Last month Comcast, the nation’s largest cable and broadband internet provider, announced that it had made a bid to purchase Time Warner Cable (TWC), the nation’s second largest cable provider for an eye-popping $45 billion.  If the deal goes through, Comcast would account for 38% of the broadband market and twice as many consumers as its next closest competitor.  Further, Comcast and TWC have about 22 and 11 million cable subscribers, respectively.

There was a swift and loud response that this potential merger would eliminate competition and burden the common consumer immensely.  Critics immediately pointed out that already bad customer service (a recent survey ranked cable companies as the worst for customer service, besting industries like insurance, credit card issuers, and phone companies) would suffer even further.  Others are crying foul, saying that consumers are eventually going to be hit where it hurts the most: the wallet.  Additionally, Kevin Roose, has simply argued that the deal should be quashed on precedent and mathematical grounds.  His argument rests on a figure called the Herfindahl-Hirschman Index (HHI), which is used to measure potential mergers in concentrated industries.  By present counts, the cable industry is a “moderately concentrated” market and any HHI increase of 100 or more in these types of industries raises red flags at the Department of Justice.  By Roose’s numbers, the Comcast-TWC merger would be an increase of 639 points, almost elevating the cable industry to “highly concentrated” status.

However, other commentators are saying, “Not so fast.”  Many have pointed to potentially large benefits of this new cable giant.  First and foremost, some are arguing that this merger might be a large win for net neutrality.  (Here’s a quick rundown on how the FCC plans to respond to a recent blow to net neutrality by one of my fellow bloggers.)  If the Comcast-TWC merger goes through, Comcast would be required to apply every condition of its 2011 merger with NBC Universal to all of its new subscribers.  This means every added TWC subscriber would also be subject to Comcast’s agreement to extend net neutrality until 2018.  Obviously, critics say this is simply a short-term fix and not a real solution to the net neutrality problem, but  any additional protection doesn’t hurt.  Comcast has also pointed to the fact that it has fulfilled the other slew of conditions imposed upon it as a result of the NBC Universal merger.  The merger also might not have that large of an effect due to the fact that Comcast and TWC presently co-exist in hardly any markets at all.  Therefore, all that would change would be that TWC customers would now be making their checks out to Comcast, while at the same time enjoying the expanded range of channels and services that Comcast offers.

Whether the merger will actually pass federal scrutiny is an entirely different question.  The CEO of AT&T, whose potential merger with T-Mobile was nixed by the feds in 2011, has publicly stated that he thinks the merger will go through.  Another tough blow to those hoping to see this deal die is that the head of the Department of Justice’s antitrust division won’t be able to participate in the department’s review.

Whether this merger eventually goes through or not, I don’t think my frustrating phone conversations with Comcast employees are going to change any time soon.

 

–Thomas McFarland


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