OT: Comcast set to buy Time Warner Cable - is there any way this makes it through the courts?

Submitted by Moleskyn on February 13th, 2014 at 8:33 AM

In an industry that's already lacking in competition, Comcast (the leading cable provider in America) and Time Warner (the #2 cable provider) have agreed on a deal that would see Comcast buy out Time Warner's stock (LINK).

Comcast Corp. agreed to buy Time Warner Cable for about $45.2 billion in stock, in a deal that would combine the nation's two biggest cable operators.

How in the world does this make it past the FCC and Justice Department though? Comcast thinks they will...

Comcast is prepared to divest three million subscribers, the people said. Those divestitures will keep its ownership of the pay TV market below 30%

...but the Justice Department recently shot down an attempt by AT&T to acquire T-Mobile, because it would have reduced competition in the mobile network industry too much.

My initial reaction to this was a negative one. I use Time Warner internet, and my first thought was "what will prevent Comcast from jacking up their prices once this goes through"...but then I realized, there's really nothing preventing Time Warner from jacking up their prices right now. There really isn't any competition as it is: 

Comcast hopes to convince regulators that because cable companies don't compete, their deal should go through.

I still don't see what good is in this for us, the consumers. It will be interesting to see how this shakes out though.




February 13th, 2014 at 8:44 AM ^

Can confirm.  

In my apartment building we are only allowed to use Comcast by the landlord's rule (except for DirecTV or Dish, but I don't want to have a satellite on my balcony).

The internet is way slower than advertised despite me being on the phone with them every other day, they charged $30 to replace a bad coax cable, their service guy was unprofessional (took a personal call in my living room, complained how hungry he was, was texting the entire time, kept saying he couldn't wait to be out of work, and sighing the loudest sighs I've ever heard).

Also, they're expensive.

I'm not sure about the legality of such a merger, but I can tell you that more Comcast can't really be a good thing.


February 13th, 2014 at 9:30 AM ^

However much you think Comcast sucks, Time Warner tops their suckage by a wide margin. I've had experience with both, and Time Warner is by far the worst company I've ever had the misfortune of dealing with. You have to try to have as terrible of customer support as they do.


February 13th, 2014 at 9:58 AM ^

time warner is the worst company regardless of industry.  every month we get new creative charges added to our cable bill and every month i have to call, and wait on hold for an hour, to get it removed.  the service itself is also terrible.  the boxes are terrible and the internet, even with their "boost" is slow.

that said, this merger likely will be approved.  the FCC and DOJ are just going to want to see that comcast and TWC don't already compete in the same markets, which for the most part, they don't.  the divestiture will just move that along.


February 13th, 2014 at 8:50 AM ^

More than likely means that TWC will survive in some form for that small subset of people.  I had Alltel a few years back when Verizion snatched them up but they "divested" a bunch of Michigan customers for this reason.  Of course we ended up with a zombie of a company providing us service and locked into a contract. Fun.


February 13th, 2014 at 8:48 AM ^

Comcast is an absolute nightmare. I decided to finally cut the cord a year ago and haven't looked back. I have to go up the street to watch games, but that's a small price to pay.

I know apples been in talks with time warner about tw integration with the new Apple TV. Comcast won't negotiate with apple, so it'll be interesting to see how a potential merger will affect the new Apple TV

Abe Froman

February 13th, 2014 at 8:50 AM ^

Pretty sure on a scale of 1 to 10, with 1 being Elmo and 10 being some unholy alliance of the antichrist, global warming, and world hunger, that Comcast scores a solid 13.

Space Coyote

February 13th, 2014 at 10:23 AM ^

You must mean Elmo's on-screen persona.

Let me tell you, I've hung out with the real Elmo, and the real Elmo is a real dick. I went out partying with him one time in NYC, and he was just poppin' pills and snorting coke the whole time. Really mean to the bar staff, really entitled, selfish, and narcissistic. Just goes to show that you can't judge a muppet/puppet by his on-screen personality.


February 13th, 2014 at 8:54 AM ^

I am not primarily an antitrust attorney, but I've looked at mergers. I have no history with either company.

As I recall, in general, a regulator or court would try to define a "market". In this case, the market would be "cable," though the companies will argue that it's something broader, e.g., all media. They would also look at the geographic market. Not just all of the US, but break it into smaller units, e.g., metropolitan areas.

Once you have the market defined (or markets in this case), you calculate the HHI, which in essence tells you how concentrated a market is. In general, it's how many competitors there are, and the number goes up if there are fewer competitors with higher percentages. So if you have 10 competitors, but 2 have 90% of the market, it's a higher HHI than 10 competitors each with 10% of the market. They then look at how much change there will be to the HHI from before and after, and whether the after picture is ugly. They have guidelines on how high the HHI can go and how much change is acceptable.

What the companies are probably saying is that in a few markets, Comcast and TW will have too much concentration. To get around this, after the merger the surviving entity would sell off the customers of one of the prior entities, spin off a separate company, or somehow make sure someone else is handling enough customers to make the HHI palatable. The regulators would have input on how they would divest the customers.



February 13th, 2014 at 10:23 AM ^

This was a good post.

Market definition will be key to this, and I think the DOJ/FTC won't put in a lot of effort into stopping this merger.

Comcast and Time Warner each provide three basic services: TV, Internet, and Phone.  While they are national companies, I doubt they would define the market nationally.  Rather, I expect market definition will be defined regionally or locally.

In the vast majority of local markets that offer one of Comcast and TW, there are already limited options.

TV: Comcast/Time Warner, DirecTV, Dish, Uverse/Verizon Fios

Internet: Comcast/Time Warner, Uverse/DSL/Verizon, possibly 4G, possibly Google

Phone: Comcast/Time Warner, Uverse/Verizon/Other, Mobile

In any of the above markets, market share or market power will not increase beyond its current level.  Only in the few markets where a customer has a choice between Comcast and Time Warner in any of the three markets would there be a danger of an increase.  It seems clear that in these markets Comcast will divest customers by selling their infrastructure to another provider.

This proposed merger is far different than Sirius/XM, or T-Mobile.

The first step of market definition is looking at areas in which the companies compete.  Comcast and Time Warner don't compete, for the most part, except for the markets where divestment is planned.  The question would then turn to whether a merger would result in a price increase.  This would occur in the limited markets where they compete.  In typical markets, price won't increase because they are still held in check by the same competitors as before.

I'd be surprised to see an effor to block this given Comcast's plan to divest in the limited markets in which they compete with TW.


February 13th, 2014 at 10:37 AM ^

I overlooked the role of Comcast and TW as pseudo-customers of the various channels that actually create the content that they distribute.

That is a very real national market issue.  For example, a merged Comcast/TW would have increased negotiating power with HBO or ESPN or the like.  But this type of power would result in the ability to demand lower costs from the HBOs and ESPNs out there.  The end users would theoretically benefit from this at the expense of HBO/ESPN.

Would the DOJ/FTC have a problem with this?  I doubt it.  The point is to protect consumers, not providers.


February 13th, 2014 at 10:45 PM ^

Except that's not the market strategy for a combined Comcast/TWC.  The strategy is to keep control of content, which means keeping content tied to cable.  They will use their market power to prevent the transition of TV from a subscription bundle model to an internet a la carte model.


February 13th, 2014 at 10:42 PM ^

This is an entirely incorrect way to look at their market power.  The market power of comcast/twc isn't in their EXISTING monopoly control of markets, but their increased bargaining power and control of the nation wide internet and content markets.  The combined entity would have 1/3 or greater of the TV and internet content market under their control, allowing them to dictate terms to pretty much any other entity. 

This would allow them for instance to lock in deals that no competitors would be able to get or simply and effectively block out competition like netflix from having access or effective access to customers.  We won't even get into their market power over content providers like Disney/ABC/ESPN or HBO.  The main hurdle to HBO having an online only option is companies like Comcast et al as an example.


February 14th, 2014 at 2:37 AM ^

I'm not advocating for either side -- and to be honest, as a consumer, I agree with your argument -- but in their (TWC/Comcast) view, that only works when looking backwards.  They will likely argue that, in the coming years, cable/satellite will be just one way of accessing things like Netflix/HBO, and that their actual cometitors include mobile networks, wifi, Google, Amazon, smaller fiber providers, and any other company capable of providing access to content in the home.  This is (in their view) more of a hedge against competition from outside the traditional cable/satellite market, than it is about creating a monopoly within a traditional home-access market.


February 14th, 2014 at 2:32 AM ^

Yes and no.  First, I apologize, I haven't read all of the posts below, so this may have been said already / corrected, and, as a disclaimer, I have actually represented one of these two companies, but not for several years.  That said, I'd be shocked if they make an argument based on any national vs. regional distinction.  Instead, I'm fairly sure they will make a product-based distinction -- i.e. that, looking at the national market, cable is just one way of accessing programming, the Internet, etc., and that, when looked at not as competitors in the cable market, but as players in the overall content market, they are not able to control the pricing, message, etc., to which consumers are subjected.


Also, I apologize for all the commas -- I type how I talk...especially after a few beers. 


February 13th, 2014 at 8:59 AM ^

I think that 30% market share is the threshhold for competition in licensing negotiations, or at least I remember reading that somewhere, so that's probably why they are willing to do concede on that particular point. Still, any merger would create a cable company that had over 30 million customers before such divestment. I believe the Washington Post mentioned that Comcast and Time Warner do not have overlapping markets, so regulators would not treat this quite like the AT&T / T-Mobile situation. 


February 13th, 2014 at 9:09 AM ^

And while I'm not aware of the specifics of this merger, I would be surprised if this went through. The DOJ antitrust division has been pretty aggressive of late.

Also, divestiture means that they will try to find another company to run Time Warner's businesses. This is done because sometimes mergers are analyzed at the local market level, and they find that while nationally the merger won't hurt competition too much, some local markets will be hurt. I would be surprised if significant harm isn't found at the national level, especially with all the content that Comcast controls. If Comcast and Time Warner are already offering divestments from the getgo, that means that a) they know this isn't a slam-dunk and b) they're arguing the cable industry is a lot of local markets, to try to get away from the national market analysis which will doom the merger.

Again, I'd be surprised if that argument worked here. Also, the FCC is feeling particularly emboldened after the rejection of AT&T and T-Mobile, as in the past year, T-Mobile has started price wars in the industry. The last merger they rejected had positive outcomes for consumers, so they'll be more willing to risk this one.


February 13th, 2014 at 11:24 AM ^

Mind you, FCC decisions are always political. But the politics may be that Wheeler (new FCC chair) disapproves of this merger partly to show his independence.

Comcast and Time Warner have to prove to the FCC that there will be public benefit. I'm very curious to see that argument.


February 13th, 2014 at 9:11 AM ^

As an ex-Time Warner customer (now Direct TV) I can tell all you Comcast haters that life with TW was no box of chocolates either. The two companies should merge cultures seamlessly.

They both seem to hate customers and employing American call center employees equally.


February 13th, 2014 at 9:11 AM ^

Living in Wisconsin, we have TWC.  I lived in Chicago for 18+ years and had Comcast.

Both suck, but TWC sucks less.

If this happens rates will go up, and there is little competition.

Bad deal for consumers.

Someone needs to start MGOCABLE.


February 13th, 2014 at 9:29 AM ^

happy as hell. Massive wait times onn the phones and service that absolutely sucks. They dropped a drill with a 2 foot bit through the ceiling on the second floor. They promised to come back to fix it and of course never did. Since they are all independent contractors, to save Comcast money, they could care less. They could never get the internet working right and every time a new person came to look into the problem they would talk about how the other people screwed it all up. Classic.


February 13th, 2014 at 9:41 AM ^

I hate Comcast as well, but mostly due to continuous outages that follow me wherever I go. Today I lost picture on NBCSP in the second period of the USA hockey game and has not come back yet. On the bright side, due to their continuous outages, I usually am able to only pay half my bill each month due to credits.


February 13th, 2014 at 9:41 AM ^

As someone who lived in New York for almost five years, I never thought TWC could get worse...and then: enter Comcast. What a crapshow this will be.


February 13th, 2014 at 9:42 AM ^

Think down the road on a National level.

After the rejection of Net Neutrality rules the game has changed a bit. Now Comcast, which owns NBC, can start slowing down and charging more for companies like Netflix. With their current market share they don't have much leverage with Netflix, but if they control most of the cable internet market then they are bringing a very large stick to the negotiations.

They want to get money from both ends on high volume internet traffic.

Also, we all have see how contentious the negotiations with individual stations like AMC have gotten over the last few years. If Comcast control so much of the cable pay TV market then they have an unfair leverage in their contract renewals.

On a local level the cable companies are a natural monopoly. So they don't truly compete with each other locally.

I think they get a pass on the local monopoly but can't get past the national monopoly. It is too strong a position for them to be in, not with their customers but with the content providers. Content providers that Comcast competes with by owning NBC.

Hopefully this gets blocked.


February 13th, 2014 at 9:56 AM ^

The Cable/broadband industry is consolidating.  Centurylink has been merging companies on the telco side and John Malone from Charter has been looking to buy TWC to do a similar thing as what was done with Liberty Global in Europe.   Cox was supposedly interested in TWC as well.   

If Comcast has 26M subs and TWC has 14M subs and there are 101.9M TV households in the U.S., how does 26M + 14M - 3M equal 30%?

The 3M sub divestiture will probably be a sell off to Charter, Cox or someone else.  

I live in a neighborhood where my only high speed option is TWC.   Unless I want to go to DSL ( I don't)   I'm stuck paying their jacked up rates after the initial offer.  


February 13th, 2014 at 10:47 AM ^

Maybe there are like 7m people who have both.

Just kidding. No one is that masochistic.

Seriously though, it could relate to how those two numbers are defined - "subscribers" might count every single subscription, while the "households" number might only count residential subscriptions, excluding businesses, etc?


February 13th, 2014 at 9:56 AM ^

Comcast?  You mean the cable company that randomly deleted every scheduled recording from my DVR last night?  The company that charges me for Showtime but blocks the channel (as "not subscribed") from my viewing?  The company with an interface 20 years outdated?  Those guys?  The company that changes my pricing nearly every month?  Love those swell guys!


February 13th, 2014 at 10:04 AM ^

I wonder how this will impact the next contract cycle, specifically as it relates to the New York-area acquisition that still seemed so certain (for 2017) when we went to sleep last night. Must anything change?


February 13th, 2014 at 10:05 AM ^

By the way, anybody here use Aereo? Their website shows that they might be coming to Cleveland sometime this year, and I'm very interested in their service. How is their picture quality? 


February 13th, 2014 at 10:08 AM ^

From what I've read, this might have a decent chance to make it through the DOJ since their coverage markets don't overlap. This is two regional monopolies (in different regions) joining up to form a monopoly on a larger region. It isn't like this is two competitors joining up to limit competition; it was physically impossible for any TWC or Comcast customers to switch from one to the other. It'll still be the same evil of both old companies, just combined under one name.


February 13th, 2014 at 10:54 PM ^

then you have read some very naive views of the merger.  The real reason behind the merger is not leverage directly at the customer side where both companies already have either real or de facto monopolies, but in the back side where the combined entity would have even more market concentration over both the internet as a whole and content providers.  This will allow the combined entity to stiffle or outright kill any competition such as netflix et al and to prevent any competition from sprouting up in the future.  It will also allow comcast to outright kill any potential of an existing content provider adding an unbundled internet option in the future.  These three things are certainly significant incentives for Comcast to complete the merger. 

Its all about increasing their market power and concentration on the back end.  And a significant enough amount of people can see that very clearly already.  This merger will likely be opposed by a who's who of the internet along with various content providers (though likely covertly). 


February 13th, 2014 at 10:24 AM ^

This deal is actually pro-consumer.  The reason your cable bills are getting jacked up is because the likes of ESPN, BTN, SEC Network and even the CBS's of the world are producing more and more content and successfuly negotiating with the Cable providers (Comcast and TWC) to charge higher per subscriber fees to show their programming to their cable subscribers.  So Comcast and TWC have been raising prices in order to cover the increased costs they have to pay to the ESPNs of the world.  With this merger, Comcast is now in a much better negotiating position to lower the growth of the fees it pays to the content providers.  If they are successful in doing this, your cable bill should actually increase less than if the deal didn't happen.  

As far as regulatory approval, Comcast and TWC don't actually compete in any of the same markets, so competition will not increase in say LA or NYC and with the increased offerings from NFLX and Amazon Prime's, I think it has a pretty good chance of closing.  In market speak, the current annualized return is ~6% on the CMCSA/TWC spread (assuming deal actually closes in one yr vs end of yr)  which seems tight given the regulatory questions/magnitude of deal...meaning that the investors who follow this space more closely than I do are not as skeptical of the deal getting approved as one may think.  


February 13th, 2014 at 11:17 AM ^

Or, he's just telling the truth:

How ESPN Is Making Your Monthly Cable Bill More And More Expensive

The Worldwide Leader’s current per-household subscription fee: $4.69. The next-closest national cable network? TNT, at…$1.16.

This isn’t strictly an ESPN phenomenon, by the way: Summers notes that some regional sports networks charge up to $3.36 per household. ESPN’s merely the biggest by a longshot, and therefore their costs have the most impact.


February 13th, 2014 at 10:51 AM ^

Your first post (despite being a member for a while), happens to be one backing up a deal/company in a thread where everyone is bashing it.  You either chose a very awkward time to start contributing, you are a Comcast or other Cable company employee/supporter, or you just happen to be quite knowledgable on the topic and figured now was finally your time to shine.  In either case, welcome to the board...I think...


February 13th, 2014 at 10:35 AM ^

But the more I think about it, the less concerned I am that this will have any actual impact on cable and internet service provided by Comcast or TWC.

The AT&T/T-Mobile merger was problematic because those two companies are in direct competition for customer business. If you don't like your cell phone provider, you can switch to a different provider which (a) gives your current provider an incentive to try to keep you and (b) gives all other providers an incentive to try and lure you away.

This is VERY different from how the cable world works, where every cable provider is a government-protected regional monopoly. There is nowhere in this country where a consumer actually has a choice between multiple cable companies, the only choice is cable from the one available provider or not-cable. It's basically what national telephone providers looked like when Bell was first split up. "Oh, we're totally independent companies working for our consumers and fostering competition. This isn't a front for a well-organized oligopoly at all!"

With any luck, the court's recent ruling invalidating the FCC net neutrality rules will actually have a positive impact. It will (hopefully) force the FCC to either re-classify cable broadband providers as the monopolies they are, or even better put an end to the practice of regional cable monopolies all together. I'm not holding my breath for the latter, but the former at least seems likely at this juncture.

And I haven't even gotten into what a ridiculous ripoff channel bundling is yet. As you may have guessed, the shittiness of cable companies is one of my favorite rants. This and how crappy Christopher Columbus was.