Comcast’s Takeover of Time Warner Cable

        During this past week, cable television and overall telecom giants Comcast and Time Warner Cable came to an agreement to facilitate a merger of their two companies.  In the deal, Comcast would acquire Time Warner Cable for $45 billion.  The companies must first go through the usual government regulatory channels for approval of the merger, given that the resulting entity would cover approximately 33 million cable television subscribers and internet broadband users.  The Justice Department, Federal Trade Commission, and Federal Communications Commission will be involved in assessing the antitrust as well as content ramifications of the deal, and an approval or rejection of the deal may come within the next year.  Comcast already acquired NBC Universal in recent years, and thus already has significant control over not just the business aspects but of content as well.

        Critics, such as consumer watchdog groups or members of Congress like Senator Al Franken of Minnesota, see the merger as a disadvantage to cable consumers who will have less choice in selecting cable packages.  By controlling more of the market, it is feared that Comcast could raise prices and not be as worried about the quality of service given that customers have fewer places to turn.  Projections show that a new post-merger Comcast would control about 38% of the market for high-speed Internet, significantly more than competitors AT&T and Verizon.  It is highly possible that if approved, it would be contingent on a divestiture by the new Comcast of certain systems in which they would be sold to other providers so that the deal would be more palatable to regulators.  Critics are also concerned that through the prior acquisition of NBC Universal and now Time Warner, Comcast would have too much control over programming content.

On the other side, it is thought that the combination of the two companies will have a technological impact, such as an increase in network speeds as a result of the new company having control over more infrastructure.  Others point to the fact that Comcast and Time Warner Cable do not currently compete in the same areas of the country, so a merger would not effectively decrease competition that never existed in the first place.  There is also the likelihood of the deal including net-neutrality terms, which would mean that Comcast could not play favorites in broadcasting its own produced content over programming content made by competitors.  These net neutrality terms would be required by order of the FCC; a similar deal was used in Comcast’s acquisition of NBC Universal.

There is also the question of how this merger will affect the industry particularly in light of the rise of television programming that streams online through Netflix, Amazon, and Hulu, for example.  Comcast may stand to benefit from these new avenues of entertainment, because it could demonstrate to regulators that sources of content other than the main cable companies exist, and that customer use of online streaming provides additional competition, thus allaying concerns over inhibition of competition.

It will be interesting to observe the government’s review and ultimate decision on this merger.  Such decisions turn on changes in market share and competition, and for television in particular, there are also considerations of content control.