From the New York Times (see here for article) about the proposed merger of Comcast and Time Warner:
Investor concerns focus mainly on the Internet side of cable operations. They include these questions: Will the Federal Communications Commission
act to ensure an open Internet — also known as net neutrality — and
competitive and reasonably priced choices for consumers, in ways that
might impair cable company profitability? Will federal agencies block
the merger outright, or impose conditions that might make it
economically unattractive? And if the merger does not take place,
auguring a tougher regulatory climate, are the two companies,
particularly Time Warner Cable, appropriately priced?
The merger will create higher prices for consumers and less choice. But the article is fairly neutral on these issues.
We had a blog conversation previously this term about the lack of competition among cable companies in America. From that article and based on this one as well, I don't think this merger is a good idea from a consumer standpoint. Competition will continue to be hindered by this near monopoly in the market; I imagine prices will be unfair for the quality of service we get. America compared to other countries has incredibly poor internet quality and streaming takes a lot longer here than other places. This is because other countries have more players in the cable and internet markets, making competition greater, prices lower, greater ranges of services, and higher quality internet. For these reasons, I think the merger will limit the services we get and will also increase prices for consumers.
ReplyDeleteOne could imagine that allowing the merger will create some returns to scale and new regulation from the FCC will be sufficient to prevent monopolistic practices. I'm not so optimistic...
ReplyDeleteI agree with Cam. I also commented on the prior blog post on net neutrality. My thoughts have remained unchanged by this article. This industry already acts like a monopoly. A merger will make things even worse.
ReplyDeleteFurther in opposition to this merger, Comcast and Time Warner engaged in a dropping a fair amount of consumers (4.5 million) in order to decrease their respective market shares, increasing their chances for the merger to go through. Moreover, the high speed internet market will become even more concentrated, prices will rise, all the while connection speeds will fall (unless you pay even more). For these given reasons the FCC seriously needs to block this merger.
ReplyDeleteWhat really stood out to me from this article was "'there is simply no competitive choice for most Americans' who want high-speed Internet in their homes. 'Stop and let that sink in,' Mr. Wheeler said. He added that three-quarters of American homes have no competitive choice for the essential infrastructure for 21st-century economics and democracy.”'
ReplyDeleteObviously there are already monopoly-like problems with the cable/internet market. For me the question then is, is this industry a natural monopoly? In which case firms should be encouraged to merge. Or does this market benefit from competition? Meaning that a company coming together to have 35% of the market share, especially when often times locally the markets are much more concentrated, is negative for consumers.
I side with the later. This NYT article (which may have already been posted, or just something I read on my own in the past) explores how Internet in the US is both less efficient and more expensive than many other countries: http://nyti.ms/1DCfevY. Other countries benefit from governments encouraging competition. For example “In many parts of Europe, the government tries to foster competition by requiring that the companies that own the pipes carrying broadband to people’s homes lease space in their pipes to rival companies.”