Mergers

A Judo Move: Merger Critics Start Agreeing With Comcast


ComcastThe secret of judo is to pull when your opponent pushes. Opponents of history’s biggest cable-TV merger are using that principle in a clever attempt to yank Comcast (CMCSA) off balance. By agreeing wholeheartedly with a key part of Comcast’s argument for buying Time Warner Cable (TWC), critics are managing to make the cable giant look like a monopolist.

The issue is overlap. Comcast is arguing that regulators should approve the deal, in part, because Time Warner Cable doesn’t overlap with its territories, so there aren’t any local markets in which a merger would reduce the number of competitors. The Consumer Federation of America agrees that the two giants don’t compete on each other’s turf, but it doesn’t see that as a good thing. The advocacy group says the lack of overlap is symptomatic of a “gentleman’s agreement” in the business to suppress competition.

Today I interviewed Mark Cooper, the research director of the Consumer Federation of America, who issued a 31-page document [pdf] declaring the cable merger “unapprovable.”

The Telecommunications Act of 1996 was written to encourage cable operators to build new networks on rivals’ turf, benefiting consumers by giving them more options. But it didn’t happen. “They’ve never competed. That was a choice on their part. No incumbent cable operator has ever overbuilt another incumbent cable operator,” Cooper says. “That should raise your antennas.”

Cooper argues that the cable giants are extending their reticence about competing with one another into digital video. TV Everywhere gives customers access to digital video, but only if they are connected to an old-fashioned terrestrial network. Cord-cutters who rely on Internet-based video-on-demand services can’t get TV Everywhere. “They have taken the local monopoly and extended it into cyberspace,” Cooper says.

In another judo move, Cooper agrees with cable television’s advertisements that flaunt cable’s superiority over satellite, wireless, DSL, and other delivery technologies. To him, that just proves the point: There’s no serious competition to local cable. And that, he says, makes it easy for the big cable operators to charge consumers a premium for their own content, as well as to charge high fees to competitors for access to their customers.

Gene Kimmelman, president of Public Knowledge, agrees: “Comcast already owns NBCU [NBCUniversal] and thus has an incentive to leverage its cable and Internet access operations to protect its content business.”

Comcast, meanwhile, sees itself surrounded by tough rivals, as my colleague Joshua Brustein writes. It will be up to antitrust regulators, and perhaps to the courts, to sort out who’s right.

Coy_190
Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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Companies Mentioned

  • CMCSA
    (Comcast Corp)
    • $56.74 USD
    • -0.11
    • -0.19%
  • TWC
    (Time Warner Cable Inc)
    • $153.16 USD
    • -0.35
    • -0.23%
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