M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

A Member of the Law Professor Blogs Network

Tuesday, February 18, 2014

Comcast merger raises questions, but any answers?

 It's no surprise that the proposed Comcast-TWC merger raises questions about consolidation in the cable business.   But it's hard to say that there are any simple answers.  The issues that are raising some of the loudest concerns stem from the fact that this merger will be a merger of number 1 and number 2 in a business where there are only really 5 significant players left.  In all seriousness, questions about the consolidation of the cable business and that issue left the station years ago.  A couple of decades ago there were hundreds of cable businesses in the country.  Through subscriber swaps and consolidation smaller systems we have seen the sector get more and more consolidated over time.  

That's not likely going to change anytime soon, if ever.  Ideally, consumers would benefit from increased competition for the last mile.  We're not going to get that from this transaction.  In fact, to the extent there was marginal competition for franchises along the edges of the consolidated territory, that competition is going away.   The potential for competition for the last mile is really muted.  Verizon has largely given up any hopes of expanding its current base.  Satellite is a poor second choice, really ideally suited for the hard to serve rural areas that cable systems aren't really interested in.   Overbuilders?  They exist, but they are will forever be, niche players. 

So, if consolidation is the way things are going to be, why not more regulation of this natural monopoly?  Perhaps regulation of natural monopolies is out of fashion.  That's unfortunate.  Consoldidation without regulation may be responsible in part for why we pay so much for the service we have.  

 Other issues that get raised by this particular transaction is the tendancy of the cable providers to consolidate vertically as well as horizontally.  As consolidated cable moves up the chain to control content as well as the pipes there are serious questions about access that are raised.  The deal Comcast reached with the government when it purchased NBC Universal last year to treat content fairly is good, but the cable providers still face the economic incentives to shift content whenver they can to their favored providers.  

In any event, perhaps Leo Hindery is correct and that when asked, this transaction will sail through the regulatory process.  Perhaps.  But there are more questions than easy answers with this transaction. 

 -bjmq

Update: Felix Salmon thinks broadband access in the US blows...and is expensive to boot.

 

http://lawprofessors.typepad.com/mergers/2014/02/comcast-merger-raises-questions-but-any-answers.html

Antitrust, Miscellaneous Regulatory Clearances | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef01a5116fc0db970c

Listed below are links to weblogs that reference Comcast merger raises questions, but any answers?:

Comments

Post a comment