Breakdown of the deal is a win for consumers
The Comcast-Time Warner merger, worth $45.2 billion, finally fell apart last week. That’s bad news for Comcast and Time Warner, but it’s good news for consumers.
Comcast and Time Warner are the country’s two largest cable and Internet providers. The idea of a combined mega-company caught the attention of both the Justice Department and the Federal Communications Commission. When FCC staffers recommended that the merger be reviewed by an administrative law judge — a clear signal that the regulators would challenge the deal — Comcast called it off.
The government’s legitimate concern was that a merger would concentrate too much of the broadband Internet market in too few hands, and that one massive company would have too much leverage against TV channel owners and new online entrants. A combined Comcast/Time Warner would control around 57 percent of the broadband market (32 million Internet subscribers) and more than 30 percent of the pay-TV market (more than 30 million customers).
In some markets — including the Bay Area — there’s little to no competition for broadband and cable service already. And if you don’t believe that monopolies have problems with service and efficiency, just ask a local how they feel about their provider. Comcast even admits that it’s not the best company when it comes to these very basic services.
“Customer service is a major challenge for us,” Comcast Executive Vice President David Cohen said in a meeting with The Chronicle’s editorial board in March. When we asked Cohen how a merger would affect service for Bay Area residents, he said it would have very little impact. That was less than encouraging. But that’s what happens when a company gains monopoly power — and that’s why federal officials were right to resist this merger.
“Regulators are giving this deal so much scrutiny because Comcast will be able to leverage its dominance of the cable and broadband markets to increase prices and limit choices for consumers,” Michael McCauley, a media director for Consumers Union, said before the dissolution of the deal. “Comcast has said that within five years they’re looking into imposing data caps on their customers and charging use fees on customers who exceed that cap.”
Even the new hard-won federal net neutrality rules wouldn’t have protected consumers if Comcast was able to dominate using market power, McCauley said. “There are plenty of places in programming and the pipeline for Comcast to cause trouble for competitors,” he said. “Last year, for example, they used their gatekeeping power to raise prices on Netflix.”
The two companies maintained that the anticompetition argument wasn’t relevant, since neither company has a presence where the other one is. But that argument never made sense. Part of the purpose of antitrust regulatory action is to prevent monopoly formation, not just to try and stop companies that already have too much market share.
The rejection of the wishes of a company as large and politically connected as Comcast is a rare and refreshing development in the nation’s capital. Comcast deployed 128 lobbyists and spent $17 million in lobbying last year, according to the Center for Responsive Politics.
But in the end, the best interests of American consumers prevailed.