we wrote

Comcast exploits oligopoly power

On April 26, we wrote on this site about Comcast's ability to use its growing oligopoly status to “get a seat at the table.” More and more, it's sitting at the head of the table. A year ago, the company completed the acquisition of AT&T's cable television network, making it the #1 cable company in the US by doubling its size, to over 21 million households.

A recent article in the Philadelphia Inquirer (11/16/2003) reconfirms everything we have said about the privileges is being nig. In his article, “With huge size comes huge influence,” writer Don Steinberg illustrates how Comcast is using its heft to control costs and get advantages over smaller competitors. It also shows how Comcast is handling changes in the competition matrix to its advantage.

Comcast not only has the most cable subscribers, it has the biggest high speed Internet service in the US. It buys more programming than anyone else. Plus it is as big a seller of ad space as the broadcast networks.

In fact, Comcast has become the most influential customers of dozens of companies –It's the biggest buyer of cable hardware from Motorola Inc. and of HBO from Time Warner Inc.= – giving it massive clout in everything from lowering the rates it pays to shaping the direction of America's mass media.

Increasingly, it is deciding how emerging technologies like video on demand, superfast Internet service, and high-definition will be made available to the public.

It's not just a matter of getting better prices; it's also using its power to stifle potential competition by redefining the terms of the market. As an oligopsony to manufacturers and producers, and a local monopoly to customers, Comcast has become what we call an oligonomy.

Comcast's response [to competitors like DirecTV]: using its clout to hammer on emerging technologies that exploit competitors' weak points.”

The article gives number of examples: Motorola is building a special electronic box for Comcast that will combine video on demand and personal recording. Also, Comcast is getting more production companies to give them high-definition versions of their programming at no extra cost. Most of all, Comcast may end up as the big pioneer in Internet telephony (VOIP) and, through that medium, inexpensive video phoning.

The power of a dominating oligonomy, properly handled, can lead to ever increasing power. Comcast is no longer being in its environment; it is shaping its environment, redefining what a cable company does and is.

[Oligopoly Watch]

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