For at least the past year, internet users have been anxiously awaiting news regarding the proposed merger between cable and internet companies Comcast and Time Warner Cable. The merger would have given the two companies access to a vast number of American homes, providing nearly two-thirds of all internet connections and roughly a quarter of the cable TV market.
However, as the merger seemed to come closer to a resolution, it started to face intense backlash from consumers and uncertainty from the Federal Communications Commission and the Department of Justice.
The FCC called for a hearing to discuss the merger, and the Department of Justice reportedly planned to object as well. The FCC’s hearing would be a months-long process that would involve company executives taking the stand to discuss subjects like the merger’s possible impacts on economy and competition, and while the two companies are adamant that competition would not be threatened by the merger, a hearing like this would be too lengthy and expensive to be worthwhile.
“It’s very hard to imagine Comcast fighting a multi-year battle with the government. Even if they won that, it sounds like the Department of Justice is waiting to sue, so then you’d have to go to war with the DoJ,” said Rich Greenfield, a BTIG analyst.
The Wall Street Journal also wrote that such hearings are very rarely seen as a good sign for potential mergers.
“The [FCC] staff reached a conclusion that the best option for the FCC is to issue a ‘hearing designation order.’ In effect, that would put the merger in the hands of an administrative law judge, and would be seen as a strong sign the FCC doesn’t believe the deal is in the public interest.”
Comcast and Time Warner explained that the merger would be better for consumers because it would broaden both cable options and affordable high-speed internet once the two companies’ resources were combined, but consumers feared that the merger would create a multimedia juggernaut that would stifle attempts at competition. It was also posited that the merger would give fewer options to consumers who are already limited to one provider for cable and internet needs.
The two corporations rebutted this argument by pointing out that they don’t operate in each other’s territory. However, it was revealed that both companies have a working agreement with each other to avoid competing with each other. With that in mind, the problem with letting the merger go ahead “would increase market power, or at least could be removing even the possibility of such competition,” according to Forbes writer Tim Worstall.
It’s true that shutting down this merger would not necessary promote a boost in competition, nor would it stop other attempted mergers with other cable and internet providers. Time Warner, for example, may restart talks to combine with Charter Communications if and when the Comcast merger is officially dead.
It will, however, mean that smaller competitors like Google Fiber won’t face such imbalanced competition when trying to spread into new areas. Fiber’s arrival in cities across the country has resulted in competitors — like Comcast — suddenly increasing their speeds, which is the type of competition consumers hope to see more of.
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