Friday, September 28, 2012

Cox Complains in a Strangely Unsavory and Incredibly Hypocritical Way

If we were't already completely used to Cox's self-serving version of fair play and level playing field behavior we might have been shocked by the corporation's most recent claim on the country's sense of fairness. But this sort of stuff shouldn't surprise anyone anymore. It certainly doesn't surprise anyone in Lafayette.

The (Strange) Plaint
Cox is complaining to the FCC that the four largest video companies in the country (Comcast, DirecTV, Dish Network and Time Warner Cable) are soooo big that they can successfully demand huge discounts from content providers that are unavailable to the poor smaller and mid-size distributors. This puts the little guys at a disadvantage.

The logic is reasonable, the little guys are at an unfair disadvantage. As Cox says:
"As programming costs are shifted disproportionately to mid-sized and small multichannel video program distributors (MVPD), their customers are disadvantaged as higher costs make it more challenging for these MVPDs to develop the innovative services at competitive prices necessary to meet the offerings provided by the largest providers,"
What is unreasonable, is the idea that Cox is one of the poor, put-upon little guys.Cox is the fifth largest provider in the country immediately following Time Warner. Not a little guy at all. But more than that: Cox joined the National Cable Television Cooperative (NCTC) back in 2009 breaking a 4-year moratorium on new members and with its large size made the NCTC the second largest buying force in the nation! Now the scuttlebutt in the trade press is that Cox has not much used that buying power, finding that it could do better on its own except for a few special deals for material like regional sports networks where the smaller cablecos are more significant regional players than Cox happens to be in that area.

Which, of course, suggests the question: Why did Cox join a coop for little guys in the first place? It really wasn't intended for the behemoths the size of Cox; it was designed to protect the mom and pop, single area cable companies from the likes of Cox. If Cox doesn't get much advantage, why bother? And why lend its buying power to a set of small local companies on the backs of whom Cox has traditionally grown by purchasing when their size disadvantage in pricing made them vulnerable to take-over?

That's the interesting question. And the answer lies in a little history.

The (Unsavory) History

The fight for fiber that lead to LUS occurred in 2005. Lafayette won; Cox and AT&T lost. Shortly thereafter the NCTC instituted a moratorium on new membership that was to last 4 years. LUS and several other municipalities put in for membership at different times during that 4 year moratorium.

Also in 2005 Cox first ran up against a small, fiber-based Louisiana competitor whose competition was aided by access to the NCTC's cheaper content in 2005 when EATEL (a locally-owned rural telecom) in Gonzales launched its triple-play package. It wasn't any more a pleasant experience for Cox to face EATel in the rapidly growing Ascension area than it had been to lose its battle with Lafayette.

The NCTC moratorium ended on Jan. 1 2009 and its first new members were quite a surprise to the industry: it wasn't any of the usual small guys who'd been waiting in line—instead Cox and Charter, two of america's largest cablecos ended the moratorium by joining up. Cox was even rewarded with a seat on the governing board.

For the rest of those guys in line? Well if they were LUS Fiber and and the other new municipal players they were simply ignored—without explanation. The munis finally got together and began the process of appealing to the FCC who is charged with preventing anticompetitive behavior. Suddenly other munis were accepted and Lafayette was, again without explanation, left out.

It's hard not to think that Cox's experience in Louisiana didn't inform its decision to join the NCTC and the new NCTC Board's subsequent decision to exclude the only muni whose competition was now an NCTC member.

{This story has a semi-happy ending: the NCTC finally backs down after LUS continues its costly battle in DC. However, during the long period where they were denied access LUS signed all its initial contracts as an independent suffering, by most accounts, about a 20% penalty that would last for years until they could bring the coop's contracts with those providers into play. No explanation for the NCTC's actions and inactions were ever made public.}

The (Incredible) Hypocrisy
So Cox is not just complaining about an injustice. The are complaining about an injustice that they are happy to take advantage of themselves. But where Comcast et al. are simply taking using their size and resulting market power  to hurt Cox is willing to go much further: It is willing to use a coop that exists to protect small local guys like LUS to force costs on Lafayette's utility that it would not otherwise bear. And they have the brass to bring that complaint to the FCC who has heard exactly this reasonable logic before—when it was aimed at Cox and its allies.

That's just incredible. You can't make this stuff up.

(Hat tip to fact-finder Mike Stagg on this story.)

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