Feb. 14 (Bloomberg) -- Comcast Corp. has pledged that its $45.2 billion merger with Time Warner Cable Inc. will be good for consumers. Eric Raynal isn’t buying it.
The first-year medical student, who gets his TV and Internet from Comcast, expects prices to go up and customer service to languish if the deal is approved.
“I anticipate this going badly for the customer,” said Raynal, who studies at Oakland University William Beaumont School of Medicine in Michigan. “Companies are in the business of making money and they go through mergers to make more money. It’s ugly for the customer no matter how you spin it.”
Raynal’s reaction underscores the challenge facing Comcast as it tries to sell the Time Warner Cable deal to regulators and the general public. Though Comcast and Time Warner Cable don’t compete in the same markets -- mitigating the usual antitrust concerns about rivals merging -- the two companies were already poorly rated by consumers.
Comcast and Time Warner Cable are the two worst-ranked companies for customer satisfaction in the cable business, according to the American Customer Satisfaction Index. Among all industries -- including airlines, banking and other businesses that frequently rankle customers -- they placed second and third from the bottom. Out of more than 230 companies in 43 industries, only the Long Island Power Authority was lower.
On a conference call after announcing the deal yesterday, Comcast and Time Warner Cable executives said the merger would improve customer service and let the combined company roll out new products more quickly. Comcast also expects to generate savings of about $1.5 billion and increase its cash flow.
“Scale matters,” Time Warner Cable Chief Executive Officer Robert Marcus said on the call. “Our customers will be the beneficiaries, as our combined scale will enable Comcast to deliver a truly great user experience.”
Josh Barnett, a six-year Comcast subscriber in Bloomington, Illinois, said he doesn’t believe customer service is going to get better. Since Comcast took over the cable systems serving his area in 2007, the company’s responsiveness and product quality have gone downhill, he said.
“A company just gets to a point where it’s just too large to wrap its arms around anything, including customer service,” he said.
Barnett dropped his TV package in September, keeping only his Internet from Comcast -- the main provider of broadband service in his area. If another provider became available, he would switch, Barnett said.
“There is no reason to think that just the merger itself would change the level of satisfaction of the customer service,” said Alexander Chernev, a marketing professor at Northwestern University. “Right now, each of the companies are large enough to be able to provide enough efficiencies of scale in service. There’s no reason to expect an improvement.”
Bobby Amirshahi, a spokesman for Time Warner Cable, said the company has made an effort in markets like New York and Los Angeles to improve network reliability. John Demming, a spokesman for Philadelphia-based Comcast, declined to comment beyond this morning’s announcement.
The merger also will undergo scrutiny from regulators, who may be swayed by public opinion. The deal faces “raw political pushback from cable critics,” who would argue it goes too far, Christopher King, a Stifel Nicolaus & Co. analyst, said in a note yesterday. “But we ultimately expect the transaction will be approved.”
Though customers may complain about the companies, the acquisition is going to accelerate competition in the industry, said Richard Greenfield, an analyst with BTIG LLC. The deal will make it easier for Comcast to challenge satellite and phone services, such as Verizon Communications Inc.’s FiOS.
“Getting bigger and controlling more of the country is going to allow Comcast to be a more aggressive competitor and offer better services to the consumer across a wider footprint,” Greenfield said on Bloomberg Television.
Comcast also may get a fresh crack at customers in areas it didn’t serve before, such as New York City. That will mean winning over customers like David Weller, a self-employed digital strategist in Brooklyn. After 15 years as a Time Warner Cable subscriber, he switched to FiOS in 2011.
After experiencing fewer service outages and shorter maintenance wait times with Verizon’s service, Weller said he wouldn’t go back to the new merged company. He’s also concerned about Comcast being able to raise prices as it adds market share.
“This deal certainly is going to create a larger monopoly at the local level,” he said. “When your revenue can still go up and your consumer customer service index can drop exponentially, then what’s the incentive to provide good customer service?”
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