Last fall, talks circulated within the cable industry about a potential buyout of Time Warner Cable (TWC). Last week, Comcast proposed a $45.2 billion dollar, all-stock, friendly bid for TWC. This merger would combine the two largest cable service providers in the country, which immediately raises antitrust concerns.
This deal would give Comcast nearly 30% of the cable TV market and “would put Comcast in 19 of the 20 largest U.S. TV markets.” Brian Roberts, CEO of Comcast, has already defended the deal, stating that the buyout “isn’t anti-competitive.” He argued that Comcast would not pursue such a deal if it did not think it would get approval from antitrust regulators in Washington, D.C.
Roberts outlined the reasons for which he believes the Federal Communications Commission (FCC) and the Department of Justice (DOJ) will approve the deal. First, he states that the two companies do not compete in the same market. Second, before the deal closes, Comcast will “shed three million subscribers . . . to ensure that Comcast and Time Warner Cable do not have collectively more than 30% of all U.S. cable operators.” While the FCC 30% rule was struck down by the D.C. Circuit, Roberts has expressed his concern not to exceed 30% of the market so as to give Comcast “a wider safety margin with regulators.”
In addition, Comcast believes the deal will get regulatory approval because TWC “customers will get so much more technology and other services” once the takeover goes through. Not only will TWC customers get more technology, but Comcast will also provide “faster Internet connections.”
Deals on such a grand scale face serious risks in getting approved by regulators. A similar deal in 2011 between AT&T and T-Mobile USA failed to get approval from the DOJ because of similar antitrust concerns. Despite Roberts’ optimism that this deal will go forward, holding 30% of the cable TV market could spark a similar response from the DOJ as that received by AT&T and T-Mobile USA.
Since the potential deal was announced, news surrounding the merger has been predominantly negative. Some argue that this deal does not serve the public interest because it decreases competition in the cable industry. Others echo this sentiment and argue that this deal is a “preposterous merger and a threat to the marketplace of ideas.”
Still, others maintain a positive perspective on the benefits of such a deal. The merger of these two companies would mean more money to spend to improve technology. Since Comcast has more capital to deploy than TWC, TWC customers could potentially benefit from the deal. Furthermore, “a bigger company could also be a check on content provides” like CBS or Disney “by keeping [] subscription fees lower.”
Regardless of the varying opinions on whether this deal will be good or bad for parties involved and for customers, the deal still needs to receive DOJ and FCC approval before it goes through. Stay tuned.