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Comcast SHOULD be Allowed to Purchase Time Warner Cable. BUT ONLY Under 2 Conditions

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You probably have seen the news that Comcast has come to a $45 billion mega-deal agreement to purchase Time Warner Cable.

If you’ve been following this blog for any length of time, you know that I have a strong disdain for Comcast and everything that they represent. You guessed correctly that this post was coming. The fire has been rekindled.

We all know this is bad news for consumers, content providers, and employees of the two companies, but just how bad is it?

Comcast has close to 22 million cable subscribers, about double second place Time Warner Cable’s 11 million. The combination of the two would lead to about 30% market share in the cable TV market and surpass the combined share of #3 – #10 in that market (AT&T U-Verse, Verizon FIOS, Cox, Charter, Cablevision, Bright House Networks, Suddenlink, & Mediacom).

comcast time warner cable purchaseComcast’s CEO, Evil McVillainston, was quick to point out,

“It will not reduce competition in any relevant market because our companies do not overlap or compete with each other. In fact, we do not operate in any of the same ZIP codes.”

He then added, “mwahahaha” before escaping through a trap door in the floor. He is correct, there is no immediate reduction in competition that would result from a merger, the likes of which typically gets antitrust regulators fired up.

But you have to look one step deeper than that to see how nobody wins, with this move:

  • a mega-behemoth cable provider carries unprecedented strength to the negotiating table with content providers. And if the content providers don’t agree, they get dropped. This is an increasingly common happening and will become even moreso. And whether you subscribe to cable TV or get that content in other ways, when content providers lose negotiating power and revenue, the content suffers.
  • “cost efficiencies” in the joining of the companies don’t equal customer price cuts. They equal job cuts and more profits.
  • if this move goes through, what is preventing Comcast from continuing to purchase smaller operators and expanding its footprint?
  • a more powerful, cash-rich Comcast equals more lobbying power to squash regulation.
  • a more powerful, cash-rich Comcast equals more lobbying power and more funds to consume or squash any challengers. Less competition = higher prices for customers and less innovation.

And that final point there is what really stinks about this. Many media outlets are focusing on the cable TV impact of this deal. While important, we can all do without cable TV entertainment. It’s not an essential service. There are endless ways for us to entertain ourselves this day and age. Consumers are figuring that out – and the cable giants have heavily been bleeding subscribers for years.

What most of us can’t do without is broadband internet access.

Broadband, high-speed internet access has become as essential to our existence and the economy as energy, water, and phone communications.

And at this point, broadband is still working off the same technology and infrastructure that cable TV has since the 1950’s: copper coaxial cable laid in the ground. But what other choice do we have? DSL lines at a blazing fast 250 kb/s upload speeds? Nope. Spotty/slow service and tiny usage caps from a satellite provider at $100/month? Nah. The same from a mobile operator? No thanks.

When you have monopoly standing in the market with an essential service, you can charge pretty much whatever you’d like. Comcast, Time Warner, and other coaxial cable monopolies know this, and the result is that they push their pricing to levels that are just below the breaking point where people say, “F this, I’m going back to 250 kb/s”. Right now, that price is about $75/month. Since the infrastructure was laid decades ago (in part through government funds, by the way), the operations/costs consist of throwing in some customer service reps, and the rest is pure profit.

While we’re at it, lets add on $7/month for a modem rental (which is why I replaced Comcast’s modem with my own), put some monthly usage caps on customers, and throttle speeds to artificially low levels so that we can create pricing tiers to extract maximum profit.

These coax monopolists not only demand ridiculous pricing from subscribers to use their outdated infrastructure, but instead of paying content providers, as they do with television, they (in coordination with mobile carriers) legally wrangled to eliminate net neutrality so that they can start charging web content providers like Amazon, YouTube, Hulu, and others to transmit content over those lines. That would be like a water utility charging Lake Michigan for allowing water to flow through its pipes in order to make it to its paying customer’s faucets.

<OK, it’s time for me to take a chill break… breathe…>

On top of all of this, unlike with electricity, gas, and owners of mobile phone spectrum – coax operators have unregulated singular ownership of these lines. The big 4 wireless spectrum operators (Verizon, AT&T, Sprint, & T-Mobile) are required to lease bandwidth at wholesale prices to MVNO’s (mobile virtual network operators). The result is consumers are able to get mobile phone plans for less than $10 per month instead of the $80+/month that the big 4 commonly charge.

If a semi-essential industry (some may argue with that assertion, but I barely use my mobile phone these days) with 4 legitimate competitive options is required to open up wholesale access with the purpose of creating more competition for consumers, why wouldn’t a pure monopoly be asked to do the same for a near-essential service like internet access?

What about Google Fiber (which has touched down in Kansas City, Austin, and Provo) coming to save the day with its blazing fast fiber technology speeds that are 100 times the coax average? Surely, that would create legitimate competition in the market, right? Well – when that happens, the coax company lobby writes out new legislation to be enacted that prohibits further competition. In the case of Kansas City, the Kansas Cable Telecommunications Association drafted up Senate Bill 304, which says it fosters more competition. From the bill:

“Except with regard to unserved areas, a municipality may not, directly or indirectly:
(1) Offer to provide to one or more subscribers, video, telecommunications or broadband service; or
(2) purchase, lease, construct, maintain or operate any facility for the purpose of enabling a private business or entity to offer, provide, carry, or deliver video, telecommunications or broadband service to one or more subscribers.”

Writing legislation to stifle competition from being able to enter the market in the name of competition? A Jedi mind trick like that would make Obi-Wan Kenobi proud. How many decades will it take Fiber or another competitor to make it to your city, even if assuming zero political/legal hurdles? Plenty of time for the cable lobby to buy out your state legislature first.

What happens when more innovative competitors are able to enter the market? As one resident near Kansas City pointed out:

“The nearby cable/internet providers panicked. In one year, the top speed of my local provider went from 5-6 Megabytes to 100 Megabytes. I didn’t need internet that fast and was able to go from the top tier package down to a lower tier and pay less.”

Alas, I have a solution for the U.S. Justice Department, to the benefit of every customer that falls within Comcast/Time Warner’s footprint:

Comcast – you can have Time Warner Cable, under 2 conditions (that should have already been required of you):

  1. You allow wholesale access to your coax for cable and broadband internet re-sellers.
  2. You agree to net neutrality, indefinitely.

Take it, or leave it.

And this is why the U.S. Justice Department lobby will never let me in the door…

Would you allow Comcast to purchase Time Warner Cable? Under what conditions?

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About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You can also explore every post I have written, in order.

  • Thank you for such an easily digestible explanation of the current plight of US telecom consumers. However, while I completely agree that your two conditions should be required of Comcast (as well as Time Warner and the like), I still disagree that Comcast should be allowed to buy Time Warner under any circumstance. Its simply not in anyone else’s best interest.

    As you’ve alluded to, broadband access has become almost as much of a necessity as electricity and water, and needs to be treated like such – not controlled by manipulative money-grubbing monopolies.

    Let’s say that Comcast (after hypothetically buying Time Warner) is then required to allow wholesale access to their network for resellers. In theory, that sounds great for consumers because it opens the door for competition of resellers. But those resellers would still have to play hardball with the monopoly that is Comcast.

    Don’t get me wrong – we do need to open the door for these middlemen (since a newcomer expecting to directly compete with Comcast is likely SOL), but allowing Comcast to obtain any stronger of a grip on broadband access than they already have is going to have a negative impact (whether direct or indirect) on everyone but Comcast.

    Finally, +1 for net neutrality. Or +1000000…

    • G.E. Miller says:

      Sometimes you have to give up something in order to get something more essential. As a consumer, would you take that tradeoff?

      If I’m sitting at the DOJ table, that is my proposition. Is it likely to play out that way? No. In today’s US of A, I have a hard time seeing any real concessions being demanded.

      But maybe this is a needed spark to light the fire that we’re all tired of getting screwed by big telecoms and it hurts our citizens and economy… so forward to as many people as you know! =)

  • Kevin says:

    For people that aren’t heavy internet users you should definitely look into FreedomPop and see if its available where you are. The device is ~$90 and then they have plans based on usage and speed from $19/mo (12 Mbps & 10 GB) to free (1.5 Mbps & 1 GB). I have the $19 plan and it is plenty fast for my normal internet usage and I even used it to stream the Superbowl although it lagged on occasion.

  • Ron Ablang says:

    Thanks GE for another great article. I agree wholeheartedly.

    Thanks to Kevin also for the good tip. I will look into that.

  • Adam K says:

    This news made my decision to cut the cord feel even better as rates should sky rocket within a year from the reasons you state. For folks that worry about lag time using roku or apple tv for entertainment all I can say is-power line adapter. I have Century link DSL at 7mbps and I don’t get any buffering on a 46 inch LCD TV while using other devices. IPads can usually handle those speeds wirelessly but big screen TVs not so much. The power line adapter uses the electrical wiring in your house to run wired. Total cost for netflix , hulu, and internet? $36 a month. Dump cable, its the best thing you will ever do.

  • Seth says:

    I am a Residential Sale Rep for a Fiber-optic company in the Peoria, Illinois market. There are many companies like my company popping up across the country. However, Comcast does not like competition, so they’ve sent in big guns sales guys to win back customers they reemed for years in our market. 99% of our customers send them packing. There are still a lot of people that still say they like comcast though. My immediate response at the door is “seriously?” and then say everything that was mentioned above.

    With no competition, prices continue to go up and service continues to fall. Competition IS GOOD.

    Ramblings after another day of trying to convince people of that….


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