First, the bad news: another American industry threatens to close up ranks by consolidation. The good news? When we complain about cable service, at least we’ll all be talking about the same company:
Comcast said Thursday it had agreed to buy Time Warner Cable for $45 billion in a deal that would combine the two biggest cable companies in the United States.
If the deal is approved, the combined group will be the country’s dominant provider of television channels and Internet services.
The two companies expect the merger to take effect by the end of the year, but regulators are likely to take a close look at the potential impact on consumers.
To address those concerns, Comcast said it was prepared to divest about 3 million subscribers. But it would still have about 30 million customers.
Divest them to whom? Charter and Cox are the other big competitors in this market, along some smaller regional players, but they’ll pale in comparison to the Comcast/TWC behemoth. In fact, Charter wanted to bid for Time Warner Cable and talked about an acquisition last month, but Comcast beat them to the punch — largely by boosting its bid to just short of TWC’s asking price of $160 a share, up from their initial bid of $130.
The big question will be whether the Federal Trade Commission allows this sale to go through. The Obama administration sued to block the AT&T/T-Mobile merger in 2011 (and succeeded in scuttling the deal), even though that transaction would have consolidated a smaller portion of that market. Furthermore, the cell-phone market is inherently more competitive, as consumers have much more opportunities to switch carriers than in the cable business.
Then there is the question of Comcast’s connections to content producers. Comcast owns NBC, for instance, a deal that raised a few eyebrows but still managed to gain regulatory approval. Its size would make them much more competitive on pricing over Charter and Cox, and that plus their hold on NBC’s assets might be just a little too much for the White House to ignore, even for the politically-connected Comcast. This has anti-trust written all over it, especially for Democrats who have played the populist-progressive card more and more.
We’ll see what happens, but I’d be surprised if the Obama administration allowed the deal to go unchallenged in court.