Former Sen. Hiram Johnson (R-Calif.) once said that the first casualty of war is the truth. The same might be said of the politics of mergers and acquisitions.
Last week in this space, Chuck Muth of Citizens Outreach offered a “conservative” critique of the proposed Comcast/Time Warner Cable (TWC) merger. As Muth sees it, Comcast is somehow inappropriately flexing its lobbying strength in support of the deal that he believes will give Comcast too much market power.
Please, let’s take a deep breath and review what American antitrust law is all about. In mergers and acquisitions, the central question is whether consumers are suffering harm by losing competitive choice. But since Comcast and TWC do not directly compete in any neighborhood in this country, no consumer will face a loss of competition in cable, broadband or telephone service if the deal is approved – not one.
And if a Comcast/TWC merger would not result in fewer consumer choices, it won’t accord Comcast any more market power in video or broadband Internet markets than it already has.
First, let’s look at the video and pay-TV market. If the merger is approved, Comcast would serve less than 30 percent of the pay-TV market – still below the arbitrary FCC cap that federal courts have twice invalidated, and which conservatives, in near unanimity, denounced as economically meaningless.
Further, preoccupation with the market power of a cable company ignores the fact that the video market has never been more dynamic or competitive. The two national satellite providers now claim over 30 million subscribers and growing, while cable television is losing subscribers every day – dropping nearly 2 million subscribers just last year. AT&T and Verizon now have 10.7 million video subscribers of their own, and they too are riding the growth curve upward while cable’s video customer base shrinks.
Meanwhile, Google is building high-speed networks for video and Internet services in 34 communities, and the FCC has argued that online video (e.g. Netflix, Roku, Hulu) has tripled its revenues (from $1.86 billion to $5.12 billion) in the last three years.
Equally important, TWC consumers will not only see no loss of competition in television and video service, but will gain demonstrably better service. Comcast’s X1 and Xfinity platforms are widely touted as the industry’s best, supporting over 300,000 movie and TV titles that can be seen as traditional linear (or real-time) TV or streamed on demand on any mobile or stationary screen. Independent programmers have also said the Comcast/TWC deal is good for them because Comcast has the best record in the business supporting new and independent networks.
Muth also argues that, post-transaction, Comcast would possess over 40 percent of the broadband Internet market. That might be true if one employs the outdated and discredited data favored by a small handful of left-leaning advocacy organizations, but not if one understands what the high-speed Internet marketplace really looks like.
First, the U.S. is only one of two countries in the world to have three fully-deployed broadband Internet technologies actively competing for customers – cable, teleco and wireless. Nearly 90 percent of the country can choose between high-speed wireline providers. And because 4G LTE wireless broadband now reaches 20 Mbps, one must also add that into the mix. Thus, 90 percent of Americans enjoy 4 or 5 choices in high-speed Internet. Seen in the context of that more realistic assessment of the market, Comcast would serve more like 20 percent of the relevant market post-transaction.
Because consumers will face no loss of broadband choice as a result of the transaction because Comcast and TWC don’t compete against one another, those in TWC’s territories are thus likely to gain the option of much faster broadband speeds.
Moreover, Comcast’s speeds are some of the fastest on the market. In the Northeast, they reach a neck-snapping 505 Mbps. Elsewhere, virtually all of their customers have access to 105 Mbps – far more than needed for virtually any app today. TWC’s systems are much slower. In most areas, TWC systems can reach speeds of only 50 Mbps (its maximum speed is 100 Mbps in a few select areas). The obvious point here is that TWC customers as well as consumers in the territories they now serve will be offered either a very impressive enhancement of their existing network, or a faster new choice from their current wireless or wireline provider.
In summary, the Comcast/TWC merger doesn’t even come close to posing antitrust issues. In both broadband and video, consumers would lose no options, and competitive choice would remain exactly the same the day after the transaction as it was the day before.
And when it comes to consumer welfare, video service would likely improve, broadband speeds would likely go up.
Ignoring the basic facts about how these markets operate, and the benefits consumers stand to receive, does not help consumers or elevate the level of debate in Washington. Conservatives should stand for free markets and trust consumers to act in their own interests, rather than encouraging Washington bureaucrats to dictate even more what they consider the “public interest.”
Lee is senior vice president of Legal and Public Affairs at the Center for Individual Freedom.