http://www.economist.com/news/leaders/21598997-american-regulators-should-block-comcasts-proposed-deal-time-warner-cable-turn-it
Cable consolidation in America
Turn it off
American regulators should block Comcast’s proposed deal with Time Warner Cable
Mar 15th 2014 | From the print edition
[1] IN “OUTLAW”, a drama that aired on NBC, a Supreme Court justice leaves the bench to join a law firm. In real life he might have begun working for Comcast, America’s largest cable company, which owns NBC. Many of Washington’s top brass are on Comcast’s payroll, including Margaret Attwell Baker, a former commissioner of the Federal Communications Commission (FCC), America’s telecoms regulator, who in government had helped approve Comcast’s takeover of NBCUniversal in 2011. Even Barack Obama has Comcast ties. “I have been here so much, the only thing I haven’t done in this house is have seder dinner,” he quipped at a fundraiser hosted last year at the home of David Cohen, Comcast’s chief lobbyist.
[2] It helps to have influential friends, especially if you are seeking to expand your grip on America’s pay-TV and broadband markets. Last month Comcast announced that it would buy Time Warner Cable (TWC), the largest provider of TV and broadband after Comcast, for around $45 billion. In the coming weeks the Department of Justice and FCC will begin to review the merger. They should be sceptical.
[3] The deal would create a Goliath far more fearsome than the latest ride at the Universal Studios theme park (also Comcast-owned). Comcast has said it would forfeit 3m subscribers, but even with that concession the combination of the two firms would have around 30m—more than 30% of all TV subscribers and around 33% of broadband customers. In the cable market alone (ie, not counting suppliers of satellite services such as DirecTV), Comcast has as much as 55% of all TV and broadband subscribers.
[4] Comcast will argue that its share of customers in any individual market is not increasing. That is true only because cable companies decided years ago not to compete head-to-head, and divided the country among themselves. More than three-quarters of households have no choice other than their local cable monopoly for high-speed, high-capacity internet.
[5] If the takeover is approved, Comcast would control 20 of the top 25 cable markets, according to MoffettNathanson, a research firm. Antitrust officials will need to consider Comcast’s status as a monopsony (a buyer with disproportionate power), when it comes to negotiations with programmers, whose channels it pays to carry. Comcast could refuse to carry certain channels, or use its clout to insist on even greater price discounts or to favour its own content over that of others.
[6] For consumers the deal would mean the union of two companies that are already reviled for their poor customer service and high prices. Greater size will fix neither problem. Mr Cohen has said, “We’re certainly not promising that customer bills are going to go down or even that they’re going to increase less rapidly.” Between 1995 and 2012 the average price of a cable subscription increased at a compound annual rate of more than 6%.
A pipe-dream
[7] The biggest worry is Comcast’s grip on the internet. Unlike Britain and France, America unwisely has no “common carriage”, allowing for internet service providers to rent cable companies’ pipes and compete on price and speed. Already Americans pay far more than people in other rich countries for slower internet. Comcast will have extraordinary power over what content is delivered to consumers, and at what speed.
[8] There is plenty for Mr Obama and Mr Cohen to discuss at their next dinner. But better yet, officials could keep their distance from Comcast, and reject a merger that would reduce competition, provide no benefit to consumers and sap the incentive to innovate.
From the print edition: Leaders