Comcast-Time Warner Cable marriage is called off at the altar
Note: This article was updated to reflect Comcast's confirmation that the merger has been called off.
In what is being viewed as a major victory for consumers, Comcast is calling off its $45 billion bid to merge with Time Warner Cable. The combined entity would have controlled, according to some estimates, more than 30 percent of U.S. pay-TV subscriptions and, more importantly, more than half of the market for broadband service.
“This is a major victory for consumers who stood up against a media Goliath and won, and a major victory for everyone who wants a fair and competitive marketplace," said Marta Tellado, president and CEO of Consumer Reports. "Comcast never was able to make a convincing case for why the merger would benefit anyone other than Comcast.”
In a statement released this morning confirming the news, Comcast chairman and CEO Brian Roberts said, “Today, we move on. Of course, we would have liked to bring our great products to new cities, but we structured this deal so that if the government didn’t agree, we could walk away. I couldn’t be more proud of this company and I am truly excited for what’s next.”
Consumer Reports and its advocacy arm, Consumers Union, have opposed the deal since it was announced, arguing that a combined Comcast-Time Warner Cable would have little incentive to treat customers better than either company did individually. Both typically rank low for customer service in Consumer Reports' annual satisfaction surveys.
Comcast already owns extensive programming through its previous merger with NBC Universal, as well as regional sports networks and other video content. This proposed merger would have given Comcast more control than ever over key programming, along with the pipes to deliver those programs—and the growing amount of Internet-delivered content—into American homes. That market dominance would have made it difficult for newer Internet companies and services to compete.
"This mega merger was a sweet deal for Comcast but a poor one for consumers that would have hurt competition and stifled innovation,” said Ellen Bloom, senior director of federal policy at Consumers Union. “Comcast would have profited handsomely, while consumers ended up paying more and facing fewer choices."
The announcement from Comcast didn't come as a complete surprise, as there's been growing speculation that the deal wasn't going to receive regulatory approval. Both the FCC and the U.S Justice Department seemed to be leaning toward opposing the deal, with the FCC requesting a special administrative hearing on the merger and the Justice Department rumored to be recommending that the government sue to stop the deal.
The next question for regulators will be whether or not to approve AT&T's proposed acquisition of satellite TV service provider DirecTV, the country's second-largest pay TV service. AT&T contends that the cost savings it would earn by adding DirecTV's customers would allow it to allocate more resources to expand its high-speed GigaPower fiber-optic broadband service. It would also allow it to offer DirecTV TV customers a TV/Internet bundle. AT&T covers about 17 percent of the broadband market, and DirecTV doesn't offer Internet service directly.
It will also be interesting to see what Comcast does next; there had been speculation that the company has put several projects on hold while it was under regulatory scrutiny. It's likely that the company will now be able to move ahead—especially with broadband initiatives for streaming video services—unfettered by this concern.
—James K. Willcox
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