Opinion: Comcast can’t make one huge cable firm look better than two big ones
There are many reasons Comcast came up empty in its bid to buy Time Warner Cable, including an administration that’s hostile to telecommunications mergers, a nearly empty reservoir of goodwill among cable TV consumers and a howling mass of Internet users freaked out by the prospect of a single Internet service provider with more than half of the ultra-high-speed market.
The main problem, though, is that the deal offered no obvious, dramatic benefits for the public.
As my colleague Meg James reported, Comcast is expected to announce as soon as Friday that it’s dropping its bid. On one level, it’s remarkable that two companies that do not compete in any residential market could fail to win the green light from federal regulators. On another, though, it’s not surprising that Comcast couldn’t overcome the parade of horribles trotted out by its opponents.
Sure, there were a number of things Comcast claimed as benefits of the deal. For example, it argued that its technology was better than Time Warner Cable’s, so the takeover translated into an upgrade for TWC’s customers. It also touted its Internet Essentials program, which offered low-cost broadband service and discounted computers to low-income families with school-age children.
But those were incremental steps up from the current baseline, not categorical leaps. It’s not as if the purchase would allow the merged company to compete on new turf, or even to do something in cable TV or broadband that each company was simply incapable of doing today.
Nothing is stopping TWC from rolling out its version of Internet Essentials, and the set-tops from Fan TV offer TWC customers state-of-the-art search and browsing capabilities. Nor would the deal shore up Comcast’s glaring weakness, which is its reputation for poor customer service (above and beyond the industry’s abysmal record on that front).
There have been hints of Comcast offering a national mobile-phone service based on Wi-Fi, akin to Google’s Project Fi. But if it does, it will have to rely on roaming agreements with other Wi-Fi networks, with or without TWC’s facilities.
That’s why it’s been easy for opponents of the deal to shift the debate to the hypothetical world of bad things that Comcast might do with the clout it would theoretically gain in certain markets. And that’s what reportedly has persuaded the Federal Communications Commission and the Justice Department’s antitrust division to oppose the deal, although neither agency has formally announced a position on it.
Here’s an example. Even though the expanded company would face the same number of pay-TV competitors that Comcast and TWC do today in each market served, TV programmers warned that they could be forced to agree to less-favorable terms simply because Comcast operated in more markets. In other words, they contended that Comcast’s larger customer base would make it more willing and able to stand the heat if it blacked out a channel in a dispute over fees. That argument only works if you assume that cable TV customers are slow to switch providers even when service is bad, but history holds otherwise. When TWC blacked out CBS for a month in a dispute over retransmission fees in 2013, it lost more than 300,000 subscribers.
Another example: As with pay-TV, the merger wouldn’t reduce the number of competitors Comcast would face in the broadband market. Nevertheless, online video services and consumer groups warned that Comcast’s larger share of the national market would give it more ability to discriminate against Web-based services that competed with its movie and TV programming (remember, it owns NBCUniversal) or its cable TV service.
Granted, there’s so little competition in residential broadband, it’s hard to count on market forces to keep any Internet service provider honest. That’s why the FCC adopted net neutrality rules to bar the sort of picking of winners and losers that opponents of the merger are so concerned about. It doesn’t help matters that the trade association representing Comcast and TWC is suing to eliminate those rules, but for now, at least, they exist. So do antitrust laws, which could be used against Comcast if it discriminated against online services that threatened its core businesses.
There’s no question that the deal would have given Comcast a significantly larger chunk of the cable TV and broadband markets. Its opponents appear to have done a better job illustrating how that size would be bad for consumers than Comcast did explaining how it would be good for them.
Follow Healey’s intermittent Twitter feed: @jcahealey
A cure for the common opinion
Get thought-provoking perspectives with our weekly newsletter.
You may occasionally receive promotional content from the Los Angeles Times.