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Sen. Franken's Floor Statement on Net Neutrality and the Comcast-NBC Merger

Saturday, December 18, 2010

M. President, I rise today to talk about the growing threat of corporate control on the flow of information in this country. Right now, we're debating incredibly important issues--and I don't mean to detract from any of them. We need to be doing everything we can to create new jobs in this country and fuel new economic growth.

But while we debate these issues in front of the public, behind the scenes-away from public scrutiny-the Federal Communications Commission is about to decide two distinct, but closely related issues, that have the potential to change dramatically the way we get our entertainment; the way we communicate with one another; and most importantly, the way we use the Internet.

The first matter before the FCC is the proposed merger of Comcast and NBC/Universal. There is no question in my mind that regardless of what you hear from industry, this merger will be bad for consumers on many levels.

It will allow Comcast to exploit NBC/Univerals' content, charging other cable networks more for access to NBC shows and movies. Do you know what that will do? It will raise your cable bills.

And NBC/Universal-which actually owns 37 broadcast or cable networks-will be favored by Comcast, to the exclusion of other independent or competing networks. This means that Comcast will pay less to carry channels like the Discovery Network, the Food Channel, Bloomberg, or the Tennis Channel-or these channels will be relegated to the graveyard around channel 690 or 691. Or worse yet, customers will have to pay even more each month to buy access to these channels.
This is bad for consumers, because it's going to put many of these networks out of business. That means less choice, and more Comcast/NBC programming.

But it doesn't end there. Comcast also happens to be the nation's leading wireline broadband Internet provider, which means this single company will both own the programming and run the pipes that bring us that programming. Here again, Comcast will be able to use its overwhelming market share, and in many markets, its near monopoly in the Internet business to favor its own video services-say its OnDemand service-over companies like Netflix that are cheaper and would otherwise win on a level playing field.

These are all major problems with the deal, but it might be tough to understand in the abstract how this deal will affect you. So let me take a minute or two to make this more concrete.

I ask the people sitting in the gallery, the Senate staff watching this speech, and everyone at home in Minnesota: How many of you like your cable and Internet provider?

When you call Comcast or Verizon or AT&T about a problem-how many of you get good service? How many of you like the prices you pay?

When you decide you want to sign up for broadband-and Comcast tells you that they aren't sure when they can come install your service - and then finally you get an appointment, and you have to take off a day from work to wait between 9am and 2pm for a repairman to come, and then he doesn't show: Is that how you deserve to be treated? Are you getting good service?

When you call Verizon and you spend 10 minutes listening to automated messages, and pressing numbers to direct you to more automated messages, and then finally, finally, you get a human being on the line-but that person tells you that he or she can't help you, and you get put on hold again: Is that how you deserve to be treated? Are you getting good service?

When you've had enough with bad service and rapidly rising bills and you decide you want to switch to another company, how many of you have found that you don't have another choice? That there is no other cable provider in your area?

Well, I can tell you that right now, Comcast has about 23 million cable subscribers and about 16 million Internet subscribers. They are already the largest provider of cable service to Americans by a very large margin, and in some areas, they have a total monopoly.

And this, ladies and gentlemen, is what cable and Internet customer service is like today. Do you think that merging the single largest cable provider, which is also the largest wireline Internet provider, with one of the biggest TV and movie studios in the country, will make any of this better? Do you think it will lead to lower prices on your cable and Internet bills? Do you think it will mean more choice for what you can watch and download at home? Do you think it will mean better customer service?

I can assure you that the answer to these questions is NO... NO... NO... and NO.

We count on competition in this country to keep corporations in check, and we have designed antitrust laws to ensure that companies are not getting too big or too powerful. These laws were designed to protect consumers, because the one thing we know about corporations is that they are created to maximize shareholder profit-not to protect consumers.
There is nothing wrong with that. We want corporations to grow, and create jobs, and provide goods and services. There are some great corporations based in Minnesota, like General Mills and 3M. In addition to providing you Cheerios and post-it notes, these companies put a lot of Minnesotans to work.

But when you go shopping for cereal, you have a lot of choice. General Mills may produce Cheerios, but they have to compete with companies like Kellogg's, which makes Corn Flakes, and Post, which makes Fruity Pebbles. And they all have to compete with the store or value brands.

Let's look at another example of the benefits of competition. When you go out for dinner at a restaurant, you usually have a lot of options. I am guessing you don't go back to the restaurant that served you limp lettuce, mediocre meatloaf, and cold, lumpy mashed potatoes. And I'm guessing you wouldn't go back if they told you that you would be served sometime between 9am and 2pm.
Unfortunately, you don't always have that kind of choice when it comes to your cable and Internet service. And this is only going to get worse if the FCC allows the merger between Comcast and NBC to sail through. It's competition-and regulation where there isn't competition-that keeps corporations accountable to consumers.

But don't take my word for it. You can already see what Comcast has up its sleeve. If the merger is allowed to go through, as I mentioned before, we can expect Comcast to favor its own content and leave consumers with less choice.

Take the Tennis Channel, which filed a complaint against Comcast earlier this year. It alleged that Comcast has been favoring the Golf Channel and its own sports channel, Versus, by making those channels available as part of its basic cable package, while putting the Tennis Channel on a so-called "premium tier." In other words, if you get cable from Comcast, you get the Golf Channel and Versus for free, but if you want to watch the Australian Open on the Tennis Channel, you need to pay another $5 to $8 per month.

Yet, Comcast pays the Tennis Channel only a fraction of what it pays itself to carry the Golf Channel or Versus, which are much less popular.

I fear this is a sign of things to come. As media conglomerates get bigger and bigger, they have every incentive to make their own content easier and cheaper to access than everyone else's content.

Now, I've been talking to a lot of people about the possible impact of this merger. And do you know what I keep hearing? Do you know what small businesses and cable programmers are telling me? They are coming to my office discreetly, and they are saying that they oppose this merger-but they can't speak out because they're worried about retaliation from Comcast. And to me, that's the definition of a company with too much market share.

Comcast has put out the word that this merger is a fait accompli. They've announced a slate of 43 officers for NBC, despite promising to refrain from doing so until the review of the merger is complete.

So it is no surprise that small - and some not so small - cable networks see the writing on the wall and aren't willing to take the chance of opposing this deal publicly, again, for fear of retaliation by Comcast.

And they're probably right. If this deal goes through, Comcast will have the power to put them out of business. If you knew that, would you stand up and complain to the FCC about Comcast? Probably not.

This type of anti-competitive conduct is exactly why we need the Department of Justice and the FCC to stop this merger.

And this merger is only the first domino in a cascade that is sure to come. Make no mistake, if this merger is approved-if this deal goes through-it will be only a year or two before we see AT&T trying to buy ABC/Disney, or Verizon trying to buy CBS/Viacom. And you know what these companies will say? "You let Comcast and NBC do it, now it's our turn." And what will the FCC or the Department of Justice say then?

Now is the time to decide whether we want four or five companies owning and delivering all content. Imagine a world with no independent voices, and no competition.

And that's just cable. Let's talk about Comcast's control of the Internet. There's no better example of how Comcast plans to use its virtual monopoly than what we've seen in the last few weeks with its treatment of Netflix.

I think we can all agree that Netflix has changed the way many Americans watch movies, and it all started because one of its founders was sick of paying late fees for movie rentals. This company is one of our nation's great success stories-it now has almost 17 million subscribers and generates hundreds of millions of dollars in revenue-and it all happened in just over a decade. But most importantly, it offered an alternative and less expensive option for consumers to watch movies.

Netflix now has a lot of money and can write big checks to buy movies and video content, so I didn't think I needed to worry about them. But then I heard that being the highest bidder for content may not be enough.

As it turns out, cable companies are worried about Netflix's success. It represents the first real competition they've seen in a long time, and they want to shut Netflix down. How can they do that? By cutting-off Netflix's access to the things people want to watch. And when is this most problematic? First, it's when Netflix's competitors-like Comcast or Time Warner Cable-also own the programming that Netflix carries. Second, it's when Netflix's competitors are also the ones that sell-and control-access to the Internet.

Neither of these are theoretical. Just last week, Time Warner's CEO brazenly stated that Netflix's deals with Time Warner may not be renewed. Other studio executives are saying the same thing. And what I'm hearing is that Comcast, which is not yet even in control of NBC, plans to reverse course and ultimately pull NBC/Universal's programming from Netflix.

Comcast also recently announced that they are imposing a new fee on Level 3 Communications, the company slated to become the primary delivery mechanism and backbone for Netflix's online streaming movies and TV shows. Coincidentally, Netflix is one of Comcast's main competitors for video delivery, which makes this price hike seem just a little fishy to me.

Regardless of Comcast's motives for charging Level 3, this is a clear warning sign of what we can all expect if this deal goes through.

If this deal goes through, Comcast will make it harder and more expensive for you to watch movies online through any service other than its own. If this deal goes through, Comcast will have the power to limit your choices to watching Comcast-owned content over Comcast's services, like its video OnDemand service.


I use the phrase "if this deal goes through..." because this is exactly the sort of anti-competitive behavior that the Department of Justice and the FCC are supposed to stop.

And what is even more ludicrous is that this is happening when Comcast and NBC should be on their best behavior. Right now, they're under close scrutiny by two federal agencies, the FCC and the DOJ. Yet, they seem to be making even more bold-faced power grabs without any concern about government oversight.

But in addition to the Comcast-NBC merger, what is also before the FCC is a new set of proposed rules that will make it easier for large media conglomerates-like Comcast-to do nothing short of controlling the Internet. The chairman of the FCC is calling this a "net neutrality" proposal. But let's be clear. This is not real net neutrality.

I believe this is one of the most serious issues facing our country today. Let me take a step back and explain what net neutrality is. Put simply, it's the idea that big corporations shouldn't be able to decide who wins or loses on the Internet. It's the idea that the Internet should be a level playing field for everyone, from a blogger to a media conglomerate, from a small businessperson to a powerful corporation. I believe that net neutrality is the free speech issue of our time.

The Internet wasn't created by corporations. It was created using taxpayer dollars, and it has dramatically altered our daily lives in more ways than any of us could have ever dreamed. It's an incredible source of innovation, a hotbed for creativity, and an unbelievable producer of wealth and jobs in this nation. It was instrumental in putting President Obama in office-but it was also equally instrumental in helping the Tea Party become a powerful force in American politics.

I may not agree with everything the Tea Party movement has done, or everything it stands for, but I do firmly believe that the Tea Party has a right to organize and to post its views on the Internet.

Strong net neutrality principles would ensure that everyone-from the most liberal blogger on Daily Kos-to the most conservative fan of Fox News-would continue to have an equal right of access and an equal ability to communicate with like-minded people.
If corporations are allowed to control the Internet, all of that would change. The Internet has become the public square of the 21st century. And this is why Tea Party activists and anyone who cares about personal liberties and freedom should care about net neutrality.

One popular Minnesota blogger should be able to get his or her information to you as quickly as MSNBC. Or to say it another way, MSNBC shouldn't be able to pay millions to get their website to load faster on your computer. We do not want corporations to be able to drown out the voices of smaller, less powerful individuals.

Unfortunately, the proposal before the FCC-which I'll admit I haven't seen because it's not been made public-would reportedly allow companies to do just that. It would allow Internet providers to create a fast lane for companies that can afford to pay a premium. It would allow mobile networks, like AT&T and Verizon Wireless, to completely block content and applications whenever it suits them-for either political or business reasons.

Let me underscore this-this is the first time the FCC has EVER allowed discrimination on the Internet.

Let me give you an example. Maybe you like Google Maps. Well, tough. If the FCC passes this weak rule, Verizon will be able to cut-off access to the Google Maps app on your phone and force you to use their own mapping program, Verizon Navigator, even if it is not as good. And even if they charge money, when Google Maps is free.

And if corporations are allowed to prioritize content on the Internet, or they are allowed to block applications you access on your iPhone, there is nothing to prevent those same corporations from censoring political speech.

The Obama campaign used a mobile app to help organize volunteers. And now there are a bunch of Tea Party apps you can download. But maybe not for long. Not if your wireless carrier doesn't want you to get them. And that is something every American should care very deeply about.

I am here on the floor today because I think Americans need to understand just how critical net neutrality really is. This is complicated stuff. But it directly affects all of us.

And it's not just about speech, it's also about entrepreneurship and innovation. It's about our economy.

There is no question in my mind that without significant changes, the proposal currently pending before the FCC would be bad for our economy.

Think about companies like YouTube, which started in a tiny office above a pizzeria-and grew to be worth billions of dollars. At the time, Google had a competing product, Google Video, which was then the standard but was widely seen as inferior. Had Google been able to pay Comcast large amounts of money to make its website faster than YouTube's, YouTube would be nowhere. Fortunately, Google couldn't pay for priority access, and the rest is history.

Think about Facebook. Once upon a time, it was a small startup. Remember Friendster or MySpace? They were once the dominant social networking sites before Facebook won over users with a vastly superior product. But that might have never happened if Friendster or MySpace had paid lots of money to reach users faster. If Facebook had taken a significantly longer time to load on your computer, it never would have succeeded.

These are just some examples of how today's free and open Internet has fostered innovation, which has created jobs, and has spurred competition, which has benefited all consumers. Now think of the next Facebook or the next YouTube or the next Amazon. The only way to guarantee that innovation will continue is to have strong net neutrality rules that will protect and maintain today's free and open Internet.

So the FCC has to make two big decisions, one on the Comcast-NBC merger, and one on net neutrality. These decisions will impact every American for years to come.

You may not know this, but the FCC is an independent agency. Independent agencies are non-partisan. They are not beholden to Congress or to the President, and they certainly should not be beholden to the industries they regulate. That's why I'm so concerned when I hear that the chairman of the FCC is calling the CEOs of companies they are supposed to be regulating, seeking their public endorsement of his net neutrality proposal.

Independent agencies are charged with acting in the public interest. So when I hear that the FCC is considering a net neutrality proposal that is supported by the largest media corporations in America, I am suspicious-and you should be too. The FCC should not be worrying about getting the sign-off from the very corporations that it is supposed to be regulating. Period.
The FCC has made public its plans to act on its flawed net neutrality proposal this coming Tuesday. I sincerely hope that the FCC will make significant improvements before then, and that each of the Commissioners will think long and hard before they vote to approve a proposal that could actually make things worse for all Americans.

I have also heard that the FCC is going to be acting very soon on the NBC-Comcast merger, and it needs to do this in the light of day-not hidden in the middle of Christmas and New Year's. The American people have a right to know about this merger. I will be supremely disappointed if approval of the merger is slipped through when most of America is unwrapping presents and spending time with their families-not worrying about their cable or Internet bills.

We are at a pivotal moment-and we need to stop the cascade of dominos that will forever change how we pay for TV and browse the Internet. But it isn't too late. The government has a role to play here, and I hope the FCC will step up, be brave, and do what is right for the American people.

Thank you, M. President, and I yield the floor.

 

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