Congress told that Comcast/NBC merger a big crapshoot

Congress held another hearing on Comcast's proposed buyout of NBC Universal on Thursday, and as at earlier gatherings, the critics came out swinging. Perhaps the most intriguing testimony came from economist Thomas Hazlett, who was circumspect about prospects for the proposed deal.

"Some financial analysts have praised Comcast for its bold new enterprise; many have condemned it," Hazlett, former chief economist for the FCC, told the Committee. "'Didn't they learn anything from the failed AOL/Time Warner merger?' is a fairly popular reaction." A new Congressional Research Service paper on the merger offers a similar impression. "The recent history of failed megamergers in the communications sector suggests," CRS observed, "that the vertically integrated postmerger entity may have so many pieces with conflicting market incentives that it proves impossible for executives to craft an internally consistent profit-maximizing business strategy, much less exploit market power to undermine competition."

It's worth briefly recalling what some critics think went wrong with the AOL/Time Warner venture. "The vision," market analyst Bill Whyman explained in 2002, was "AOL anywhere—that consumers would go home, see AOL on their TV with Time Warner content, they would go to the supermarket and get messages on a cell phone with AOL content in it... And this was sold to consumers globally, that this would change the nature of technology, of content, of cable. They really promised the moon." But once it became clear to investors that the merger wasn't really that lunar in scale -- that the complex entity's growth would not come to anything close to the promised 30 percent a year, disillusionment set in. "When you miss a target by that much, Wall Street is absolutely unforgiving," he observed.