No way Comcast will buy Time Warner Cable

Regulators will look closely at giving one company such dominance in pay TV, but they'll balk at giving Comcast the keys to our Internet.

By MSN Money Partner Feb 13, 2014 12:32PM

File photo of the Comcast logo on a television screen (© Elise Amendola/AP Photo)By TheWeek.com

 

Comcast (CMCSA) is proposing to buy rival Time Warner Cable (TWC) for $45 billion, combining the No. 1 and No. 2 cable TV providers in the country.


The all-stock deal needs approval from each company's board of directors -- reportedly a done deal -- as well as the Justice Department's antitrust division and the Federal Communications Commission.


The deal isn't going to happen. Not in any recognizable form. 


First, here's the argument for why it might: Comcast has 22 million pay-TV subscribers and TWC has 11 million, a number it has already suggested it could shave by three million under the deal. That would give the combined Comcast-TWC about 30 million subscribers -- far more than its closest cable rivals (as of 2012, Cox Communications had 4.5 million subscribers, Charter Communication had 4.2 million).


But 30 million customers would still be about 30 percent of the national market for pay television -- the FCC's unofficial cut-off point for blocking a deal.

 

(Post continues after video.)

That pay-TV number includes satellite-TV providers like Dish and fiber optic providers like Verizon's (VZ) FiOS, so Comcast's share of the cable TV market would be higher than 30 percent. But still, "a merger may have little impact on consumers," says David Gelles at The New York Times. "Comcast and Time Warner Cable compete in very few markets. As a result, few consumers will see their choices of cable operators reduced."


In other words, your choice for cable TV, wherever you live in America, would be a very aggressive Comcast or smaller, maybe local, providers with comparatively tiny marketing budgets and little muscle.


"Let's get to the bottom line," says Michael Hiltzik at The Los Angeles Times. "There's no way this combination can conceivably be in the public interest." The only real question on the table is "whether the FCC will fold against the economic and political power of these two behemoths."


Well, economic and political power, meet "optics." The proposed merger may not give Comcast a full stranglehold on cable TV access, but it looks like it will. Everybody who has even considered getting cable TV or broadband internet knows that Comcast and Time Warner are the two giants in the room. That's a lot of Americans. Will they care if the giants get hitched? Craig Aaron, president of the consumer advocacy group Free Press, makes a compelling argument they will:


No one woke up this morning wishing their cable company was bigger or had more control over what they could watch or download. But that -- along with higher bills -- is the reality they'll face tomorrow unless the Department of Justice and the FCC do their jobs and block this merger. Stopping this kind of deal is exactly why we have antitrust laws. Americans already hate dealing with the cable guy -- 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. [Free Press]


If there were a Hall of Fame for persuasive press releases, that would have to be a serious contender.


But let's say public outrage fails: There's also the issue of broadband Internet and VoIP (internet) telephone service. Unlike with pay-TV, here Comcast would be the indisputable king. If this merger goes through, notes Om Malik at GigaOm, "Comcast will become the largest broadband provider in the United States, and perhaps the largest outside China." It would have 33 million broadband customers and "control about half of what is called triple-play services -- video, voice, and Internet -- in the U.S."


Along with the pay-TV muscle, this would give Comcast-TWC enormous power in negotiations with content providers, especially since Comcast already owns one of the big ones, NBCUniversal. Allowing one company the keys to one of the most important (and most lucrative) utilities that come into our homes -- the Internet -- could also raise prices and restrict the amount of the web you consume (read: Netflix). Comcast caps the amount of data customers can use each month, for example, while TWC does not.


The FCC isn't the only agency that can scuttle this deal -- the Justice Department's antitrust chief has been pretty aggressive in challenging mergers, at least wringing concessions in cases where the deals went through — but the wild card in this whole Comcast deal is new FCC chairman Tom Wheeler. Wheeler used to be a top lobbyist for the cable industry, but he promises to be a tough advocate for consumers now.


On Monday, at a high-tech conference in Boulder, Wheeler talked up "the primacy of 'competition, competition, competition'" in protecting the rights of consumer. "Our competition policy will take the 'see-saw' approach," he added. "When competition is high, regulation can be low; when competition is low, we are willing to act in the public interest."


Well, "the Comcast-Time Warner deal manifestly would be disastrous for the competitive landscape Wheeler says is his paramount goal," says The Los Angeles Times' Hilzik.


I don't know if Comcast really thinks this deal will sail through, or if it's just trying to scuttle the efforts by Charter to buy Time Warner. But someone in the Obama administration will surely stop this train. My money's on Wheeler.


More from The Week

VIDEO ON MSN MONEY

44Comments
Feb 13, 2014 12:50PM
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combine this with internet laws passed recently this would be the end of Internet.

Feb 13, 2014 1:50PM
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Comcast is monopoly already, never enough. 
Feb 13, 2014 2:07PM
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oooh, I see bad things in our future if this goes thru.
Feb 13, 2014 2:21PM
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Both companies are rip offs who charge entirely too much and provide only a few watchable channels with mostly channels that nobody watchs. They should both be shut down and more smaller companies formed to give the consumer a better deal gain through a higher level of competition in the market. If nothing else the two companies should have their prices regulated so they aren't continually raising the costs.
Feb 13, 2014 2:03PM
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Comcast is monopoly already, never enough just greed. For past 13 years price of the cable done up 6 times, amount of adds absolutely crippled, shows length shorter. It no longer paid cable television anymore. Loyal customers have no respect no promotions no deals on services, every single time you have to fight for the deal. Customer service useless and unhelpful. You have to contact executives officers to get thinks done. If it all of that cost $45 Billion. Good luck.
I need to a Verizon come to Minnesota to wipe Comcast's nose, I will be fist to switch.  
Feb 13, 2014 4:33PM
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I'm a TWC customer for TV and internet.  If this goes through, I will be a new DSL customer from a small local provider and a new DISH customer.  This isn't about looking out for the customer - I watched CNBC this morning and saw some joker exec from one of these companies use the phrase 'maximizing shareholder value' about 10 times.  For those not in the know, that is slang for padding the pockets of the execs and hedge funds (who own most of the stock) while firing employees and screwing customers in the name of short term EPS.
Feb 13, 2014 3:03PM
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Oh.........I thought they were going to buy The Weather Channel TWC.
Feb 13, 2014 3:06PM
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Cox cable is bad enough, always trying, and finding, ways to pump up your bill, just like all the corporations in this country. Incessant greed, aided and abetted by Congress, until you no longer have pants with any pockets for them to pick. Tell me again how wonderful these greedy bahsterds are.
Feb 13, 2014 2:46PM
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the fcc and antitrust portion of the government does not give two shakes about the public interest. big money rules and this merger is no exception. how many of these types of mergers have been slapped down by government in the last 25 years? most likely already a done deal. since people are pulling the plug on cable for streaming and downloads they are looking to get a stranglehold on internet services. 
Feb 13, 2014 3:13PM
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Similar issues came about when banks were allowed to merge and offer multiple services (investments too). When the banking industry was allowed to get involved in investments (stocks, bonds, mortage resales), that is when the &%$# hit the fan. In the "old" days, savings and loans were exactly that, banks that took deposits and made loans, while commercial banks dealt with busnesses. Once banks, investment houses, and other institutions were allowed to "do it all",  the mess came about due to conflicts of interest (make high risk loans, then sell them off as investment grade instruments).  With cable, the same is happening. Cable companies offer TV, internet access (broadband), and VOiP services (phone via the internet). A larger company offering all those services and dominating the market place can only get the sector in the same place. I know in my area, we  are too far away for DSL services, so high priced TW broadband is our only option unless we want to spend even more on satellite internet access. Without competition, there is no way to hold costs down. Maybe one way is break up the businesses and have one company offer only TV and another be an internet provider only.

Feb 13, 2014 2:43PM
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Lets face it.  There never was any competition. They stayed out of each domain and that is why you never had any other cable company to select from.  At least not for me up here in Seattle. It was either Comcast or Satellite TV and thats it.
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"There's no way this combination can conceivably be in the public interest."


Where was this objection when about 90% of what was done to save the banks and the car companies, especially all QE's, cash for clunkers, the three card monty of the stock purchases, sell backs and repurchases for GM, not to mention the preferred stock legal creativity?
Feb 13, 2014 2:39PM
Feb 13, 2014 3:33PM
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People still pay to watch TV?   People still waste their lives away watching junk and all the stupid ads that go with it?     Wake up!  Quit wasting your time.


Good luck cable watchers, the rest of us stream content when we want to watch or use the trusty roof  top antenna.  Get ready for the internet service price hikes when people continue to stop wasting money on paid television channels.     TW already has more internet subscribers than paid channel subscribers.



Feb 13, 2014 3:44PM
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In an un-regulated market all roads lead to monopoly and it's attendant problems - high costs, few choices, and low quality, along with less innovation. 
Feb 13, 2014 3:25PM
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For a free market economy to work well more competition, not less is required. Large companies should routinely be split up. We should have dozens of cable companies, dozens of phone companies, dozens of banks, etc...The guiding principle should be what's in the public interest, and that will always include a combination of low cost & high quality, along with more choice. Instead, we typically have few choices, high costs, and low quality. Comcast is the poster child for this marketplace dysfunction. 
Feb 13, 2014 7:34PM
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As a consumer who already has no choice, I vote no. Not that the FCC gives a rats behind about us, the consumer. Big money rules again. Average joe comes up a distant second.
Feb 13, 2014 7:17PM
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This is going to happen.  I work in the industry and the most likely scenario is Comcast purchases TW then divests some of the systems and subscribers to Charter and Cox.  TW has been losing video subs for the last 6 months, while Comcast and Charter continue to grow top line revenue and subs.

Feb 13, 2014 4:21PM
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Check again everyone......Comcast has agreed buy TWC!!!!!!!! This is no good :(

Direct from the WFAA web site :

Comcast agreed to buy Time Warner Cable for $45 billion Wednesday night, swooping in to top a bid by Charter Communications to merge the nation's top two cable companies in a huge media deal, according to a person familiar with the matter.

In the all-stock deal, Comcast will pay $159 per share, representing an 18% premium from TWC's Wednesday closing price of $135.31.

Feb 13, 2014 7:27PM
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As long as I can still play with my dingy...I don't stress the small stuff. This coming from a guy who loves to play with his dingy. Now GFY!
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