There has been lots of controversy over the merging of two of the largest cable companies Comcast and Time Warner (News - Alert) Cable. Concerns range from fear of a monopoly to worse customer service to higher fees and data caps.
Jim Edwards at Business Insider, for example, says you will get screwed if the merger goes through. Consumers Union thinks if the merger happens, prices will increase and service will suffer. Peter Radizeski, who I consider to be a foremost expert on telecom and M&A, hates the deal, saying it is terrible for consumers.
Radizeski’s blog on the topic reads as such: “’The transaction will generate approximately $1.5 billion in operating efficiencies.’ IN THEORY! The only operating efficiency will be the reduction in personnel. So even more layoffs in the telecom space. Awesome! The FCC's sole job is to protect the consumer. This is not a pro-consumer move. We already have enough too-big-to-fail companies with massive debt and flat markets.”
Another TMCnet writer, Tracey Schelmetic, penned a piece titled Comcast Can Afford to Buy Time Warner But Not To Improve Its Awful Customer Service?
Tara Seals, also a TMCnet contributor, noted Free Press and Public Knowledge comments indicating the combined company would have outsized influence when it comes to negotiating content deals and network peering arrangements.
Cable companies are fascinating because they are government-sanctioned monopolies in their own areas so a merger of two companies doesn’t change much since they don’t really compete with each other. In other words there should be less concern than if two large oil companies like Exxon and Mobil wanted to merge as their gas stations compete on price on many street corners.
From a competitive standpoint both of these cable companies are seeing an onslaught from the phone and wireless competitors – in many cases from both at once. In fact, a wireless broadband router can easily replace a cable connection and with bonded LTE (News - Alert)-A around the corner, the speeds of wireless will actually be faster than wired for many households.
If that wasn’t a big enough of a threat, Google (News - Alert) Fiber is a solid alternative that will potentially put even more pressure on cable companies. Which would you want: broadband from your cable company or Google broadband with a Chromebook, Chromecast, enhanced Google cloud storage and an Android device thrown in?
Speaking of Chromecast, YouTube, Xbox, Netflix and Hulu are just some of the serious competitors to cable companies at the moment. I wager we all know people who have cut the TV cord at home and are getting all their video from OTT providers.
The reality is this merger gives these companies economies of scale to compete effectively and lower prices if needed.
The flipside to this argument comes from Doug Mohney who writes for TMCnet sister site TechZone360 that Verizon’s lowering of prices yesterday is a direct result of competition from T-Mobile. Moreover, this competition comes because AT&T (News - Alert) was not allowed to acquire the company. Meaning, the more competition you have in the market, the lower the prices.
A few years back I argued against the T-Mobile (News - Alert) acquisition on the basis that small telecom equipment and software companies would be shut out of working with smaller carriers and would in-turn negatively impact choice in the market. I am still a believer in this idea, and it holds true as a reason to block this merger.
So in the end I am neutral on the acquisition – I think it will be bad for equipment and software companies, but it will allow the combined company to compete more effectively with satellite, phone and Google, who I expect to become a major force in the market over the rest of the decade.
Edited by Stefania Viscusi