As if we couldn’t have fewer cable options, Comcast plans to buy Time-Warner Cable:

Comcast and Time Warner Cable confirmed Thursday that they will enter into a $45.2 billion deal to combine the nation’s two largest cable companies, a mammoth proposal that will trigger close scrutiny from federal regulators.

Swooping in to top a competing bid by Charter Communications, Comcast will pay 2.875 of its shares to TWC shareholders. The companies’ respective board of directors have approved the all-stock agreement, which will see all of TWC’s 284.9 million shares acquired at a value of about $158.82 per share. Current TWC shareholders will own about 23% of Comcast’s common stock.

The Justice Department is expected to take a look, but will ultimately approve it, most likely.

My first thought was, as with the proposed AT&T-TMobile merger, was that the administration would put a stop to it one way or another. But I thought Matt Yglesias made a great point on Twitter:

From company-to-consumer, our choices were limited to one before and they will be limited to one if this happens. The only immediate difference from our end is that more people will be limited to Comcast and nobody will be limited to TWC. Customers could actually benefit. When I was in Arapaho, our cable company was bought out twice and each company offered better prices than the last for Internet (more on the cable vs ISP distinction in a minute). One of the real cost-drivers for cable TV are the negotiations with the channels. Since there is competition for cable in the form of satellite, that has always given the networks more leverage than the cable companies. Networks tend to win these battles. CBS recently smacked around TWC. This is probably not good for consumers, especially those that (unlike myself) favor a la carte programming and complain about having to pay for channels they don’t want to watch. One of the things the networks bargain for against the cable companies is the inclusion of more of their channels (and the subscriber fees to match).

If this does give Comcast more leverage than Comcast and TWC had previously, it could be a win for consumers. Further, most of the bigger concerns about Comcast – that they own NBC and were not only carriers of other networks but competition – were at least theoretically dealt with in the previous round of negotiations when Comcast purchased NBC.

What has me concerned, however, is the Internet side of things. Yet Yglesias’s Multiply By Zero also applies there as well. The primary concern I would have is that Comcast is in a better position to set itself up for direct competition than Time-Warner was, but I’m not sure if that holds water. Comcast+TWC still doesn’t have enough market position to easily challenge Netflix and Amazon to the point of throttling them, and they’re legally prohibited from doing so as a condition of the Comcast-NBC merger (despite the recent Net Neutrality reason that would otherwise apply).

To be clear, for a variety of reasons, the Internet in the US tends to be slower than in other countries and Comcast already does particularly poorly when it comes to Netflix. Also, the legal prohibition will run out, at which point it’s unclear in what ways Comcast would be able to use its new market advantage. And yet Comcast customers presently enjoy Net Neutrality rights that TWC customers don’t, as a result of letting a previous merger go through. It seems that more concessions could be called for this time around, benefiting consumers more.

Comcast is not promising to lower prices or slow the rate at which prices increase, though my parsing of the statement means “than it has been in the past” rather than “than if this doesn’t happen.”

My rather strong inclination here is to oppose the merger. Perhaps as a reaction to and rejection of the degree of consolidation we’ve seen thus far. Local cable and ISP’s don’t operate in a free market, which means that we’re not going to see the benefits that sometimes come with consolidation… but also means that – unlike with AT&T and TMobile – the costs aren’t the same, either. So after my initial “Ack!” response, I’m coming up short on reasons why this particular consolidation should seem particularly troublesome. I just hope the feds can negotiate some goodies.

Category: Market

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6 Responses to The Mega-Cable Company (Multiply By Zero)

  1. Abel Keogh says:

    Having not had cable or satellite TV for many, many years and stream any content online, I say people are better off cutting the cord.

    • trumwill says:

      Biggest issue for me is sports.

      • Same here. Even with NBA League Pass online, unless my plan is to get my mother to figure out how to watch games online via illegal feeds on sites riddled with malware, I’d have to pay for cable or satellite to get games that are blacked out due to being on national cable and broadcast partners or carried in my local market.

    • Mike Hunt Rice says:

      I disagree. Verizon runs such great deals on TV, phone, and internet that to get rid of them would be more trouble for me than the trivial amount of money I would save.

  2. superdestroyer says:

    If people plan on getting everything through netflix or other internet sources, then which ISP are they using for their internet service. If they are not going through the cable company or the phone company, then how are they getting a wire connected to their house.

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