These Arguments Explain The Pros And Cons Of Comcast Buying Time Warner Cable
Comcast is the largest cable and Internet provider in the country, and it wants to buy the second-largest provider in the country, Time Warner Cable.
This tentative merger is going to raise a lot of issues with federal regulators, especially since this marriage would give one corporation total control over the U.S.' Internet and cable services.
Throughout the day, several sources have presented compelling arguments as to why this is good for business but bad for customers. See below for the ones you need to read.
Pros
Comcast, the most technologically advanced of the primitive cable-box proprietors, wants more leverage. Size, plus ownership of high-speed Internet connections, will grant it more power at the bargaining table with program networks and Internet platforms.
This is just business. Online streaming platforms are becoming a viable source of revenue, and Comcast can use the resources from Time Warner Cable to build powerful forms of delivery for content.
Shalini Ramachandran and Dana Cimilluca, The Wall Street Journal
Time Warner Cable, in turn, was uncomfortable with the amount of debt Charter would have layered onto the company had it succeeded in buying it, one of the people said. Combined with Comcast, Time Warner Cable would have much more conservative leverage ratios than it would have, had Charter succeeded.
Over the past few months, Time Warner Cable had been fending off an aggressive takeover bid from Charter Communications. TWC indicated that it didn't like the amount of debt Charter would have forced upon it, and thought that Comcast was a more reasonable partner.
You can see broadband is not only a much faster growing business, it also has higher gross margins and comes with much fewer headaches - such as paying through the nose for programming. Broadband also comes with one more thing - a virtual monopoly.
Malik's argument explains why broadband access was really the target of this merger. He references online video and explains that people are going to need more bandwidth to watch more stuff online, which could lead to cable companies increasing prices to make more money from Internet access.
Cons
While the articles explain why this merger is good for business, these two sources highlight the very obvious implications this merger would have for customers:
Kevin Roose, New York Magazine
Being a huge national conglomerate gives you advantages when you're negotiating with cable networks. And the bigger Comcast gets, the more leverage it will be able to exert on the networks who depend on it for distribution, and the less competitive the entire cable industry will be as a result. That's ultimately bad for customers, even if their monthly bills don't change all that much in the short-term.
Roose explains that this merger would give Comcast too much power to get what it wants. Acquiring Time Warner's resources puts it on an uneven playing field. Plus, Comcast and Time Warner Cable don't have spectacular reputations for customer service. It would erode customer relations more if they raise prices.
The biggest concern regulators are likely to have is over the combined company's control of broadband access to more than one-third of consumers in the country, particularly in light of a recent ruling striking down "net neutrality." Here is likely where the bulk of the review will focus and where regulators will likely seek the most concessions and service guarantees.
Buzzfeed's Peter Lauria explains that the control over broadband access could be the biggest issue, which is why Comcast is going to have a huge fight with the FCC.