I just finished listening to a hearing in front of the U.S. House Sub-committee on Regulatory Reform, Commercial and Anti-Trust Law. Eight panelists tried to persuade the committee that the proposed merger between Comcast Corporation and Time Warner Cable was either great for the delivery of innovative products and services to consumers or would harm consumers with higher prices and restriction on the availability of content. What I barely heard was any analysis regarding what type of companies Comcast and Time Warner actually are today.
Based on most of the questions posed by the sub-committee members, their constituents look at Comcast and Time Warner as either 20th century cable companies, sitting somewhere with a huge dish catching satellite signals from HBO, Cinemax, or Disney and sending their programming down some cable wire into a consumer’s home or the company’s that connect us to the Internet. And the discussion regarding whether the merger will be harmful to competition seemed to center on competition in broadband access or the last mile.
Comcast and Time Warner don’t appear to look at their relevant market as just last mile or broadband services. From the near beginning of their joint testimony Comcast and Time Warner describe their proposed combination as creating a “world-class communications, media, and technology company.” Not only are Comcast and Time Warner responding to and servicing the commercial activity generated by online companies such as Amazon, Apple, Google, Facebook, and Netflix, but they are now competing against these companies as these edge providers enter the world of digital voice and broadband access.
The question the U.S. Department of Justice will have to answer is why should we treat the services of each company as a silo such that we carve out one relevant market by which to analyze two companies that operate in multiple markets based on the multiple services they provide. If the Justice Department identifies a relevant market, then can they say that there is a monopoly in the relevant market and was that monopoly power abused?
Yes, Comcast is already a monster of a company. It has two main businesses; Comcast Cable and NBC/Universal. Assuming that the Justice Department finds that the relevant market is a national one, can the DOJ conclude that Comcast would have a monopoly in cable services? How about in content production? In theme park ownership? In broadcast television station ownership? In broadband?
Speaking of broadband, will the merger mean no more deployment of broadband facilities? Probably not. It would be highly irrational for a going concern that invests in a DOCSIS 3.0 digitized platform to not squeeze the last ounce of value out of it by not selling broadband services to more consumers. For this reason alone I don’t see broadband adoption being harmed by the merger.
Cries of the big bad broadband wolf by the opponents of the merger tells me that they are still living in the late 1980s. Comcast and Time Warner aren’t cable companies anymore. Ironically it is because they have grown beyond their original core cable service and gotten larger in the process that they are able to escape antitrust concerns, assuming regulators admit they are in the 21st century.