Why the Comcast–Time Warner Cable deal could be a disaster for consumers

comcast van | Flickr - Photo Sharing!

The two biggest—and most hated—cable companies in the U.S. could become one.

The fight started immediately.

Comcast and Time Warner Cable, America’s two biggest broadband cable providers, are merging in a deal worth $45.2 billion to create what Comcast calls a “world-class technology and media company” with 30 million subscribers, about 30 percent of all American paid TV subscribers.

The deal will be scrutinized and need approval from the FCC—chaired by Tom Wheeler, a former cable industry lobbyist—and the Department of Justice. It is expected to be complete by the end of 2014.

The merging pair, which would become a company seven times larger than the third-place cable provider (Cox), have earned the title of two worst cable companies in the country according to 2013’s American Customer Satisfaction Index. The news of their impending marriage broke Wednesday night and was confirmed Thursday morning. It took no time at all for impassioned critics to weigh in.

Comcast is already the richest media company in the world: It owns two national TV networks (NBC and Telemundo), 26 regional stations, and 20 cable channels, to say nothing of its television, movie, broadband, phone, and home security businesses.

As soon as news broke, antitrust concerns about a potentially harmful cable behemoth were voiced immediately across social media.

Anticipating those voices, Comcast opened its press release by saying that the “transaction creates multiple pro-consumer and pro-competitive benefits, including for small and medium-sized businesses,” and that it was prepared to “divest systems serving approximately 3 million managed subscribers.”

In a press release outlining the “public interest benefits,” a Comcast spokesperson said the merger will accelerate the deployment of advanced technology and the development of new products for customers.

The state of American Internet service today is, well, not ideal. The United States ranks far behind other developed nations in both speed and affordability according to a 2013 report released by the nonpartisan, Washington, D.C.–based New America Foundation. The report claims that the cost of an Internet connection in American cities is often more than twice as much as one in similarly sized metropolitan areas around the world.

The report also asserts that local cable monopolies are largely to blame. A lack of competition gives Comcast and Time Warner Cable little incentive offer better plans.

Our data also shows that the most affordable and fast connections are available in markets where consumers can choose between at least three competitive service providers,” the report explains. Only 9 percent of Americans have access to three or more providers; the majority are limited to one or two incumbent telephone or cable companies.”

Comcast and Time Warner Cable don’t overlap on turf (the former serves cities like Washington, D.C., the latter New York City), so they don’t directly compete against each other in the cable and Internet market.

“If they are not competitors, a merger between these cable television and cable Internet services cannot harm competition, and therefore should not raise antitrust concerns,” Gus Hurwitz of the American Enterprise Institute argued.

While the two companies don’t serve the same zip codes, this deal does kill whatever hope consumers had that the companies would eventually do battle over what has become a famously frustrating cable landscape.

Outside of on-the-ground competition, the consolidation of two enormous mass media and telecommunications companies have raised the uncomfortable spectre of rising prices for consumers and bully tactics against much-loved video providers like Netflix, who Comcast views as direct competition against its cable service. Comcast famously gives preferential treatment to its own video applications over services like Netflix.

Comcast and Time Warner Cable both lost video subscribers this past quarter. Netflix and similar services are increasingly popular among “cord cutters” who have ditched cable television in favor of Internet video.

The immediate public and media reaction to the merger was largely negative.

“This deal would be a disaster for consumers and must be stopped,” wrote Craig Aaron, CEO of Free Press. 

“Americans already hate dealing with the cable guy,” Aaron said, “and both these giant companies regularly rank among the worst of the worst in consumer surveys. But this deal would be the cable guy on steroids—pumped up, unstoppable and grasping for your wallet.”

In advocating for the deal, Comcast itself is calling the merger a generator of “substantial public interest.”

“When Comcast and Time Warner Cable come together, it puts a lot of pressure on the Verizons and AT&Ts of the world,” Roslyn Layton of the AEI told the Daily Dot. 

While the two cable giants don’t overlap on turf with one another, companies like Verizon will have a newly powerful competitor to contend with for consumer dollars. Therefore, this deal, Layton and Comcast CEO Brian Roberts assert, actually increases competition.

On the Comcast side, advocates of the deal argue that it will give the new company powerful leverage to bargain with content providers like ESPN that can increase cable bills by almost $5 per month. The sports channel has been called “a tax on every American household.”

Throughout the day, a cacophony of voices will be weighing in through mass media to measure the pros and cons of the deal.

If the deal goes through, customers “will probably see prices rise, with no corresponding improvement in service,” Harvard Law professor Susan Crawford recently wrote.

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

The battle to convince the public and then, much more importantly, federal regulators, is only just beginning.

Photo via tyler/Flickr

Patrick Howell O'Neill

Patrick Howell O'Neill

Patrick Howell O'Neill is a notable cybersecurity reporter whose work has focused on the dark net, national security, and law enforcement. A former senior writer at the Daily Dot, O'Neill joined CyberScoop in October 2016. I am a cybersecurity journalist at CyberScoop. I cover the security industry, national security and law enforcement.