Comcast bid for Time Warner Cable likely to get antitrust scrutiny
February 14, 2014
U.S. antitrust regulators are expected to take a close look at Comcast Corp.'s proposed $45.2 billion takeover of Time Warner Cable.
The purchase would create a company that would be a dominant force in American entertainment. It also would combine two companies that have scored low in consumer-satisfaction surveys.
"How much power over content do we want a single company to have?" said Bert Foer, president of the American Antitrust Institute, a Washington consumer-interest group.
And, with 30 million TV customers and 32 million Internet subscribers, such a company might be able to raise prices at will, critics say.
"The industry's pattern of yearly price increases, coupled with sporadic reliability, keeps customer satisfaction low relative to other household services and vulnerable to new technologies that enter the market," said David VanAmburg, director of the American Customer Satisfaction Index.
In the most-recent survey by the American Customer Satisfaction Index, an Ann Arbor, Mich., research group, Comcast and Time Warner Cable had the two lowest scores.
In the 2013 J.D. Power consumer-satisfaction ratings, done by region, Time Warner Cable and Comcast were ranked at or near the bottom in every region and in every category. Meanwhile, Dish, DirecTV, Verizon and AT&T U-verse took turns occupying the top ranks.
Public Knowledge, a Washington consumer-rights group, denounced the Comcast-Time Warner Cable deal, saying it would give Comcast "unprecedented gatekeeper power in several important markets."
"An enlarged Comcast would be the bully in the schoolyard," the consumer group said.
But the Ohio Cable Telecommunications Association sees the deal "as a benefit for the state and consumers in the state."
"Comcast has invested billions of dollars in the past few years in programming and technology," said Jonathon McGee, executive director of the association. "This is going to be a good thing."
The company that would result from the merger of the top two U.S. cable-service providers would dominate 19 of the 20 largest U.S. TV markets, including Ohio, New York, Chicago, Los Angeles, Dallas, the Carolinas and Milwaukee.
"I don't know if the deal is too big to fail to be approved, but it is definitely too big to sail through either the Department of Justice or the FCC without serious, serious examination," said Reed Hundt, a former Federal Communications Commission chairman
That's because Comcast is not only the nation's largest cable company but also a majority owner of NBCUniversal, which operates TV networks and channels including NBC, Telemundo, USA Network, Syfy, E, Bravo, CNBC, MSNBC and the Weather Channel.
Comcast believes it can answer regulatory worries by divesting 3 million subscribers because the combined customer base of 30 million would represent a bit less than 30 percent of the U.S. pay-television video market.
DirecTV, the largest U.S. satellite-TV provider, has more than 20 million subscribers.
Also, Comcast could argue that, with little or no overlap in the regions that the two cable companies serve, they don't directly compete and therefore won't reduce consumer choices.
The purchase "is a huge deal," said industry analyst Jeff Kagan. "Cable TVhas been going through a tough period, losing customers to new competitors."
Over the past few years, Comcast and Time Warner Cable have suffered a combined net loss of more than 3 million subscribers. Meanwhile, subscriber numbers at DirecTV, Dish, AT&T and Verizon have risen.
Information from the Associated Press and Reuters was included in this story.