Comcast's Takeover of Time Warner Is a Horrible Deal for Consumers
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As Comcast pushes regulators to approve its just-announced deal to buy out Time Warner Cable, it'll make one essential point: the acquisition won't visibly change the competitive landscape for TV and internetcustomers.
Nice try. Regulators and competition authorities are supposed to consider the public interest when looking at such deals. In no way does the public interest benefit from this one.
We're talking immense scale with this deal. Comcast – which completed its takeover of NBC Universal a year ago in a deal that never should have been allowed in the first place – is the nation's biggest cable company, with about 21m subscribers. Time Warner Cable, the second largest, has 11m. According to the Wall Street Journal, the combined company will sell off what amounts to 3m of those subscribers in order to keep its overall market share slightly below a mythical threshold that raises worries about too much market power.
The public interest is not served when a company that provides one-third of all cable TV service in America replaces two smaller ones (which were plenty big in the first place). It is not served when that company already owns one of the four major broadcast networks, a major movie studio, several cable channels (including CNBC, which will assuredly be boosterish) and other properties.
And the public interest is distinctly not served when what's already the largest and most important internet service provider becomes vastly more so. The cable companies, with their inherently better bandwidth than phone company DSL lines, are becoming natural monopolies for wired-line internet access except in the few places where other providers have installed fiber lines. As Om Malik, founder of the GigaOm technology news company, put it in a blog post, cable consolidation in this century "is all about broadband", which has high profit margins and doesn't have to deal with Hollywood.
America's cable companies grew up in the cozy embrace of local governments that gave them monopoly franchises, which they've expanded over the years via mergers and acquisitions, not just normal growth. The noncompetitive local franchise model means that when one cable giant buys another, the customers generally have the same choices as before for subscription TV (cable or satellite) and internet service (cable or phone company DSL).
Whose interest is served by such a deal? The shareholders of TWC and Comcast would be thrilled, for sure. So would the NSA and other surveillance statists, who would undoubtedly be happiest if we reverted to the era when a single behemoth telecommunications enterprise served, for all practical purposes, as an arm of the spy services.
The other main winners would be the remaining telecom "competitors" that would be part of an ever-cozier oligopoly of enterprises that upgrade reluctantly and, compared to providers in other developed nations, grossly overcharge their customers. So look for more mergers, even less user privacy, higher prices and – if this is possible for the generally loathed cable companies – even worse service.
Will the Federal Communications Commission and Justice Department veto this buyout? Don't bet on it. The cable industry's clout is enormous, and Comcast is the alpha dog in that pack.
After building a robust and open communications system that gave people more and more choices for information and entertainment, we have permitted – no, we've encouraged – corporate interests to peel away those choices. The new choke points are designed to enrich a few at the expense of the many, and to recentralize information as well as digital media innovation. Profits and power: that's the end game.
In a nation with a sane telecom policy, a Comcast could buy a Time Warner Cable with no pushback, because both carriers would have been required to share their natural monopoly with other internet service providers. We don't live in such a place, and someday soon we will deeply regret it.