Thursday, February 13, 2014

Comcast to purchase Time Warner for $45 billion

This is from

Comcast and Time Warner Cable could face a big, uphill battle against regulators in order to win approval for their $45 billion merger.

The combined company would bring cable or Internet service to about 30% of American subscribers and serve 19 of the country's 20 largest metropolitan regions. That would give Comcast, which is already the nation's largest TV, Internet and home phone provider, an even more sizable lead on its rivals.

Comcast (CMCSA, Fortune 500) and Time Warner Cable (TWC, Fortune 500) will have to gain approval from two regulators: both the Federal Communications Commission and either the Department of Justice or the Federal Trade Commission. The agencies have not yet decided which will take up the case. (The FTC typically scrutinizes cable mergers but the DOJ usually handles media deals, including Comcast's 2010 purchase of NBCUniversal from GE (GE, Fortune 500).)

The companies said in a statement the deal will be "pro-competitive" and "strongly in the public interest." For instance, Comcast noted that it has higher broadband Internet speeds than Time Warner Cable, more high-definition offerings, and the deal will help make future broadband and digital TV deployment cheaper for the combined company.
 So Comcast is trying to purchase Time Warner for $45 billion, in a deal that would combine two of the biggest cable companies in the United States.  This would make Comcast the dominant provider for cable television, and internet service, reaching out to around one in three Americans.  According to Tim Hanlon, founder of Vertere Group, a media and technology investment advisory firm, '"This isn't about TV anymore -- it's about controlling a fatter, more intelligent pipe for multiple services that emanate from it," including broadband Internet, phone and home security monitoring.'

The control here for Comcast is about broadband internet.  Internet sites such as Hulu and Netflix online through your TV and computer.  However, downloading these movies and TV episodes requires a fast internet connection--certainly faster than your old modem, or even DSL.  Otherwise, when you play an online movie, it will pause at time, as the movie is being downloaded.  So it takes a lot of bandwidth to download and play such online content.  By gaining more control over cable and broadband internet, Comcast can certainly charge higher fees to their customers, who use download online content, and possibly even block internet sites, such as Hulu and Netflix, from Comcast broadband internet customers.  According to Michael Hiltzik: 
 Comcast CEO Brian Roberts tried to finesse the issue Thursday by arguing that the deal "does not reduce competition in any market or in any way," thereby acknowledging the paramount flaw in the nationwide cable market and trying to depict it as a virtue.

But the ramifications of the cable monopoly go beyond mere access to channels on your set-top box. As we observed back in August, the more damaging consequence of the cable monopoly is in broadband Internet access, where the power of the cable firms' monopolies is magnified by the lack of practical alternatives to their Internet services.
Yes, you can buy DSL Internet connectivity from your local telephone company. In some places, you can buy fiber-optic connectivity, also from a phone company (Verizon or AT&T). But DSL service is typically much slower than cable service and is geographically constrained even within service districts. (The further you are from a DSL connection box, or "central office," the crummier your signal.).
Verizon has ended its rollout of its FiOS fiber service; if your neighborhood doesn't have it now, it's not getting it. AT&T says it's still rolling out its Uverse fiber service, but hardly at a light-speed pace.
The harvest of this domination of broadband connectivity by cable monopolies is easy to see: In general, the U.S. has the lowest connection speeds and the highest prices in the developed world. The New America Foundation serveyed the world in 2012 to determine what customers could get for the equivalent of $35 a month. In Hong Kong, they could download from the Internet at 500 megabits per second (a half a gigabit); in Tokyo 200 Mbps; in Seoul, Paris, Bucharest (Romania) and Berlin 100. In Los Angeles, 10. Los Angeles is a Time Warner Cable monopoly.
The constraint here isn't technological, but commercial. Our fat and secure cable monopolies simply don't feel competitive pressure to provide customers with the fastest speeds at reasonable, affordable rates. When they do get pressured, they respond.
So in the end, consumers will end up with even crappier cable and broadband internet services from Comcast, while also paying higher rates.  

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