Purge the Merge!

So, back in February, I was asked to comment on the proposed merger between US cable television giants Comcast and TimeWarner Cable, essentially Comcast's acquisition of TWC, the latter an independent company with no ties to media giant TimeWarner since 2009. Comcast, on the other hand, is a major media corporation, not quite on the scale of TimeWarner proper, but the owner of NBCUniversal.

The request for a comment came from the St. Paul Pioneer Press in Minnesota, where Comcast is king. For my part, I live in TimeWarner Cable territory. But that's besides the point, because the question of the benefits and costs of mergers such as this one transcends localities. But for the record, here's the comment I gave on the deal:

Consumers generally do not have a choice of which cable company to use, the companies are granted monopolies within given territories, so the short-term impact will be negligible. The long term impact will be negative, however, in that in the absence of strong regulation, monopolies have a tendency to overprice their products and services. The merger also makes it harder than ever to protect net neutrality, as Comcast becoming even more powerful will be in a better position to restrict access to certain parts of the internet, and charge more for that access, to in effect create a tier system for online access similar to the system used for cable channels. And since Comcast owns NBCUniversal, there are conflicts of interest between the corporation's role as content provider and carrier that are intensified by this expansion, and further impact net neutrality. The one saving grace in all this is that this trend may result in more effort being put into alternative delivery systems, such as fiber optics from telephone companies, satellite, perhaps an expansion of Internet2 to home delivery, and maybe even a renewed form of over-the-air digital broadcasting.

Now, let me take you to the actual article, written by Julio Ojeda-Zapata, and published on February 13th of this year. Entitled, Comcast-TimeWarner Deal Has Some History in the Twin Cities, the article obviously has a local slant, and you can read it over in its local environment by clicking on the link, or read it here on my more New York Metropolitan Area-based site.

Here's how it begins:

Comcast's proposed Time Warner Cable takeover, announced Thursday, would create a mega-national cable company. Whether that deal would have any immediate impact in the Twin Cities remains unclear, though, especially since Time Warner no longer has a foothold here.

Time Warner once offered its services in the city of Minneapolis and the west-metro suburbs, but Comcast took over that territory in August 2006 as part of a complicated $17.6 billion deal. At that time, the companies bought up the assets of bankrupt cable company Adelphia and then swapped territories around the country to consolidate their respective holdings.

That's when Comcast seized control of virtually the entire metro area, minus small pockets served by other companies like Charter Communications, which still operates in the region.

"We fought very hard to put the Twin Cities together, finally," Comcast CEO Brian Roberts said at the time.

And the company is committed at the corporate level as well. It announced last month it is keeping its 700-employee regional headquarters in downtown St. Paul through 2024. From the offices across the Mississippi from downtown's core, Comcast oversees operations in Minnesota, Wisconsin, Kansas and Missouri.

For customers, the merger with Time Warner shouldn't significantly alter the operational landscape in the Twin Cities, at least in the short term.

And this is where I come in, with the long and the short of it:

"Consumers generally do not have a choice of which cable company to use, (since these) are granted monopolies within given territories, so the short-term impact will be negligible," said Lance Strate, professor of communications and media studies at Fordham University in New York City.

"The long term impact will be negative, however, in that in the absence of strong regulation, monopolies have a tendency to overprice their products and services," Strate added. "The merger also makes it harder than ever to protect net neutrality, as Comcast becoming even more powerful will be in a better position to restrict access to certain parts of the Internet, and charge more for that access."

 And do note that net neutrality has become even more of an issue over the intervening months as the Federal Communications Commission has proven to be less than vigorous in defense of this basic principle regarding online communication, especially in the face of attempts to undermine and eliminate net neutrality on the part of internet providers, i.e., cable and telephone companies.

But let's get back to the rest of the article, which is more concerned with competition among content and connectivity providers:

Barry Randall, a financial-portfolio manager in St. Paul for Boston-based Covestor Investment Management, recently saw his Comcast bill exceed $200 for the first time. He does not believe the proposed merger would have an appreciable short-term effect on that score, or anything else involving Comcast in this area.

But he does think Comcast is running scared because of long-term trends. He notes how more and more people are dumping cable TV for online-streaming options, and how wireless carriers like Verizon and AT&T are building mobile broadband networks that are comparable to Comcast's Xfinity broadband Internet service in raw performance.

Randall smelled the desperation when he visited a Comcast store in Highland Park to pay his cable bill.

The company has been pushing its next-generation X1 television equipment, and "I could see the marketing effort first-hand," he said. "Anything that reduces the number of remotes in the living room is going to get a try, even while Comcast is subject to a changing competitive landscape."

Local observers have complained for years about the region's paucity of competing Internet providers with pricing and performance similar to Comcast's Internet access, a scenario not likely to change if and when Comcast gets regulatory approval to acquire Time Warner.

 While cable companies are given monopolies over their territories, here in the New York Metropolitan Area they compete with satellite TV services, and telephone companies. But it's easy to forget that other parts of the company don't have as many options as we do, just as, for those of us of a certain age, when we were growing up, we had access to seven VHF channels, including the three major commercial networks and PBS, whereas in other parts of the county, outside of similar major markets, folks might have had access to only one or two networks, and one or two local stations. Anyway, here's how the article ends:

David Lutchen, who runs Lutchen Computer Services in Cottage Grove, said Internet options other than Comcast border on the pitiful.

Verizon does not offer its fiber-optic-based Internet service in this area. CenturyLink does provide phone-based DSL service, but the infrastructure to support the service in Lutchen's area is spotty at best, he said, and connection speeds pale compared to those of Comcast broadband.

"We just don't have a very steady CenturyLink option," he said.

Comcast, in defending the proposed merger, said it will divest itself of several million cable subscribers to allay competitive concerns, and to make this deal more palatable for federal regulators, which need to sign off on it. Some such subscribers could be in the Twin Cities.

And hey, you can't blame them for focusing on the local angle, and the immediate impact on consumers. But we also need to talk about the large scale and long term impact on the media landscape, and the harmful effects of industry consolidation. 

Or to put it succinctly, let's purge the merge!