What would a proposed merger between the two largest U.S. cable providers – Comcast and Time Warner Cable – mean for consumers?
Media outlets across the country reported an announcement by Comcast on Thursday, February 13 indicating the cable giant’s intent to buy its rival, Time Warner Cable, currently the nation’s second largest cable provider. The projected deal, estimated to be worth $45.2 billion, would mean that Comcast, already the largest U.S. cable company, would dwarf its remaining competitors. AT&T and Verizon, currently the third and fourth largest cable providers, service about 5 million homes each, but a post-merger Comcast would provide television and cable services to nearly 30 million customers nationwide, or just under 30 percent of the domestic market.
Before the merger can take place, however, the corporations will need to obtain the approval of the Federal Trade Commission (FTC) and other government regulatory agencies. If approved, Comcast’s acquisition could occur before year’s end.
Whether or not this proposed deal would be detrimental to consumers has become an issue of widespread speculation. Debate over the pitfalls of potentially monopolistic practices undertaken by a market-dominating giant versus the possible benefits of enhanced technological innovation and increased broadband penetration in the U.S. has proliferated on the web since the announcement.
Monopoly concerns vs. technological innovation
The spectre of monopoly has long haunted the cable industry. In many parts of the country consumers have access to only one cable provider. This has largely been the case because of the upfront infrastructure demands associated with constructing fibre-optic cable networks. In many markets, providers expect to bid for and win exclusive rights to specific territories prior to laying down their wiring. Over time, these leases can run out and other providers may offer competitive bids designed to encourage innovation and limit consumer prices. But, a decline in the overall number of cable providers means less bidders and potentially higher prices for their services.
Next is the question of programming control raised by the proposed merger. Comcast currently owns NBCUniversal, a mass media and entertainment company that operates television networks, cable channels, a movie studio, and various production companies. Presumably, Comcast would privilege programming provided by NBCUniversal over its competitors when offering content to its cable subscribers.
Because of Comcast’s already strong presence in online content, the merger also raises questions about the future of net neutrality, the ongoing debate about keeping Internet data free from manipulation by private and commercial interests. Despite such concerns, this issue is considered less urgent due to Comcast’s self-imposed, seven-year net neutrality deal, made with the government regulators who approved its merger with NBCUniversal. (The terms of the deal are set to last until the beginning of 2018.)
Still, some estimations of the likely effects of the proposed merger on consumer competition have been deeply negative. According a recent article on the subject at theverge.com,
approving Comcast’s purchase of Time Warner Cable would essentially rip away the already perishingly tiny hope of new competition ever emerging in the cable landscape…. ("Why You Should Be Scared of Comcast and Time Warner Merging.")
Although the gargantuan power of a post-merger Comcast could be detrimental to competition for online content, the author of the article also admits that Comcast’s nationwide reach could offer some benefits to consumers. For instance, its size might allow it to negotiate innovative deals with the likes of Apple and Microsoft that could help bring next-generation Internet TV products into living rooms across the country.
A related technological area of interest involves the future of internet data transfer speeds, and the relationship between Comcast and competing content providers, such as Netflix. Recently, Netflix reported a drop in streaming speeds of online movies and tv shows by customers you use Comcast and Verizon. An interesting article posted at the consumerist.com examines this data and considers the possibility that these providers may be deliberately throttling Netflix’s streaming content.
Should the government allow this merger?
So, the question for government regulators and the public in general remains. Should the merger be blocked on antitrust grounds as one that would ultimately be bad for consumers?
On the one hand, a recent Bloomberg article argues that Comcast’s acquisition could improve service for current Time Warner Cable customers. Also, the expanding company’s increased ability to negotiate and produce cheaper programming would likely allow it to shift resources toward improved technology that could ultimately increase Internet access and speeds across the country. Thus, the Bloomberg reporter observes that,
Although it’s unlikely that the merger will lead to lower cable bills, the acquisition might help moderate price increases and increase U.S. broadband penetration. ("Stop Whining About the Comcast Time Warner Merger.")
A sister Bloomberg article by Harvard law professor Susan Crawford takes an opposing view by examining the proposed merger as really about the nation’s infrastructure needs and, ultimately, America’s future. According to Crawford, fiber-optic networks of the kind used by Comcast and its competitors should be regarded as national infrastructure, like roads, waterways, and bridges. These, she argues, cannot be left entirely in the hands of companies with monopolistic tendencies, entities that can use their immense size and power to dictate prices and control content. In conclusion, she writes,
We can't flourish as a country unless someone takes the long view and ensures that American businesses aren't forced to pay whatever tribute Comcast demands in order to thrive. ("Comcast's Time Warner Deal Is Bad for America.")
Whether or not Comcast can ascend to near-unrivalled status in domestic cable broadband is now up to regulators at the Federal Trade Commission and the Department of Justice. If, after carefully weighing the issues discussed above, the merger is allowed, American consumers will learn whether a future of monopolistic broadband price increases and stifled choices in viewing content awaits, as naysayers fear. Or, perhaps the merger will promote expanded technologies and the benefits of scaled economics, which could lead to a more satisfying broadband experience for consumers nationwide.