Issue of the week: Comcast buying Time Warner Cable
Has Comcast won the cable wars?
Has Comcast won the cable wars? asked Paul Krugman in The New York Times. The broadband giant, by far the biggest in the U.S., announced last week that it would acquire Time Warner Cable—the second-biggest—for $45.2 billion. If approved, the deal would give Comcast half of all U.S. cable users, making it “an overwhelmingly dominant player in the business.” Such a competition-stifling acquisition “would have been unthinkable” years ago, when regulators and policymakers took antitrust seriously. But since the Reagan years, critics have argued that in our “era of global competition,” new technology alone is enough to disrupt “old industry giants.” The dogma is that antitrust is essentially anti-market and that regulation isn’t necessary. Don’t believe it. “Creative destruction has been oversold,” especially for services—like cable—that aren’t subject to international competition. For them, “monopoly itself is a barrier to innovation.” After all, when cable customers “have nowhere to go,” what incentive do providers have to get better?
Still, there’s a compelling logic to “this unholy union,” said Brian Barrett in Gizmodo.com. It’s getting hard out there for cable providers. “Companies like Comcast and Time Warner Cable are losing customers by the hundreds of thousands every quarter,” as “cord-cutters” switch to cable alternatives like Hulu Plus, Netflix, and Aereo. Together, Comcast and TWC “will be able to capture whatever cable TV market is left, even as it dwindles.” More ominously, though, these companies also “control the pipes to get the Internet to your house.” The concern is that without a big competitor, the joint company will find it “easy to do nothing” to improve service.
Comcast certainly deserves “some marks for chutzpah,” said John Cassidy in NewYorker.com. It has tried to defend the deal as “pro-consumer, pro-competitive, and strongly in the public interest.” In fact, there is almost no vigorous competition for broadband services in the U.S., and if this deal goes through, there will be that much less. This country is in dire need of a regulatory regime “that puts the interests of consumers first,” but don’t hold your breath. The new head of the Federal Communications Commission, Tom Wheeler, is an ex-lobbyist for, “you guessed it, the cable companies.” Wheeler “has pledged to do all he can to defend the public interest.” If he’s serious, the Comcast deal offers a good chance to prove it.
Yet he’ll likely find that “none of the arguments against the combination hold up to scrutiny,” said Adam Levine-Weinberg in Fool.com. Comcast and Time Warner “do not compete against each other in a single ZIP code,” so their merger would leave customers with no fewer options than they currently have. A merger could help Comcast “offset other costs and therefore raise prices more slowly than it otherwise would.” Even concerns about Comcast’s dominance as a content provider are moot: In the course of its recent acquisition of NBCUniversal, the company promised regulators it would “not discriminate against other pay-TV providers” in distributing NBCUniversal content. Sure, “it’s easy to hate cable companies.” But that’s no reason to ban this merger.