Massive Cable Deal Means Your Bill May Jump

But not for a year, as regulators examine the proposed deal

  • Share
  • Read Later
Robert Galbraith / REUTERS

A Comcast sign is shown in San Francisco, California February 13, 2014. Comcast Corp's proposed $45.2 billion takeover of Time Warner Cable Inc could face close scrutiny from U.S. antitrust regulators because of the deal's potential to reshape the country's pay TV and broadband markets.

What impact will the proposed blockbuster merger between Comcast, the nation’s largest cable company, and Time Warner Cable, the No. 2 cable provider, have on consumers? For now, not much, because the deal could take more than a year to be approved. But in the long run, public interest advocates warn that if Comcast is able to swallow up Time Warner Cable, consumers could face higher prices and fewer choices due to decreased competition. For its part, Comcast calls such fears “hysteria.”

The cable-TV market is already highly concentrated thanks to years of industry consolidation. Many major cable-TV markets in the U.S. are duopolies, and in some cases effective monopolies. Small businesses could face reduced choice as well. If the deal is approved, the only choice for a high-capacity wired connection for the vast majority of businesses in 19 of the 20 largest metropolitan areas in the country will be Comcast, according to Susan Crawford, the John A. Reilly visiting professor in intellectual property at Harvard Law School.

“An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content,” says John Bergmayer, Senior Staff Attorney at Public Knowledge, a digital advocacy group in Washington, D.C. “By raising the costs of its rivals and business partners, an enlarged Comcast would raise costs for consumers, who ultimately pay the bill.”

Comcast argues that because it does not compete with Time Warner Cable in most major markets, the takeover isn’t anti-competitive. But a merger between the two companies would create a powerful gatekeeper with unprecedented buying power in the cable market. Comcast already owns NBCUniversal, one of the giants of American media and entertainment landscape, after buying the company from industrial conglomerate General Electric in a highly controversial deal made complete last year.

(MOREIs Broadband Internet Access a Public Utility?)

“At a time when cable companies already serve as gatekeepers in the delivery of a number of communications services, this merger represents an unprecedented move to consolidate market power even further,” says Sarah Morris, Senior Policy Counsel for the Open Technology Institute at New America Foundation. “A Comcast-Time Warner Cable merger will mean fewer competitive incentives to invest in network infrastructure, and will likely lead to higher prices and less innovation.”

Both the Justice Department and the Federal Communications Commission will scrutinize the merger, and already Comcast has said that it’s willing to make concessions in order to help the deal go through. Last month, a federal court struck down the FCC’s open-Internet rules, but Comcast had previously agreed to abide by the rules until 2018 as part of its acquisition of NBCUniversal. On Thursday, Comcast said it’s willing to extend that agreement to the Time Warner Cable acquisition.

Comcast does not expect that the proposed merger would result in the combined entity having more than 30% of the market. (The D.C. Circuit Court of Appeals has twice thrown out a FCC cap limiting cable ownership to 30% of the pay-TV market — the most recent decision was in 2009.) But in order to help assuage regulators, Comcast said it’s willing to divest as many as 3 million subscribers in order to make sure the new company falls below the 30% threshold. That means that Comcast could sell off a chunk of Time Warner Cable’s business to another cable company.

“We believe Comcast’s willingness from the get-go to divest at least 3 million TWC subscribers to keep its market share below 30%, acknowledge that the Comcast-NBCU merger conditions will extend to TWC (either automatically or through new arrangements), and offer a few new concessions will likely soften up some of the potential resistance,” Stifel analysts Christopher C. King and Josh James wrote in a note to clients. (Time Warner Cable was spun off from TIME parent Time Warner in 2009.)

(MORE: The 6 Most Important Tech Bombshells Coming This Year)

Relevant Congressional committees will also examine the deal. “This proposed merger could have a significant impact on the cable industry and affect consumers across the country,” said Sen. Amy Klobuchar, the Minnesota Democrat who chairs the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights. “As chair of the Senate Antitrust Subcommittee, I plan to hold a hearing to carefully scrutinize the details of this merger and its potential consequences for both consumers and competition.”

It’s possible that the deal could have some positive benefits for consumers, because the combined company would have increased leverage in contentious negotiations with the TV broadcasters over “retransmission consent fees,” which the cable and satellite companies must pay for the right to carry popular programming like prime-time shows and sports. That could mean downward pressure on prices for consumers — if the combined company chose to pass those saving on to them, which is by no means certain.

For its part, Comcast believes that fears of consumer harm are drastically overblown. “Once you get through the hysteria, the deal is pro-consumer, pro-competitive and strongly in the public interest,” Comcast executive vice president David Cohen told reporters on conference call Thursday. He said that Time Warner Cable customers will benefit because Comcast offers faster broadband service and a wider array of video products, including on-demand movies and shows.

11 comments
Darryl8n
Darryl8n

I feel like I was just slammed by TWC for telling me "promotional" contract expired after 10 years of service its suddenly promotional?...monthly price jacked up 25% last month...no other ISPs in my area. 

fenglin1
fenglin1

I was just thinking that there needed to be less competitiveness in the cable market. 

captainmike81
captainmike81

I sincerely hope regulators deny this for the good of the people.

JackHudson
JackHudson

In my area TWC is the only game in town, and they absolutely suck. Their customer service is horrible, and they raise rates at will. This leaves me wondering how could it get any worse?


This will probably drive me to ATT which is the only other choice we have. Now if we could have some true competiiton by Verizon coming in with their FIOS network, then we would have some real choice but alas, it's not available here.

jwarrencollins
jwarrencollins

When industry owns government, it literally owns the people. If you own the people, you own your own customer base. It's like ranching, and the customers are the cattle. Get used to it. Voters place their incumbent U.S. Congressmen and Senators back into office cycle after cycle after cycle ad nausea (or don't vote at all), then bellyache at the trends toward Robber Barronism. Stunningly stupid. 

GeekHillbilly
GeekHillbilly

As Time Warner is the ONLY option where I live in Hardburly,Ky (Satellite dishes doesn't work here in this bowl valley) I have to deal with very lousy service,lines so old that the insulation is falling off when the slightest breeze starts. At $72.02 a month for basic TV,it is bad enough that I have to use a 20 db TV signal booster just to get a half decent signal.If Comcast takes it over,I expect the bill to go to $150 or more,which means I cut the line.I can download anything I want to watch as it is.

DarleneDove
DarleneDove

I haven't had cable TV for 4 years. I imagine may more people are going to say No Way to cable. 

IbcinguToo
IbcinguToo

SCREW THAT!!  I'll go to full time HuluPlus or Neflix before I'll pay cable another G.D. penny.

IceToes
IceToes

Yeah, right, it might have some benefits. Tell me another. If there ever was a chance to give consumers a lower bill, none of these companies would do it. Savings would go right to their profits, not the customer. How could further consolidation of this industry not violate ant-trust laws??

GeoffDesantis
GeoffDesantis

Are you kidding me? Not only are we in the worst recession since the Great Depression (worse than), but Anti-Trust laws are blatantly ignored?!? What is happening here? This is what is killing---killing! The middle class. We must stand, enough of this...