Comcast's proposed $45.2 billion offer for Time Warner Cable would create a telecommunications-industry behemoth with about 30 million subscribers. When any telecommunications company gets that big, naturally it raises a lot of quesitons about the potential impact on consumers.
On the surface, it may not seem like a problem. The cable industry is regional by nature, and Comcast and Time Warner Cable compete in few markets. To appease regulators, Comcast proposes to divest itself of about 3 million subscribers, bringing the total market share of the merged companies to about 30 percent of U.S. subscribers. Indeed, Comcast is touting the deal as a boon to consumers, saying:
“Through this merger, more American consumers will benefit from technological innovations, including a superior video experience, higher broadband speeds, and the fastest in-home Wi-Fi. The transaction also will generate significant cost savings and other efficiencies.”
The cable industry has historically been slow to innovate—although the last few years have brought a trickle of better cable boxes and higher broadband speeds. But there’s no reason to believe that a merger would lead the combined Comcast–Time Warner Cable to upgrade technology any faster than the prospect of Internet content providers such as Amazon, Google, and Netflix breathing down the individual companies' necks. And we’ll be watching closely to see whether those “significant cost savings” find their way to consumers.
Even if this merger doesn’t have a direct effect on regional competition, it could lead to a broader lack of competition in the industry as a whole. Large corporations make broad strategic decisions about things such as improving service in rural markets, rollouts of new technology platforms, net-neutrality policy, and consumer pricing. Such a large merger can also have an indirect effect on customers of smaller cable and telco companies that won't have the negotiating muscle that Comcast-Time Warner Cable will with cable channels—that could mean higher pricing for them.
According to Consumer Reports’ annual customer satisfaction survey, cable and telecom companies routinely score low on perceived value. Comcast came in eighth overall out of 16 companies in our Ratings of telecom bundlers, and Time Warner scored even lower, ranking 10th.
And the industry has hardly been friendly to consumers of late, with the recent Verizon vs. FCC ruling, and statements from cable executives such as Cablevision's CEO, Jim Dolan, about cracking down on promotional pricing. A Comcast-Time Warner Cable congomerate puts even more negotiating power in the hands of increasingly fewer companies.
“It's hard to understand how this kind of concentrated market power, which would account for almost three-quarters of the cable industry, is going to benefit consumers," Delara Derakhshani, policy counsel for Consumers Union, the policy and advocacy arm of Consumer Reports, said. "It raises several red flags about the power and influence that one company would have on the marketplace, and the impact it would have on your wallet and the choices you get. We’re counting on regulators to take a very hard look at what this enormous merger would do to competition, customer service, and bills that continue to climb year after year.”