Something big is brewing in the cable industry. Comcast appears to be considering a bid for Time Warner Cable. Of course, it may have to beat an offer that Charter Communications is putting together—unless, that is, the two companies can find a way to make a joint bid.
So should you care about what is shaping up to be a major consolidation of the cable industry? And will Washington?
A person involved in the deal tells Bloomberg News that Comcast doesn’t think the government would stop such a deal on antitrust grounds, but there will certainly be others trying to convince regulators to do so. Cable companies, of course, don’t really compete in the U.S. Your cable provider is wholly a function of where your house is. But if they did merge, the combination of Comcast and Time Warner Cable would create one giant provider covering more than 60 percent of subscribers nationwide and would account for one-third of all pay-television customers, according to industry analyst Craig Moffett.
The Federal Communications Commission has objected to this level of consolidation in the past, but regulators have been stymied by the Court of Appeals for the D.C. Circuit, which has thrown out a rule prohibiting cable companies from controlling more than 30 percent of the industry. The court found such a cap to be arbitrary, especially with the rise of satellite television as an alternative to cable.
Still, the FCC could challenge a merger on the more general grounds that it’s bad for consumers. “The challenge is that a Comcast-Time Warner Cable combination would be so large that you could argue that you couldn’t survive as a programmer without a distribution agreement from Comcast,” says Moffett.
An optimistic take on this would be that it would put an end to those pesky blackouts that happen when content providers and cable companies butt heads over how much the programmers will get paid. The pessimist’s take is that the entire country shouldn’t be forced to watch only those shows that Comcast Chief Executive Officer Brian Roberts deems worthy.
Another wrinkle comes from the fact that Comcast is also a content provider and might be particularly tempted to veto its competitors. Comcast and Time Warner Cable would also control a large proportion of the broadband market—i.e., the way Internet television services reach their customers—and this could be an area where the federal government might try to wrest some concessions. Lawmakers and consumer advocates have already expressed concern about anticompetitive behavior aimed at cable’s Internet TV rivals.
It’s clear that this is in flux, and the specifics will obviously impact how regulators react to it. Either way, it will be an interesting early test for new FCC Chairman Tom Wheeler, a former lobbyist for the cable industry who has made it a point to talk up how aggressively he plans to protect consumer interests. He even hired Gigi Sohn from the advocacy group Public Knowledge, making a consistently harsh critic of anticompetitive behavior in the cable and wireless industries his special counsel for external affairs.
Of course, the consolidation of the cable industry isn’t the only thing Americans are scared the FCC will mishandle. After all, we’re facing the specter of a country where people will be able to make phone calls on planes.