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The announced merger agreement between Comcast and Time Warner Cable (TWC) for $45 billion in stock will combine the nation’s two of the nation’s largest media companies. Each is a major cable multi-system operator (MSO) within an industry structured on the basis of local “regulated” monopolies, with little meaningful competition. The merger will be one more step in the further consolidation of the media marketplace that includes “last mile” connections for wireline delivery, wireless communications, Internet access and, increasingly, programming.
Comcast is the largest cable and home Internet service provider (ISP) in the U.S., with 2013 revenues of $64.6 billion. The new post-merger media behemoth will control 34 million cable subscribers throughout the country. Among the territories it currently controls are Boston, Chicago, Denver, Detroit, Houston and Philadelphia. In 2011, it acquired NBC-Universal Pictures from GE, including 33 local TV stations, the Spanish-language network, Telemundo, 13 cable networks (including USA, CNBC, Bravo, SyFy, MSNBC, CNBC, NBC Sports, Oxygen, the Weather Channel) as well as Universal, a major movie studio (and Focus Features, a boutique “art house” micro-studio) as well as the Universal theme parks in LA and Florida. It addition, it controls the Golf Channel, E! Entertainment, G-4, Style and regional sports cable services as well as the lifestyle website, Daily Candy. It also runs the Philadelphia Flyers NHL franchise and the NBA’s Philadelphia 76ers.
TWC’s 2013 revenue were $22.1 billion and provides cable service in 29 states, with controlling interests in Dallas, Los Angeles and New York as well as large segments of Maine, North Carolina and Ohio. Under increasing financial problems resulting from its shotgun marriage with AOL, Time Warned spun off its TWC holdings in March 2009.
Cable television emerged in the late-1940s as a “retransmission” service to improve the signal quality of over-the-air broadcast analog TV channels. Broadcast TV viewers often received signals that were dimmed or blocked because the local station’s signal was weak or due to interference from natural obstacles (e.g., mountains). In the 60-plus years since the first cable wires were strung, the industry slowly improved the carrying capacity of the underlying coaxial “cable” and, with digital technologies, enomously increased the number of channels it could offer.
The cable industry’s power is two fold. First, cable companies operate on the basis of an exclusive franchise negotiated with a particular locality. Second, cable companies long controlled in-home access to video programming through a subscriber’s rental of the cable converter or set-top box. Until recently, the cable industry effectively limited competition by restricting programming sources to major media conglomerates and resisting alternative signal providers especially via the Internet. Today, the cable industry consists of two overlapping (and increasingly integrated) oligopolies: (i) cable multi-system “operators” (MSOs) or distribution companies and (ii) powerful “content” or programming companies exemplified by the Comcast-NBC-Universal merger.
Under today’s “regulated” media marketplace, cable monopolies face apparent competition from satellite companies like DirecTV and telecom companies like AT&T (Uverse) and Verizon (FiOS). To appreciate how dubious such competition is, in 2011 Comcast and TWC (along with Bright House and Cox) signed a co-marketing agreement with Verizon. Under the agreement, Verizon ceded competition over the delivery of broadband services in specific territories controlled by the cable companies for control over wireless services. This contributed to Verizon’s decision to stop building-out its competitive FiOS service.
In all likelihood, the Washington, DC, No Theatre of public “regulatory” deception, the FCC and the Dept. of Justice will approve the merger. Comcast will likely divest 3 million subscribers to comply within terms of what is known as the “30 percent rule” that ostensibly assures industry competition. In addition, it is also expect to agreed to net neutrality requirements that it agreed to when it acquired NBC-Universal.
However, the consequences of the merger are clean. As Free Press notes, “Comcast will have unprecedented market power over consumers and an unprecedented ability to exert its influence over any channels or businesses that want to reach Comcast’s customers.” Corporate executives and bankers will get rich, cable jobs will be cut through “efficiencies” and subscribers will get worse services at higher prices. And the U.S. status as a 2nd-rate telecom nation will only get worse.