Comcast Wants to Buy Time Warner Cable for $45 Billion — This Should Worry You

Comcast, the largest cable company in America, just announced plans to acquire Time Warner Cable, the second-largest cable company in America, for approximately $45 billion in stock.

If this deal goes through, a single company will provide cable TV and broadband internet to more than 30 million American households — roughly one in three homes with a broadband connection. In many of those markets, Comcast would be the only high-speed broadband option.

This should worry you regardless of who your ISP is.

The Numbers

Comcast currently serves about 21.7 million cable subscribers and 20.7 million broadband subscribers. Time Warner Cable has 11.4 million cable subscribers and 11.2 million broadband subscribers. Combined, the new Comcast would serve approximately 33 million cable and 32 million broadband subscribers.

Comcast has said it will divest about 3 million subscribers to stay below the 30% national cable market share threshold — a number that used to be an FCC cap before a court struck it down. Even after divestitures, the combined company would control roughly 30% of the pay-TV market and a similar share of broadband.

In broadband specifically, the numbers are more concentrated. The FCC currently counts about 85 million fixed broadband connections in the U.S. Comcast would control roughly 30 million of them — over a third of the market, with the next largest competitor (AT&T) having about half as many.

The "We Don't Compete" Argument

Comcast's primary argument for why regulators should approve the deal: the two companies don't directly compete. Comcast and Time Warner Cable operate in different geographic markets. If you're in a TWC market, Comcast isn't an option, and vice versa. Therefore, the merger doesn't reduce consumer choice in any local market.

This argument is technically true and completely misses the point.

Cable companies don't compete with each other. That's the problem, not the defense. The reason Comcast and TWC don't overlap is that the cable industry has long operated as a series of regional monopolies. Merging two monopolies into a bigger monopoly doesn't create competition — it consolidates power.

The relevant question isn't whether Comcast and TWC compete with each other. It's whether a company controlling 30+ million broadband connections has too much power over the internet ecosystem — over content providers, device makers, competing services, and the subscribers who depend on it.

The Broadband Leverage Problem

Here's the specific concern. A Comcast serving 30 million broadband subscribers becomes an unavoidable gatekeeper for any company that wants to reach internet users. Netflix, Google, Amazon, small startups, anyone delivering content or services over the internet — they all need to pass through Comcast's network to reach a third of American broadband customers.

We've already seen what Comcast does with that kind of leverage. Netflix's streaming quality on Comcast mysteriously degraded throughout 2013 until Netflix agreed to pay Comcast for direct interconnection. Comcast's defenders call these paid peering arrangements normal business deals. Netflix calls it extortion. The reality is that when a single ISP controls access to tens of millions of customers, "normal business deal" and "extortion" start to look pretty similar.

Double the size of that ISP, and the leverage doubles. A Comcast-TWC serving 30 million homes could effectively demand payment from any content provider that wants adequate performance for a third of the country's internet users. That's not a competitive market — it's a toll road.

What This Means for Prices

Comcast and TWC both rank near the bottom of every customer satisfaction survey. The American Customer Satisfaction Index consistently places them among the most disliked companies in any industry. Comcast's customer service is legendary for its awfulness — and not in a good way.

Mergers in concentrated industries don't historically lead to lower prices or better service. They lead to the opposite. When there's less competition, there's less pressure to keep prices down or service quality up. And in most markets, broadband competition is already thin — typically one cable provider and one DSL provider, with DSL increasingly unable to compete on speed.

Comcast's broadband prices have risen steadily even without the merger. Its basic Performance tier (25 Mbps) runs about $67 per month in most markets. That's more than double what comparable service costs in cities with real broadband competition.

The Regulatory Fight Ahead

The deal needs approval from both the FCC and the Department of Justice. The DOJ will evaluate antitrust concerns. The FCC will conduct a broader public interest review that considers competition, diversity of content, and the impact on consumers.

Public advocacy groups — Free Press, Public Knowledge, the Consumer Federation of America — have already come out in opposition. So have several content companies and tech firms, though many are staying quiet publicly because they fear retaliation from Comcast.

The FCC review will take months, possibly more than a year. Public comments will be solicited, and given the intensity of feeling about broadband prices and service quality, expect a flood of opposition.

Comcast is a politically sophisticated company that spends heavily on lobbying — over $19 million in 2013 alone — and has allies in both parties. The company successfully won approval for its NBC Universal acquisition in 2011 by accepting conditions that included net neutrality commitments and requirements to expand broadband service.

But this deal is bigger, and the broadband market has become even more concentrated since 2011. Regulatory approval is far from guaranteed.

What You Can Do

File comments with the FCC. Once the formal review begins, the FCC will open a public comment period. Voice your concerns. The Commission pays attention to volume.

Contact your elected representatives. Members of Congress can influence the FCC and DOJ review. Tell them you oppose the merger and why.

Support competition. If you have the option to switch to a non-Comcast, non-TWC broadband provider — DSL, fiber, fixed wireless — consider it. The best argument against this merger is a market where consumers have real choices.

The Comcast-TWC merger is the biggest broadband policy fight since the net neutrality debate. What happens here will determine the structure of the American internet industry for the next decade. Pay attention.