriage fees in the industry, ensure placement on basic tiers, and compel carriage of ancillary networks like ESPN Classics and ESPN Deportes.

espn_sportscenter_logoFor those pay-TV subscribers not in the ESPN demographic, however, that leverage has acted like a tax, imposing higher costs for networks and programming they don’t watch, yielding what amount to windfall rents for ESPN. Those windfall rents, in turn, have given ESPN the wherewithal to pay the skyrocketing rights fees for live sports. Thoseinflated rights fees, in turn, have become the primary economic engine of most professional and big-time amateur sports while acting as a formidable barrier to entry for would-be competitors to ESPN, yielding a virtuous cycle that reinforces ESPN’s dominant position within the pay-TV ecosystem. Read More »