What does Comcast-Time Warner deal mean for cable customers?

Comcast's planned $45 billion acquisition of Time Warner Cable would increase the nation's largest cable company by 30 million households
Comcast's planned $45 billion acquisition of Time Warner Cable would increase the nation's largest cable company by 30 million households (AP)
Posted: February 17, 2014

What do pay-TV subscribers have to worry about with Comcast's planned acquisition of Time Warner Cable, a $45 billion deal that will grow the footprint of the nation's largest cable company by more than a third, to 30 million households?

Not much at first glance - and that, paradoxically, illustrates the real problem in the marketplace.

To most consumers around the country, "the cable company" is the only cable company available, just like "the electric company" is the utility that delivers power to their homes. When Comcast executives say they can swallow up most of the nation's second-largest cable company without doing harm to competition, that's basically true - because there really wasn't much competition to start with.

But is the Time Warner takeover really "pro-competitive, pro-consumer, and strongly in the public interest," as David L. Cohen, Comcast's political mastermind, promised the day the deal was announced?

Consumer-advocacy groups such as Public Knowledge, which plans to fight the deal, say that's just spin aimed at mollifying consumers and meeting the public- interest standard the Federal Communications Commission is required to apply in weighing such mergers.

"This is much too great a concentration of power for any one company to have," said Harold Feld, senior vice president of Public Knowledge. "This isn't just about cable anymore. This is about leveraging across all the platforms that these companies have."

Public Knowledge says the deal is problematic, in part, because of Comcast's "vertical integration": Its earlier acquisition of NBCUniversal gave it control of a major film studio, a broadcast network, and a lineup of popular cable channels - key content to any pay-TV system.

"An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content," said Public Knowledge's John Bergmayer.

Feld said the deal was also problematic because cable systems are the dominant U.S. provider of broadband Internet service and have learned to use their high-speed data pipes to compete outside their core business - say, by offering digital phone service or other data-reliant services such as home security and automation - while protecting their traditional turf.

Comcast's behavior in its home market, Philadelphia, highlights some of the risks critics describe.

Though Philly is one of the few markets where a cable provider faces new competition, from Verizon's state-of-the-art FiOS fiber-optic service, Comcast fought off an earlier attempt at local competition from RCN.

And it depressed the share of two satellite providers, Dish Network and DirecTV, by long refusing them access to its local SportsNet channel, which carries Phillies, Flyers, and 76ers game telecasts. Pushed by the FCC, Comcast now ostensibly offers SportsNet to the satellites, but at a price they consider too high in a market where they have already lost the most serious fans.

Comcast and other cable companies have also limited the inroads made by companies such as Netflix that use digital streaming to challenge their core pay-TV business, Feld said.

For years, there were hopes that major players like Intel would compete by offering "virtual cable systems." No longer, Feld said.

"Companies like Netflix are essentially video-on-demand providers, and they don't get stuff till after the cable video-on-demand services," he said.

Cable TV's loose regulation, which dates to the days before it also offered broadband, has frustrated the FCC's attempts to exercise oversight over a service now considered essential.

"From a consumer perspective, the problem is that they're stuck with a local monopolist in about 80 percent of the country," said Susan Crawford, a visiting professor at Harvard Law School and outspoken critic of the cable industry. The occasional duopoly is hardly much better.

The cable companies "are subject neither to competiton nor a cop on the beat," she said.

But maybe this time, the FCC will grow a little more spine.


jgelles@phillynews.com

215-854-2776 @jeffgelles

www.inquirer.com/consumer

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