Would Comcast purchase of Time Warner make it too powerful?

The potential merger between Comcast and Time Warner Cable, announced Thursday, would create a juggernaut of a cable/Internet provider – but only if it gets past antitrust regulators.

|
Brendan McDermid/Reuters
Traders work at the kiosk that trades Time Warner Cable on the floor of the New York Stock Exchange on Thursday. Comcast Corp said it would buy Time Warner Cable Inc for $45.2 billion, in a mammoth deal that combines the two largest US cable operators.

Cable giant Comcast said Thursday it had agreed to purchase Time Warner Cable for $45 billion in stock, a deal that would merge the two biggest US cable companies into a titanic conglomerate. But would it be too big?

The enormous deal – if it passes regulators’ inspections – would produce an Internet and cable service empire, spanning some 30 million subscribers and folding in some of the biggest US markets, from New York to Los Angeles.

“This merger is unprecedented,” says Seth Bloom, a former general counsel of the Senate Antitrust Subcommittee and current president of Bloom Strategic Counsel. “There has never been a cable merger of this size – we’re talking here about the number one and number two cable companies in the US.”

And it’s that jumbo size that could trouble regulators reviewing the merger for adherence to antitrust laws, analysts say. The deal, before it can close, will have to be reviewed by federal antitrust inspectors at the Department of Justice for whether it gathers up an unfair expanse of the Internet/cable market, disadvantaging consumers and putting other media companies on the slip and slide. Then, in a separate process, the merger will also have to clear the Federal Communications Commission (FCC), which will investigate if the deal is in the public’s interest.

Seeking to head off possible antitrust concerns, Comcast said in its announcement of the deal that it planned to drop about 3 million subscribers before taking aboard about 8 million more after the merger, putting its total subscriber count at about 30 million.

That means that the provider would hold just under 30 percent of the US market for pay television subscribers, an unofficial threshold for mitigating media antitrust concerns, Comcast said, in the release. The FCC used to have a formal 30 percent ownership limit on the cable industry, but a D.C. court tossed out that cap in 2009.

Comcast also noted that its current market overlaps little with Time Warner’s purview and that the two are not direct competitors.

"Significantly, it will not reduce competition in any relevant market ... because our companies do not overlap or compete with each other," Comcast Chief Executive Brian Roberts said of the deal, in a conference call with financial analysts, according to Reuters. "In fact, we do not operate in any of the same zip code."

Mr. Roberts called the deal “pro-consumer” and “pro-competitive,” according to CNBC (Comcast owns CNBC).

Still, the deal is sure to attract concerns about the considerable leverage a Brobdingnagian cable provider could have over programmers. Of particular concern is Comcast’s ownership of NBCUniversal: Comcast purchased the media behemoth in 2011 for $17 billion, becoming the umbrella organization to that company’s rolodex of enterprises, from NBC broadcast network, to Universal Studios, to cable channels like MSNBC. That might raise concerns among regulators about how the relationship could bias a colossal, more powerful Comcast against NBC’s competitor programmers.

“The question is, what does this deal mean for programmers that aren’t affiliated with NBC Universal,” says Mr. Bloom.

The deal could also be noteworthy to regulators for the amount of power it might give one cable company to influence the fate of the still fledgling online television programming market, he says. Cable providers, including Time Warner, have in recent years been accused of negotiating contracts with networks that limit when and if their shows can be provided to online distributors – like Netflix – in an effort to hit back against online companies’ burgeoning edge against them in millennials’ mobile/laptop world.

The Obama administration’s record on antitrust cases offers few clues to how the DOJ might handle the Comcast-Time Warner deal.

In his first campaign, President Obama said that aggressively blocking uncouth corporate mergers would be among his administration’s top priorities, a revision from the outgoing Bush administration’s light regulation of the matter.

In one of the highest-profile cases since then, the DOJ rejected AT&T’s proposed union with T-Mobile in 2011, saying that the deal would monopolize markets in cities across the US. In a speech in New York on Jan. 30, Assistant Attorney General Bill Baer highlighted the cancellation of the deal as spurring a highly-competitive mobile service market that has advantaged consumers.

Still, just a few months ago, in a reversal of its original opinion, the DOJ cleared a mega-merger between United Airways and American Airlines, an industry that has in recent years been whittled of competitors as more airlines coalesce.

On the whole, the DOJ appears to be interested in working with companies to fine-tune their deals, rather than outright blocking the mergers, says Bloom. In the 2011 Comcast-NBCUniversal merger, the DOJ agreed to terminate its investigation into the deal by issuing a consent decree, which introduced into the deal measures assuaging concerns that the takeover would disadvantage NBC’s network competitors.

Concerns over the latest deal, including those about biases against non-NBC programmers and attacks on online media providers, could also be resolved in the DOJ with consent decrees, says Bloom.

He said that the FCC is somewhat of a “wild card,” since its chairman, Tom Wheeler, has been in the post for just over three months. He added, though, that the FCC is unlikely to strike down the deal if it passes federal antitrust regulators’ review. 

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Would Comcast purchase of Time Warner make it too powerful?
Read this article in
https://www.csmonitor.com/USA/USA-Update/2014/0213/Would-Comcast-purchase-of-Time-Warner-make-it-too-powerful
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe