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Comcast and Time Warner Cable merger: What it means for consumers

Daily Ticker

Comcast and Time Warner Cable merger: What it means for consumers

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Comcast and Time Warner Cable merger: What it means for consumers

Comcast and Time Warner Cable merger: What it means for consumers
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The planned $45 billion merger of Comcast Corp. (CMCSA) and Time Warner Cable Inc. (TWC) makes perfect business and financial sense – to the point that it was the obvious megadeal to expect in an industry clearly poised for consolidation.
 
But will it, and should it, win approval from government regulators? And, if it does, what will it mean for the 30 million customers who would get their broadband and video service from the merged giant, and the hundreds of content networks that sell their programming to cable operators?
 
As I discuss with Lauren Lyster in the attached video, the combination of Philadelphia-based Comcast, controlled by the Roberts family, and New York’s Time Warner Cable, which was spun off by Time Warner Inc. (TWX) in 2007, results in very little geographic overlap. Cable operators are all essentially local monopolies in the first place, so very few customers have had the choice of Time Warner or Comcast.

Related: CBS Wins Showdown with Time Warner Cable, But What About Customers?

What’s more, unlike 15 years ago, when cable companies had a strong hold on offering the full package of video networks, there is now intense competition among several competitors that deliver packages of in-home entertainment and Internet service.

Related: How cable companies are fighting back against cord cutting
 
There are two satellite-TV providers; Verizon Communications Inc. (VZ) and other telecom companies offer fiber-optic broadband and video; and, increasingly, “over-the-top” services such as Netflix Inc. (NFLX) and Aereo that allow consumers to buy programming a la carte, with out subscribing to a cable “bundle” of channels.
 
In fact, this merger is part of an essentially defensive strategy by the “legacy” cable operators to cut costs, constantly reinvest in their network infrastructure and absorb ever-higher content costs – all with declining subscriber ranks. “Horizontal” mergers of the major cable firms have been central to a long-predicted endgame in the media business for some time.
 
The number of cable-video subscribers has dropped by around five million since 2010, and the slide has steepened the past several quarters. A growing number of households simply use the cable company for a broadband connection rather than programming packages.
 
All this, no doubt, leaves Comcast confident that it can persuade the Department of Justice to approve the deal, perhaps with certain conditions of small asset sales.
 
What’s less clear is how the Federal Communications Commission will view the merger in light of the agency’s mandate to consider the broad public interest in approving deals in this industry. Will the FCC object to the concentration of buying power for one-third of pay-TV households in one company? The FCC will focus on things like ensuring the diversity of programming available to the public. Time Warner Cable famously blocked CBS Corp. (CBS) networks from its customers in a dispute over program fees.
 
Comcast also owns NBC Universal, one of the largest TV-network operators, and its vertical integration with another big player might draw some FCC concerns or conditions.

If the merger goes through, Time Warner customers would likely see no immediate changes in terms of their channel lineups or Internet service. But the companies suggest in their announcement that some of Comcast’s broader array of video-on-demand offerings and programming accessible on mobile devices could be rolled out to Time Warner customers. Comcast boasts a leading position in its breadth of programs, with 50,000 video on demand choices and 300,000 streaming offerings on its XfinityTV.com and a new cloud-based DVR system.
 
Unfortunately for consumers, this deal is unlikely to do much to improve customer service in an industry that is notoriously disliked by the public for its price increases, inflexible scheduling of service visits and occasional outages.

But if customer defections accelerate further, maybe the bulkier new Comcast will find that it has to compete more on the basis of customer satisfaction rather than yet another sports network or fractionally faster download times.

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