An Economic Overview of the Implications for Online Video of the Proposed Comcast-NBCU Transaction

An Economic Overview of the Implications for Online Video of the Proposed Comcast-NBCU Transaction

The net welfare effect of any vertical merger, such as the Comcast/NBCU transaction, is theoretically ambiguous. Empirical research of previous vertical transactions, however, tends to find positive outcomes. Pro-competitive effects of the Comcast-NBCU transaction include potentially increased incentives to invest in online content, experimentation with new content and new methods of distributing content, and investment in the delivery platform itself. The key antitrust question is whether the newly vertically integrated firm can leverage the vertical relationship to raise rivals’ costs anticompetitively and reduce output. Any merger review involves assumptions about the future, and the nascent nature of online video makes the effects of this transaction even more difficult to evaluate. Because it is impossible to say with any certainty how online video markets will develop, let alone how they should develop, it becomes extremely difficult to know how the merger will affect that trajectory.

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Scott Wallsten is President and Senior Fellow at the Technology Policy Institute and also a senior fellow at the Georgetown Center for Business and Public Policy. He is an economist with expertise in industrial organization and public policy, and his research focuses on competition, regulation, telecommunications, the economics of digitization, and technology policy. He was the economics director for the FCC's National Broadband Plan and has been a lecturer in Stanford University’s public policy program, director of communications policy studies and senior fellow at the Progress & Freedom Foundation, a senior fellow at the AEI – Brookings Joint Center for Regulatory Studies and a resident scholar at the American Enterprise Institute, an economist at The World Bank, a scholar at the Stanford Institute for Economic Policy Research, and a staff economist at the U.S. President’s Council of Economic Advisers. He holds a PhD in economics from Stanford University.

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