Support our non-partisan non-profit newsroom 💜 Donate now

The Comcast merger with Time Warner isn’t a sure thing

Dan Weissmann Feb 24, 2015
HTML EMBED:
COPY

The Comcast merger with Time Warner isn’t a sure thing

Dan Weissmann Feb 24, 2015
HTML EMBED:
COPY

Last February, when Comcast announced it was buying Time Warner Cable, federal approval of the merger didn’t seem like a major hurdle. The two biggest cable companies said their merger wouldn’t reduce competition — and wouldn’t result in higher rates —  because geographically, they served different markets.

However, as the Federal Communications Commission prepares to rule on the merger in late March, investors seem to think the deal may fall through. Time Warner’s stock has been trading at prices below the amount Comcast has offered to pay.

“There’s a lot changing in how people consume media,” says Amy Yong, an analyst with Macquarie Group. “And that’s why it’s become a lot more contentious than a lot of people originally anticipated.”

She means cord-cutting — getting video on the Internet instead of over cable TV — has started to look more like a reality. For instance, HBO announced last fall that it would soon offer a stand-alone online service, no cable package required.

That prospect raises new questions about Comcast and Time-Warner, companies that sell both cable TV and broadband services. As broadband providers, might they choke out cord-cutting services to protect their TV business?

The FCC has started looking at new regulations to prevent just that, including a proposal to regulate broadband services as a utility.

“The actions that we’ve seen may suggest a mindset that is more concerned about competition in broadband, and simply less hospitable to further mergers in this sector,” says Kevin Werbach, a Wharton School professor and former counsel to the FCC.

The FCC’s concern might spell trouble for the Comcast merger. 

However, Jeff Wlodarczak, CEO of Pivotal Research Group, thinks Comcast’s interests in selling broadband services, and the FCC’s interests in protecting video services like Netflix or the new HBO service, line up just fine.

“Cable has no real interest right now in doing anything that makes Netflix less attractive,” says Wlodaczak. “Netflix consumes massive amounts of bandwidth.” And as a broadband provider, Comcast wants to sell more bandwidth, not less.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.