Warner Cable merger
Lack of competition could lead to higher rates and fewer choices, consumer advocates warn.
Consumer advocates, industry analysts and cable customers wasted little time Thursday in airing concerns about the blockbuster deal to combine Comcast and Time Warner Cable, the nation's two largest cable companies.
The $45 billion deal, if approved by federal regulators, would result in a total customer base of 30 million subscribers and could bring technological advances to the world of cable TV and high-speed internet.
But the proposed merger comes at a time when customer satisfaction with the cable TV industry — and the two companies in particular — is low. Last year, Comcast and Time Warner Cable came in dead last in an industry consumer satisfaction survey performed by the American Customer Satisfaction Index.
Time Warner Cable has had numerous customer service and operational issues that have hampered its reputation, exacerbated last year by its high-profile fight with and decision to drop CBS over retransmission fees. This ire was seen across social-media sites such as Twitter and Facebook Thursday, as users voiced concern about the megamerger.
Consumer advocates warn the merger could deepen customer distrust of the companies and the industry as a whole. "The idea that the two largest cable companies are going to get bigger and more powerful is not one the average consumer is going to feel very happy about," said Phil Swann, president of TVPredictions.com, a website that tracks the TV technology industry.
The merger would give Comcast the leverage to demand higher fees from programmers, such as HBO and AMC, and would also likely result in higher fees for consumers, he said. The new megacompany could more readily drop smaller programmers, such as IFC, who don't agree to new payment schemes, leading to fewer channel choices for viewers.
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The deal could also pressure satellite providers, such as Dish and DirecTV, to form their own merger, leading to bigger companies, fewer choices and higher fees, Swann said. "This will have a ripple effect," he said. "It affects pretty much everything across the board."
In a conference call with reporters, Comcast CEO Brian Roberts defended the deal, calling it "pro-consumer, pro-competitive and strongly in the public interest." He said the deal would benefit millions of customers through technological advancements and innovative products. He pointed out that Comcast and Time Warner Cable don't compete in any of the same markets, adding that the merger won't reduce competition in any relevant market.
"The combination of Time Warner Cable and Comcast creates an exciting opportunity for our company, for our customers and for our shareholders," Roberts said.
But in areas in which competition has been erased, technology tends to stagnate, not flourish, said Sean Meloy, campaign manager with Public Knowledge, a Washington-based technology advocacy group. The proposed cable merger will lead to higher prices and less technology, he said.
"Consolidating doesn't help breed innovation — competition does," Meloy said. "This is very much a bad idea for consumers."
Cable companies for years have tried to varnish their image with consumers and stem the exodus of subscribers to competing providers or online streaming options. But the so-called "cutting the cord" trend, in which viewers eschew cable altogether for websites such as Hulu and Netflix, is a relatively small and won't affect the cable industry — at least not yet, Swann said. He estimates the number of viewers who have left cable providers for cheaper online options is less than 1 million.
The merger could be a needed boost for the cable industry at a time it has struggled to hold on to viewers — and could be good for the U.S. economy, columnist Antoine Gara wrote in TheStreet.com.
"Time Warner Cable's $158.82-a-share takeover by Comcast may raise alarming antitrust issues; it may have caught some in the media by surprise," Gara wrote. "However, it is the best deal to push the cable industry forward in a time of great change."
But consumers were generally less enthusiastic, taking to social-media sites to air their cutting — and at times, whimsical — views on the massive merger. On Twitter, "#Comcast" quickly became a hot topic.
"My #1 least fav. company being bought by my #2 least fav. Looks like I'll be hating my cable/Internet company for the foreseeable future," wrote @laurenpreston.
Jamie Kilsten, @jamiekilsten, added this perspective: "Time Warner merging with Comcast is like Justin Bieber merging with Nickleback and that's the only thing you can listen to."
In a Facebook post, Robert Reich, former U.S. labor secretary, said he understood why Comcast wanted to buy its rival, giving it more power over content providers. But consumers will likely see higher prices, he said. "Cable subscription fees continue to skyrocket, and in customer-satisfaction surveys, subscribers consistently rank cable companies last," Reich writes. "Some deal."