Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Baer discusses role of antitrust enforcement in video competition, (Oct 9, 2015)

By Linda O’Brien, J.D., LL.M.

The future of video competition should be left for the market to decide, while the role of antitrust enforcement and competition policy is to let competition thrive and innovation continue for consumers’ benefit, said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division, in the keynote address today before Duke Law School’s The Future of Video Competition and Regulation Conference in Durham, North Carolina.

Baer began his remarks, entitled “Video Competition: Opportunities and Challenges,” by noting that innovation and competition have reshaped how consumers receive video content and the availability of such content. For example, the streaming option of video programming has been transformative. Programmers now have the Internet as an alternative to distribution over traditional broadcast, satellite, and cable networks, and consumers are embracing this new option. This new distribution option lowers the barriers to entry for non-traditional content, such as YouTube, and allows programmers to deliver more tailored services.

While competition policy and antitrust enforcement must not interfere with the market when it is working, it must address market imperfections and bad conduct, according to Baer. There are some characteristics of the current landscape that complicate that Antitrust Division’s enforcement efforts. One such characteristic that is most consumers do not enjoy competition for high speed Internet access. The Antitrust Division is aware that there are substantial barriers to entry and expansion for new broadband services. Building fixed broadband networks requires large investments, and the economics may not work in areas of the country where there is low population density.

Moreover, wireless is too capacity-constrained and costly to provide a meaningful alternative to consumers. So consumers’ only option for high speed Internet service is the cable company — the same cable company that derives significant revenues from its cable television business. As online video distribution increases, cable companies have incentives and the means to use their gatekeeper power to slow innovation to protect their video profits. If cable companies can be prevented from exploiting their bottleneck in anticompetitive ways, a more competitive video entertainment market would also spur more broadband competition, the Antitrust chief noted.

In Baer’s view, the video and broadband markets present unique challenges. Video and broadband providers not only contract with residential customers to sell services, they also bargain with content companies to make content available to customers. The cable companies are essential gatekeepers to what customers watch and how they watch it. If cable companies can use control over the broadband pipeline to increase the charges that streaming services must pay to reach customers, those services may be less effective in competing with traditional video services.

In discussing competition and its importance to innovation in video markets, the Antitrust Division and the Federal Communications Commission (FCC) share the same space and point of view. Both the division and FCC recognize that antitrust enforcement is not the only tool available for dealing with anticompetitive market structures. There is also a role for procompetitive policies that can help prod change when competitive pressure is missing or protect competition in situations that the antitrust laws cannot easily reach, Baer concluded.

News: Antitrust AntitrustDivisionNews