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Comcast's competition isn't cable companies -- it's Netflix

Comcast headquarters in downtown on February 13, 2014 in Philadelphia, Pennsylvania. 

Comcast is buying Time Warner Cable in a $45.2 billion deal that will unite America’s two biggest cable companies. A massive deal like this one will draw the keen interest of the Justice Department and FCC. They’ll look at the potential impact on competition.

But in our rapidly changing media world, defining competition and figuring out how this will impact us, the consumers, isn’t quite so simple.

To start, cable companies deliver a lot more than pay TV.

"This transaction is really all about broadband, not so much cable," says Porter Bibb at Mediatech Capital Partners. "There may be a good five, even ten years of profitable business left for cable, but the business is rapidly transitioning into broadband."

Antitrust regulators are also looking beyond cable. Down the road, depending on agreements Comcast makes and court rulings, a bigger Comcast could make life harder for streaming services like Netflix. It could slow down Netflix access for Comcast customers with the goal of advantaging Comcast’s own streaming offering.

"This makes the fate of companies like Netflix very uncertain, because in order to reach us as subscribers, they’ve gotta go through that gatekeeper," says Susan Crawford, visiting professor at Harvard Law School and author of "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age."

She and other merger-skeptics worry that a new cable giant could hurt innovation and raise prices for all of us.

On the other hand, a bigger Comcast could also play hardball with ESPN and other networks in negotiations over subscriber fees, which determine what consumers actually pay for cable. Scaling up would enables Comcast to drive a harder bargain in those tough fights that sometimes blackout channels. If the larger company gets a better bargain from cable networks, it could pass the savings on to consumers.

"A bigger buyer that’s able to get lower prices is probably gonna benefit consumers," says University of Iowa antitrust law professor Herb Hovenkamp.

Regulators will weigh all of this. It’s likely they’ll ultimately approve the deal, but only with concessions from Comcast. Cable TV may be shrinking, but broadband is exploding, which means how the feds treat this deal will impact all of us.

Mark Garrison: These cable companies bring tens of millions of Americans their TBS and Nickelodeon. But as Porter Bibb at Mediatech Capital Partners reminds us, they deliver a lot more than pay TV.

Porter Bibb: This transaction is really all about broadband, not so much cable. There may be a good five, even ten years of profitable business left for cable, but the business is rapidly transitioning into broadband.

Antitrust regulators are also looking beyond cable. Down the road, a bigger Comcast could make life harder for streaming services like Netflix in order to promote its own products. Harvard Law professor Susan Crawford and other skeptics of the merger worry that a new cable giant could hurt innovation and raise prices for all of us.

Susan Crawford: This makes the fate of companies like Netflix very uncertain, because in order to reach us as subscribers, they’ve gotta go through that gatekeeper.

It’s complicated and some of this depends on what happens in courts. But a bigger Comcast could also play hardball with ESPN. University of Iowa antitrust law professor Herb Hovenkamp says scaling up enables Comcast to drive a harder bargain in those tough fights that sometimes blackout channels.

Herb Hovenkamp: A bigger buyer that’s able to get lower prices is probably gonna benefit consumers.

If they pass the savings onto us, that is. Regulators will weigh all this. It’s likely they’ll approve the deal, but only with concessions from Comcast. Cable TV may be shrinking, but broadband is exploding, which means how the feds treat this deal will impact all of us. In New York, I'm Mark Garrison, for Marketplace.

About the author

Mark Garrison is a reporter and substitute host for Marketplace, based in New York.

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