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July 13, 2010

TPI's Scott Wallsten Testifies at FCC Forum on Comcast/NBC Joint Venture

·         The net welfare effect of any vertical merger, such as the Comcast/NBCU transaction, is theoretically ambiguous.  Empirical research of previous vertical transactions, however, tends to find positive outcomes.

·         Pro-competitive effects of the Comcast-NBCU transaction include potentially increased incentives to invest in online content, experimentation with new content and new methods of distributing content, and investment in the delivery platform itself.  The key antitrust question is whether the newly vertically integrated firm can leverage the vertical relationship to raise rivals’ costs anticompetitively and reduce output.

·         Any merger review involves assumptions about the future, and the nascent nature of online video makes the effects of this transaction even more difficult to evaluate.  Because it is impossible to say with any certainty how online video markets will develop, let alone how they should develop, it becomes extremely difficult to know how the merger will affect that trajectory.

Wallsten stated that “the Commission must engage in careful, empirical analysis to weigh the pro-competitive effects against the probability of foreclosure times the harm if foreclosure is in the interest of the merged entity, recognizing that we cannot know with confidence how a decision will affect a rapidly evolving market such as online video.”  He added, “the Commission must show that any conditions it proposes in order to approve the transaction are likely to enhance consumer welfare.”

The Technology Policy Institute

The Technology Policy Institute is a research and educational organization that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world. More information is available at http://www.techpolicyinstitute.org/.

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