A BLOG ABOUT BUSINESS AND ECONOMICS.
APRIL 21 2015 10:21 AM
The Comcast–Time Warner Merger Will Create a Cable and Internet Behemoth. Here’s What You Need to Know.
Photo by Mark Wilson/Getty Images
On Wednesday, Comcast and Time Warner Cable are expected to meet with Justice Department officials to discuss their proposed $45.2 billion merger for the first time since the deal was announced in February 2014. The companies are presumably hoping to get their plans back on track after Bloomberg reported Friday that lawyers at the DOJ were getting ready to recommend blocking the deal and could submit a review of it sometime this week. But before that sit-down happens, here’s a quick guide to bring you up to speed on the potential merger.
What would happen if Comcast and Time Warner Cable combined?
Comcast and Time Warner are the No. 1 and No. 2 biggest cable operators in the U.S., respectively. Comcast currently has nearly 22 million high-speed Internet customers and slightly more video users. Together, it and Time Warner would serve about 30 million customers and control roughly 57 percent of the market for broadband and 30 percent of the market for pay TV (aka your standard cable bundles). Basically, Comcast would go from just another cable giant to the cable behemoth.
Comcast and Time Warner are the No. 1 and No. 2 biggest cable operators in the U.S., respectively. Comcast currently has nearly 22 million high-speed Internet customers and slightly more video users. Together, it and Time Warner would serve about 30 million customers and control roughly 57 percent of the market for broadband and 30 percent of the market for pay TV (aka your standard cable bundles). Basically, Comcast would go from just another cable giant to the cable behemoth.
What concerns does the Justice Department have about the merger?
As you might expect when the two biggest companies in any industry express interest in combining, regulators are worried that the resulting corporation will simply be too powerful a player in its market. The DOJ is looking at this from an antitrust perspective, while the Federal Communications Commission is evaluating whether the deal would help or hurt the public.
As you might expect when the two biggest companies in any industry express interest in combining, regulators are worried that the resulting corporation will simply be too powerful a player in its market. The DOJ is looking at this from an antitrust perspective, while the Federal Communications Commission is evaluating whether the deal would help or hurt the public.
What does Comcast have to say about these hesitations?
Comcast, as you’d similarly expect, argues that the merger isn’t anti-competitive. Should the deal go through, it’s already made arrangements with Charter Communications so that it can divest roughly 4 million customers. Comcast also says merging with Time Warner is necessary to help it compete with cord-cutting services like Netflix and Apple TV, which it sees as an existential threat to traditional pay TV. And to be fair, cable TV subscriber numbers have been dwindling. “We continue to believe that our transaction with Time Warner Cable will bring substantial benefits to consumers without any competitive harms,” a spokeswoman for Comcast told the Wall Street Journal in a statement.
Comcast, as you’d similarly expect, argues that the merger isn’t anti-competitive. Should the deal go through, it’s already made arrangements with Charter Communications so that it can divest roughly 4 million customers. Comcast also says merging with Time Warner is necessary to help it compete with cord-cutting services like Netflix and Apple TV, which it sees as an existential threat to traditional pay TV. And to be fair, cable TV subscriber numbers have been dwindling. “We continue to believe that our transaction with Time Warner Cable will bring substantial benefits to consumers without any competitive harms,” a spokeswoman for Comcast told the Wall Street Journal in a statement.
OK ... who should I believe?
It’s a tough question. On the one hand, the notion of a Super Comcast isn’t exactly palatable. Comcast, you might remember, was voted the worst company in Americain 2014; is responsible for possibly the most awful customer-service call of all time; and once got a man fired from his job at Pricewaterhouse Coopers for complaining about its service. Those public-relations disasters certainly haven’t done Comcast any favors in pursuing its merger. John Bergmayer, a lawyer at advocacy group Public Knowledge, told Ars Technica in February that he believed the customer-service horror stories had presented “the political cover that the higher-up officials at the agencies need” to oppose the merger.
It’s a tough question. On the one hand, the notion of a Super Comcast isn’t exactly palatable. Comcast, you might remember, was voted the worst company in Americain 2014; is responsible for possibly the most awful customer-service call of all time; and once got a man fired from his job at Pricewaterhouse Coopers for complaining about its service. Those public-relations disasters certainly haven’t done Comcast any favors in pursuing its merger. John Bergmayer, a lawyer at advocacy group Public Knowledge, told Ars Technica in February that he believed the customer-service horror stories had presented “the political cover that the higher-up officials at the agencies need” to oppose the merger.
On the other hand, a Comcast–Time Warner merger could change surprisingly little. The cable industry is already largely uncompetitive because most parts of the country are serviced by only one player. In other words, cable companies tend to stake out their territory and not infringe on that of their competitors. As Matt Yglesias noted in Slate last year, the proposed merger “will in effect turn two medium-size regional monopolists into a big sprawling monopolist. But in terms of consumer-facing competition, you’re going from zero to two times zero.”
That’s why a lot of people think the real issue here isn’t for content consumers, but for content providers. Consumers wouldn’t lose much choice because they basically didn’t have any choice to begin with. But a merger between Comcast (which owns NBCUniversal) and Time Warner would give Comcast even more leverage in network negotiations.*
What about my cable bill? Is it going to go up?
Who knows! As explained above, a Comcast-TWC merger wouldn’t radically change competition at the level of local service providers. And Comcast has adamantly maintained that the deal will benefit consumers. That said, even Comcast doesn’t want to talk about what could happen to your bill. “We’re certainly not promising that customer bills are going to go down or even that they’re going to increase less rapidly,” David Cohen, a Comcast executive vice president, told reporters in February 2014 after the plans were first announced.
Who knows! As explained above, a Comcast-TWC merger wouldn’t radically change competition at the level of local service providers. And Comcast has adamantly maintained that the deal will benefit consumers. That said, even Comcast doesn’t want to talk about what could happen to your bill. “We’re certainly not promising that customer bills are going to go down or even that they’re going to increase less rapidly,” David Cohen, a Comcast executive vice president, told reporters in February 2014 after the plans were first announced.
How does net neutrality fit in with all of this?
Back in February, the FCC passed landmark rules that reclassified broadband as a utility and upheld net neutrality by prohibiting fast lanes, throttling, and content blocking. At the time, Comcast issued a statement condemning the FCC’s decision to consider broadband a telecom service and said it expected “years of litigation and regulatory uncertainty” to ensue. Now, Ars Technica reports that those changes might lead Comcast to abandon its bid for TWC altogether as “a merger condition could require Comcast to follow the rules even if they are later blocked in court.”
Back in February, the FCC passed landmark rules that reclassified broadband as a utility and upheld net neutrality by prohibiting fast lanes, throttling, and content blocking. At the time, Comcast issued a statement condemning the FCC’s decision to consider broadband a telecom service and said it expected “years of litigation and regulatory uncertainty” to ensue. Now, Ars Technica reports that those changes might lead Comcast to abandon its bid for TWC altogether as “a merger condition could require Comcast to follow the rules even if they are later blocked in court.”
*Correction, April 21, 2015: This post originally misstated that Time Warner Cable’s holdings include HBO and Turner Broadcasting. Those are not among its holdings.
