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Comcast/Time Warner Merger in Jeopardy

 

The future of Comcast and Time Warner Cable does not look very hopeful. At first, this merger was opposed by consumers because it would lead to monopoly of the Comcast Corporation and the consumers would have to pay the price. It would lead to higher prices, less consumer choice and less diversity. Now, to add fuel to fire, the lawyers at Justice Department and Federal Communications Commission that the merger would lead to a monopoly of the company. This is not permissible under the anti-trust laws. The companies are going to meet for the first time on 22nd April, 2015 with the officials from FCC and Justice Department to discuss solutions for saving the merger.

The merger was first announced on 13th February 2014. The merger was going to be worth approximately 45 billion dollars. If the merger succeeds it would provide 30 million subscribers to both the companies. There is no direct competition among the companies for customers because they operate in separate markets. Boston, Philadelphia, Washington and Chicago, are the markets targeted by Comcast. Milwaukee, Los Angeles, Dallas and New York are targeted by Timer Warner.

Comcast was known as Comcast Holdings originally. The headquarters of the company are located in Philadelphia. In United States Comcast is the largest broadcasting and Cable Company.  It provides Internet services and telephone services as well. It acquired NBC universal in 2011 so now it also produces television programs and films.

Time Warner Cable was originally known as Warner Cable Communication. It provides cable telecommunication services in United States. It is second behind Comcast in United States. Time Warner Cable provides business services, residential services and cable internet services.

Comcast Corporation is already a big giant and if it merges with the second large cable company in United States it would completely dominate the market. This means that consumers would be at the mercy of these companies. Having a monopoly in the market means that a company is not affected or concerned by the demands and wants of consumers. They can charge whatever price they like and provide whatever services they want to provide. It will negatively affect the consumers and few consumers will be able to afford internet services. Moreover, the competitors would­ also be negatively affected. When such big giants merge the small companies will crumble.  It would also prevent new companies from entering the market. Competition is the only thing which inspires innovation and creativity. The fear of competitors producing better products keeps a company on the right track. Fear of competitor forces a company to produce a better quality and better priced product. It makes a company work to please the consumer. If the competition is not present then a company does not innovate or improve its products in any way. This results in less diversity and fewer choices for consumers to choose from. The consumer is rendered helpless in the hands of producer.

However, Comcast argues that the merger isn’t anticompetitive. “We continue to believe that our transaction with Time Warner Cable will bring substantial benefits to consumers without any competitive harms. We will continue to engage in our productive discussions with the government and do not see any value in commenting on rumors and speculation” says Sena Fitzmaurice, spokesperson of Comcast. “The Comcast-Time Warner Cable transaction will result in significant consumer benefits – faster broadband speeds, access to a superior video experience, and more competition in business services resulting in billions of dollars of cost savings. These benefits have been essentially unchallenged in the record – and all can be achieved without any reduction of competition.”

The Department of Justice which regulates anti-trust issues and FCC considers the public interest. Both of the federal structures are not very satisfied with the defense provided by the company and they are inclined towards blocking the merger. They haven’t made the final decision yet, but they have been questioning media companies which have dealt with Comcast Corporation in past. We can hope that whatever decision is taken by the government organizations is in the best interest of the people.

 

 

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