Over the last few years, it has slowly come to light just how much power Comcast has due to their ability to ensure that they are the only provider of broadband/TV service in so many of their service cities. It has gotten so bad that the Department of Justice has entertained the idea of forcing Comcast to break up.
You may wonder why more broadband/TV providers don’t try to battle Comcast (or any other major telecom company) in different parts of the country. Good question. The fact is that other telecom companies have tried to provide service in areas already served by an incumbent telecom. Unfortunately, incumbent telecoms tend to threaten lawsuit after lawsuit at the newer telecom until either the newer telecom decides not to service this area or the city tells the newer telecom to hit the road and service elsewhere.
The major telecom’s are able to do this because of what is known as a “most favored nation” (or MFN) clause that is found in many telecom-city contracts. Essentially, a most-favored nation clause allows an incumbent cable/broadband provider to renegotiate the terms of a city franchise agreement if a new cable/broadband provider receives a franchise agreement and has better financial terms included in the newer agreement.
In reality, cable and broadband providers use it as a way to threaten a city with a lawsuit if they feel that competition may be coming their way. For example, when Bright House was trying to stop Verizon from entering their areas of Florida, they threatened to sue the city if they accepted Verizon’s proposed franchise agreement. When Mediacom was forced to deal with an actual competitor in one Minnesota city, they did in fact sue the city for no reason other than the city accepted another company’s proposed franchise agreement.
Note that the MFN clause says absolutely NOTHING about how how the incumbent provider MUST be given the best terms across the board or else. The clause simply allows an incumbent provider to renegotiate if major parts of their deal are beaten by a new competitor. Situations like these have gotten so abused around the country that the Department of Justice spent years probing whether there are even any legitimate business reasons for MFN clauses.
When it comes specifically to Comcast, they have quite the history of using a MFN clause to threaten cities with a lawsuit if the cities allowed outside broadband/cable services.
- In St. Paul, Minnesota, Comcast told city leaders to “expect a legal challenge” if CenturyLink was allowed to compete with Comcast. Just a few weeks ago, Comcast again expressed “concern” about CenturyLink being allowed to compete against Comcast in other parts of Minnesota.
- When AT&T began the process of getting a local franchise agreement so that they could offer TV service to consumers in Little Rock, Arkansas, Comcast’s legal counsel sent the city a letter reminding city leaders about Comcast’s MFN clause.
- In Portland, Oregon, Comcast pulled out all the stops in trying to stop Google Fiber from entering the area. First, Comcast submitted a seven-page list of requirements that Portland imposed on it, but didn’t on Google’s proposed franchise agreement. Then Comcast had a spokesman remind city leaders about the MFN clause that Comcast has with the city. As OregonLive wrote, “Comcast didn’t say so specifically, but the cable company might be suggesting that it may seek to reopen its own deal, reduce its own financial burden — and city franchise revenues — should commissioners approve Google’s deal.”
Thankfully, it seems as if the FCC is finally waking up and realizing just how terrible these clauses are to consumers. Within the last few months, the FCC has sent letters to telecom companies asking them to describe how often they use MFN clauses with local contracts.
Now, we have Comcast’s reaction to this inquiry. According to Comcast (tip FierceTelecom), MFN clauses are not a big deal and should be viewed as “benign” in such a super-duper competitive marketplace. So “benign” that in the next paragraph, Comcast goes on to claim that MFN’s are vital to ensuring that telecom’s are “shut out” from better deals. Comcast deserves our protection from better deals. Their revenue in 2015 was….that’s right….$75 billion.
Essentially, Comcast has no defense of their use of MFN’s. None. There is not a single credible reason to allow anyone to include these clauses in a local franchise agreement. If there was, Comcast and other telecoms would have told us. Instead, we are left with Comcast claiming that MFN’s “benefit consumers” without a single ****ing example of how consumers are benefiting.