In February, Comcast came to an agreement with Time Warner Cable on a $45 billion deal that, if finalized, will result in the generation of the largest cable company in the US.
The proposed deal will be heavily scrutinized by the US Justice Department to address anti-monopoly laws and the Federal Communications Commission (FCC), which will determine if the deal is in the public’s best interest. The first hearing was held earlier this month, shortly after which Netflix publicly opposed the merger.
The Wall Street Journal reports that Comcast controls about 20 percent of the US pay television market. In addition to owning a vast number of media and entertainment properties, like NBC Universal, E! Entertainment Television and Universal Pictures, the buyout will turn Comcast into the chief cable TV and broadband Internet provider down the entire East coast. Comcast will stretch from Maine to Florida, including the densely populated regions in the northeast corridor. Comcast will also be moving into Los Angeles and lucrative markets in Texas.
According to J.D. Power & Associates, respondents still prefer cable over satellite TV. With cable already in the majority of American homes, why is the buyout sitting at such a high price? Delara Derakhshani, policy counsel for Consumers Union reports, “For such a large cost, Comcast must see a larger potential gain.”
As some market analysts still argue, this it isn’t about TV anymore—its about gaining more leverage in the growing multimedia market.
However, Comcast CEO Brian Roberts took to business news station CNBC to assure people otherwise.
“It’s a really special transaction. The deal is pro-competitive,” Roberts said. “It’s pro-consumer. Since Comcast doesn’t overlap with Time Warner, there is no reduction in competition.”
Time Warner Cable currently serves New York and Los Angeles, two of the biggest markets for television, and doesn’t do well in either state.
After a month-long hiatus with CBS and Showtime last year, and Southern California’s hour-long blackout during Super Bowl 2014, Time Warner is certainly not on consumers’ good side, which stunts possibilities for future growth.
According to the American Customer Satisfaction Index, they have been losing subscribers by the boatload, ranking bottom in their customer service since 2009, and slow on the trigger to roll out special offers other companies have jumped on, like cloud-based TV. Ratings show their broadband Internet connection has also dropped in customers’ satisfaction.
Consummation of the two cable TV companies will make Comcast a dominating force to competitors like AT&T, DirectTV, and Charter providing more leverage into states that have little to no competition in the television and internet marketplace.
Analysts predict that Comcast will eventually turn into more than just an outlet for cable TV by branching out into streaming services: a video service that enables customers to instantly view their favorite movies and TV shows.
This would allow Comcast to sell select bundles of cable channels via the Internet to households that are unable to subscribe to pricey cable packages on TV. With cable bills skyrocketing into the hundreds, this just may be what students have longed for: a cable service they can afford.
The combination will create a higher value for both shareholders and a new experience for customers, resulting in changes that will certainly help the company identify its cost savings, and can end up cutting cable bills.
“I think customers are going to benefit from this transaction,” said Comcast’s Chief Executive Vice President, David L. Cohen. “I don’t believe there’s any way to argue that they’re going to be hurt from a price perspective as a result of this transaction.”
Still, there has been a wave of commentary as market analysts and lawmakers have gone on to express their doubts and concerns of the two cable providers merging together.
“It’s hard to say whether it will affect consumer prices, but you do wonder what happens when a company gets that much control over a market,” said Melanie Williams, J.D. , the CSUN department chair of business law . “The government gives little monopolies to smaller companies, so this wouldn’t be an antitrust problem unless they were competing against each other. But it doesn’t make sense to put these expensive companies in one area unless they’re sure consumers will use it.”
According to Comcast, this mega-merger means Time Warners’ consumers will benefit by the quality of service, the quality of offerings and technological innovations. The “X1 Video Operating System”, which simplifies navigation, makes channels accessible on devices and offers whirlwind features like voice control through the iPhone app.
Time Warner Cable will combine its unique products and services with Comcast’s, including StartOver, which allows customers to restart a live program in progress to the beginning, and LookBack, which allows customers to watch programs up to three days after they air live, all without a DVR.
Again, this is good news to college students.
“As a college student, I don’t have time to watch TV on a regular schedule. The new technology would allow me to catch up on my programs,” said Ashley Barnes, sophomore psychology major.
Picture coming home from a long day of school or work and still being able to catch your favorite show. Sounds like a pretty solid deal, particularly for the small percentage of those with spouses and dependents living in student housings’ University Village Apartments located at the north end of campus.
Time Warner currently services the 120-unit complex, and will most likely be joining the Comcast family this year if the deal gets approved.
“We won’t have definite answers until later on, but the likelihood of dropping Time Warner and tacking on a new contract with DirectTV is thin,” IT contractor Keith Holland said.
The bulk of cable in student housing is serviced by DirectTV.
“We would have to go in and lay more cable wires down to connect the complex with our main provider,” Holland said. “Consequently this can become very expensive and inconvenient.”
As time goes on, the arguments against the mergers are starting to evaporate.
“I do believe the buyout will get approved, but under harsh conditions,” Williams said. “A lot of concern rises for consumers (like) whether it will increase the quality of services and what effect it will have on consumers that are paying.”
For now, the odds of the deal being rejected appear to be relatively small until legal filings and federal approvals are finalized at the end of the year. To reduce competitive concerns, Comcast plans to divest 3 million of Time Warner’s 11 million subscribers, bringing Comcast’s total managed subscribers from 23 million to 30 million.
Merger agreements between Comcast and Time Warner Cable are based on approval by shareholders and pending regulatory reviews that are expected to close by the end of the year. Rest assured, that debates about the proposed mega-deal have only just begun.