Why The Death Of Comcast-Time Warner Merger Won’t Help Consumers


by Peter Lee  San Francisco Chronicle  April 29 2015

Credit to the Federal Communications Commission for doing its job — about 20 years too late.

Due to opposition from the FCC and U.S. Department of Justice, Comcast dropped its proposed $45 billion bid to purchase Time Warner Cable on Friday, preventing two of the nation’s least-popular companies from becoming one enormously unpopular mega-company.

For consumers, the failed merger represents something of a muted victory. The FCC’s record on protecting consumers has been beyond abysmal since the federal government deregulated the telecom industry in the mid-1990s, but Friday’s decision shows the agency is still, apparently, willing to draw the line somewhere.

Comcast’s defeat answers the question of whether “the regulatory agencies are going to say yes to any merger, no matter how bad,” said Tracy Rosenberg, executive director of Media Alliance, an advocacy group in Oakland. “Over the past 20 years, there has been no merger too terrible for the FCC to block.”

The FCC’s stated purpose is to provide “leadership for consumers, public safety, accessibility, competition and technological and economic opportunity.” Technology and economic opportunity? Perhaps. Consumers? Not so much.

When Congress passed the landmark federal Telecommunications Act in 1996, proponents predicted the law would usher in a period of innovation and competition that would ultimately benefit the consumer. Cable, Internet service providers and phone companies could now compete on each other’s turf.

Indeed, we owe the existence of Netflix, HBO Now, and Hulu — some of the most exciting advances in content creation and distribution — to the Telecommunications Act, which freed up the bandwidth for streaming video.

While Internet users have benefited, all that cable television subscribers got out of the deal was higher prices and inferior service.

From 1995 to 2013, the average monthly basic price for cable TV grew at an annual rate of 6.1 percent, more than twice the rate of inflation. For the 12 months ending Jan. 1, 2013, the cost of basic service jumped 5.1 percent to $64.41, according to an FCC survey.

Cable companies have used that extra money to expand their Internet infrastructure — securing their future as the pay-TV industry withers.

But in the process, they neglected the customers. According to the American Consumer Satisfaction Index, cable operators, led by Comcast and Time Warner, provide some of the worst customer service among all industries in the United States.

On a scale from 0 to100, Comcast scored a dismal 60 last year, a 4.8 percent drop from 2013. Time Warner was even worse: 56 last year, a 6.7 percent drop from the previous 12 months.

It’s hard to believe putting these two companies under one roof would have helped.

“The issue at stake is not that the proposed merger will limit competition but whether a combination of two pay-TV providers with such poor records could possibly create a better customer experience,” the index said.

Unfortunately, it’s also hard to believe customer service or prices will get any better with Comcast and Time Warner continuing to operate independently.

For that, customers can thank the FCC, which allowed cable companies to grow into monopolies, the very situation the telecommunications law in 1996 had sought to prevent. In many markets, Comcast and Time Warner are the only games in town. Had they merged, Comcast would have controlled 58 percent of the U.S. cable market.

The FCC’s opposition to the merger might signal a resurgence in regulation. After hemming and hawing for months, the FCC earlier this year preserved net neutrality, which, in a blow to companies like Comcast and Time Warner, forced Internet service providers to treat all online content equally.

The agency also successfully opposed AT&T’s merger with T-Mobile in 2011, another attempt to create something better by putting together two companies with famously awful customer service.

Rosenberg of Media Alliance said she is pleasantly surprised with the FCC’s actions on net neutrality and the Comcast merger.

“I thought we would win one of those cases, not both,” she said.

That’s what happens when your expectations hit an all-time low. Even the smallest wins feel like a victory.