What does the Comcast-Time Warner Cable merger mean for you?

It certainly doesn’t sound good when the two largest cable operators, substantially bigger than any of their non-satellite rivals (a year ago TWC had 12.2 million subscribers; even counting telco companies Verizon had only 4.7 million), announce they’re going to merge. As part of the deal, Comcast announced it would sell off systems representing 3 million subscribers to other parties, getting to 30 million and under a former 30% cap that had been thrown out by the courts. Were it not for that, the combined Comcast-Time Warner monolith would have had control over fully a third of the market, over seven times that of the next largest cable company, and nearly as big as DirecTV and Dish Network combined. But what would that actually mean?

Cable operators are natural monopolies; with the exception of a few “overbuilders” (none of which have more than a million subscribers), in most places you only have the choice of one cable operator if you don’t want to get a dish or Verizon or AT&T aren’t available. There’s basically nowhere where Comcast and Time Warner Cable were in direct competition with one another. The fear of a Comcast-TWC merger, it seems, is that such a behemoth could basically set up shop wherever it wanted and keep other cable operators from growing, but even then it’s hard to see how realistic that is. (Or maybe that Comcast could afford to rest on its laurels in terms of service, making it even more Comcrap.) Comcast’s purchase of NBCUniversal had the potential to be far more detrimental to the consumer in this light.

The image that comes to mind when it comes to horizontal integration on this scale is the former AT&T telephone monopoly, but even that was not broken up so much because of its overall reach but because of its vertical integration with AT&T’s business selling telephones and using its control of the phone network to undercut rival phone sellers. Perhaps the analogous fear is that Comcast will use its broad reach to show preferential treatment to NBCUniversal networks, crippling rival programmers by denying them access to 30% of the country or subjecting them to onerous conditions to get there, but it’s not clear that’s actually possible, certainly not as cable providers increasingly become Internet providers first and foremost – especially given the conditions Comcast agreed to as part of the NBCU deal, including abiding by net neutrality even after the courts threw the FCC rules out last month. If anything a larger Comcast (which, if it continues negotiating for Bright House Networks as TWC had, will be negotiating on behalf of 32 million subscribers) might actually lead to positive outcomes for consumers in the long term, standing up to increasing rights fees asked for by other programmers, especially ESPN – though of course Comcast’s own stake in content production might still give them an edge that results in worse outcomes for rival content providers and consumers. (Time will tell if the new Comcast’s approach to sports networks will be more like that of Comcast – which has largely avoided rocking the boat with anyone en route to a portfolio it proclaims as “your home for the most live sports”, legal wrangling with Tennis Channel excepted – or Time Warner Cable, with its high-profile showdowns with the likes of NFL Network, MSG, Viacom, and broadcast networks like CBS and Fox.)

Of course, where those fears might be well founded is in how much leeway Comcast has had even under net neutrality rules, including engaging in its own carriage disputes with bandwidth providers,┬áthrottling traffic on video sites, and imposing broadband data caps. A monolithic Comcast/TWC union could still conceivably, without restrictions imposed by Congress or the FCC or agreed to voluntarily by Comcast, create winners and losers in the Internet marketplace, to the point of being able to throttle cord-cutting for a substantial number of Americans. That underscores the importance of allowing as much video as possible to be transmitted over the air where it can lie outside of Comcast’s reach.

2 Comments

  1. Posted February 14, 2014 at 1:17 pm | Permalink

    Fox Sports 1 is going to have the worst time with this. Fox was triple-teamed by TWC, DirecTV, and Dish into a much lower carriage fee for FS1. Now combine TWC with Comcast in that equation. If they continue to triple-team FS1 when the next round of carriage negotiations come up, that’s going to make it awfully hard for Fox to get the kind of subscriber fees it needs to pay for all the rights it has.

    What’s more, if carriers pull Fox channels, Fox can’t go off the reservation and stream video to Comcast customers, because Comcast controls the broadband as well. Comcast could either block those streams or use those data caps to force consumers to stop streaming.

    Keep in mind, TWC internet is uncapped, so to them, Netflix is a tool that helps them acquire more internet customers. Comcast, on the other hand, owns a dozen NBC cable channels, so they view Netflix as competition. Big difference.

    Basically, Congress and the FCC need to reclassify broadband internet as a communications tool and write something into the rules that make data caps illegal. That’s pretty much the only way to force Comcast to do anything resembling the right thing by consumers.

  2. Morgan Wick
    Posted February 14, 2014 at 4:34 pm | Permalink

    Remember, though, TWC, DirecTV, and Dish were specifically asking to carry FS1 under their old Speed contracts. What’s more, Fox never publicly acknowledged the dispute or asked people to call their cable providers, which is why I still suspect Fox was mostly bluffing about giving them Speed Lite and always planned to “cave”. That’s not going to be the case in the next round of negotiations; the cable companies won’t have the leverage of an existing contract that’s supposed to continue, and Fox will actually be getting serious about getting the rights fees they want to the extent they weren’t before. Where Fox might have a problem is if FS1 hasn’t attracted the viewership base to create a critical mass against any cable provider that wants to drop it.

    Maybe this is because I read too much Broadcasting & Cable with what may be a pro-corporate bias, but I don’t think data caps are necessarily a way for Comcast to throttle video specifically – it’s just that video takes up so much more bandwidth than any other use of the Internet. From that perspective, data caps are primarily about controlling bandwidth demands on the company’s network. After all, it’s not like TWC hasn’t flirted with something similar to Comcast’s caps, to say nothing of the wireless companies’ own love of tiered data plans. You may disagree with how much of a justification that is or how true it is, but I’m just a little skeptical that a blanket ban on data caps is quite the way to go. Of course, this just reinforces my point at the end of keeping as much video out of Comcast’s reach as possible, but obviously that’s not the whole story. I just think a ban on data caps is a Band-Aid for the larger problem of the bandwidth demands of video and Internet providers’ varying ways of dealing with it, nor do I think it’s likely to inspire much investment in bigger pipes.

    I’d also probably prefer a communications law that gave the FCC the most leeway to regulate technologies the way they saw fit without worrying about how they’re “classified”, or whether those “classifications” bring with them inappropriate baggage.

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  1. [...] (The potential irony? If all proposed media deals go through, Time Warner’s former cable division could end up owned by a direct competitor.) [...]

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