California’s innovation economy depends on rules that are clear, modern, and applied consistently. Companies can adapt to rigorous oversight. What they cannot reasonably plan around is a regulatory standard that seems to change depending on which side of a market is under review or which mergers regulators feel like challenging for political gain.
That concern is becoming harder to ignore as state attorneys general take an increasingly prominent role in challenging mergers already reviewed by federal regulators. State enforcement can be an important safeguard, but when a state approves one deal with negotiated conditions and drags another into multi-year litigation, its officials owe the public an explanation grounded in facts.
Two major media transactions in California now offer a useful test.
On August 13, the California Public Utilities Commission approved Charter Communications’ combination with Cox Communications, a deal that combines two of the country’s largest cable and broadband providers. The state imposed a substantial package of conditions focused on broadband affordability, network investment, digital inclusion, service quality and public-access channels.
Those commitments may deliver real benefits. But the state’s review of the transaction failed to address the combined company’s new scale in pay television, and Attorney General Rob Bonta did not mount a public challenge focused on this issue.
That stands in sharp contrast to Bonta’s treatment of Nexstar’s acquisition of TEGNA. The New York Post's editorial board recently called out his case against Nexstar as a risk to local news and one that was putting taxpayer-funded lawyers to work advancing the interests of a commercial rival, DIRECTV.
In leading California’s lawsuit against that transaction, Bonta has repeatedly emphasized the risk that greater scale for broadcasters might increase programming fees and result in higher cable and satellite bills for consumers.
But this ignores the fact that cable and satellite providers—not local stations—set the prices consumers pay for TV service. If increased scale is going to trigger additional state regulatory review and an aggressive lawsuit against local broadcasters, who play no direct role in setting cable or satellite prices, then it seems only reasonable to expect the same state scrutiny of cable and satellite providers when they decide to merge and increase their scale. Oddly, Attorney General Bonta chose not to conduct such a review of Charter’s acquisition of Cox.
The reality is that the combination of Charter and Cox makes sense because consumers continue to cut the cord and leave traditional cable packages for streaming services and new connectivity options. Nexstar and TEGNA face a very similar situation. Local broadcasters now compete for viewers and advertising against global streaming platforms, social networks, and technology companies operating at a scale no local television group can match. Both deals are rational responses to the same structural shift and regulators applying one consistent, market-based standard would recognize that.
At CALInnovates, we support competition because it drives investment, better products, and more choices. Sound competition policy must reflect how consumers access media today, not twenty years ago.
This new environment does not mean every merger should be approved. It means merger reviews in a state as economically powerful as California should be grounded in facts rather than politics. Unfortunately, the challenge to the Nexstar-TEGNA transaction suggests the latter, particularly given that federal regulators previously cleared the deal.
Enforcement resources are finite, and California’s should be repurposed to focus on real consumer harms and issues that are much more important to voters. Instead, California is committing government lawyers, staff time, and taxpayer-supported resources to litigating a politically-motivated case, and one in which the underlying merger has clear, tangible benefits for Californians.
In its Charter-Cox review, California regulators identified concerns and worked with the parties to negotiate conditions. The process worked. If state officials believe certain protections are needed in the Nexstar-TEGNA deal, they should take the same approach and work with the parties to negotiate a mutually beneficial settlement.
Innovation policy requires the government to be predictable, evidence-driven, and even-handed. California should have one standard when evaluating what does or doesn’t impede fair competition and apply it equally.
As Executive Director of CALinnovates, Dustan Batton has been with the organization since its inception and played a pivotal role in leading advocacy and organizing efforts across a host of issues that ranged from broadband, spectrum and net neutrality to ride and home sharing. A longtime political consultant, Dustan has led successful ballot measures opposing regressive taxes at the state and local levels.
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