<html xmlns:v="urn:schemas-microsoft-com:vml" xmlns:o="urn:schemas-microsoft-com:office:office" xmlns:w="urn:schemas-microsoft-com:office:word" xmlns:m="http://schemas.microsoft.com/office/2004/12/omml" xmlns="http://www.w3.org/TR/REC-html40">
<head>
<meta http-equiv="Content-Type" content="text/html; charset=us-ascii">
<meta name="Generator" content="Microsoft Word 12 (filtered medium)">
<style><!--
/* Font Definitions */
@font-face
{font-family:"Cambria Math";
panose-1:2 4 5 3 5 4 6 3 2 4;}
@font-face
{font-family:Calibri;
panose-1:2 15 5 2 2 2 4 3 2 4;}
/* Style Definitions */
p.MsoNormal, li.MsoNormal, div.MsoNormal
{margin:0in;
margin-bottom:.0001pt;
font-size:11.0pt;
font-family:"Calibri","sans-serif";}
a:link, span.MsoHyperlink
{mso-style-priority:99;
color:blue;
text-decoration:underline;}
a:visited, span.MsoHyperlinkFollowed
{mso-style-priority:99;
color:purple;
text-decoration:underline;}
span.EmailStyle17
{mso-style-type:personal-compose;
font-family:"Calibri","sans-serif";
color:windowtext;}
.MsoChpDefault
{mso-style-type:export-only;}
@page WordSection1
{size:8.5in 11.0in;
margin:1.0in 1.0in 1.0in 1.0in;}
div.WordSection1
{page:WordSection1;}
--></style><!--[if gte mso 9]><xml>
<o:shapedefaults v:ext="edit" spidmax="1026" />
</xml><![endif]--><!--[if gte mso 9]><xml>
<o:shapelayout v:ext="edit">
<o:idmap v:ext="edit" data="1" />
</o:shapelayout></xml><![endif]-->
</head>
<body lang="EN-US" link="blue" vlink="purple">
<div class="WordSection1">
<p class="MsoNormal" style="text-indent:.5in">Comcast and Time Warner Cable: The upshot for us<o:p></o:p></p>
<p class="MsoNormal">Woody Leonhard <o:p></o:p></p>
<p class="MsoNormal">By Woody Leonhard on March 19, 2014 in <o:p></o:p></p>
<p class="MsoNormal">Top Story<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Last month, cable TV giant Comcast announced it had agreed to buy Time Warner Cable for U.S. $45 billion, merging the largest and second-largest cable companies<o:p></o:p></p>
<p class="MsoNormal">in the U.S.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">While the raging debate over the advisability of the merger focuses primarily on TV, ultimately the far larger question will be our future access to the<o:p></o:p></p>
<p class="MsoNormal">Internet.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">For cable TV users, the impact of the merger on fees and (cough) service is clearly of concern. But the more important, complex — and cloudy — discussion<o:p></o:p></p>
<p class="MsoNormal">should be about the future of our connection to the Web. Most of us could face major changes to how we view content in the Internet — and at what cost?<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">In this first installment of a two-part series, I’ll provide some background on the Comcast/Time Warner Cable merger — and some of the more obvious ways<o:p></o:p></p>
<p class="MsoNormal">it could impact the millions of affected broadband users.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Merging markets: The art of the deal<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">On the surface, Comcast’s proposed purchase of Time Warner Cable looks like any other billion-dollar merger of an industry’s two largest players: consolidated<o:p></o:p></p>
<p class="MsoNormal">operations, reduced overlap, economies of scale, and larger customer base are all supposed to lower customer costs and provide better service. (Show me<o:p></o:p></p>
<p class="MsoNormal">one case where all that has come to pass.)<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">But the Comcast/Time Warner Cable merger is especially complex — far more so than, say, the melding of Compaq and HP. Because for the cable industry, the<o:p></o:p></p>
<p class="MsoNormal">Holy Grail is to both own and deliver content — to essentially control the media you want to watch and the pipes that deliver it.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">And Comcast has worked on that goal more diligently than most. For example, it bought NBC Universal a year ago. Watch a show on NBC, and you’re watching<o:p></o:p></p>
<p class="MsoNormal">Comcast. Pay to see a movie from Universal, and it’s Comcast. Operating under the XFINITY brand, the company has about 22 million cable customers in 40<o:p></o:p></p>
<p class="MsoNormal">states. With about $65 billion a year in revenues, Comcast is widely recognized as the largest media and communications company in the world.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Time Warner Cable, on the other hand, has recently encountered some tough times. It was spun off from Time Warner proper five years ago. So it has no connection<o:p></o:p></p>
<p class="MsoNormal">to Time Warner media outlets such as Time Magazine, CNN, HBO, Warner Bros., or Cartoon Network. Time Warner Cable claims 13 million customers in 29 states<o:p></o:p></p>
<p class="MsoNormal">and about $22 billion in revenues. The company, led by its new CEO, Rob Marcus, is in the middle of a turnaround plan.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">But Time Warner Cable was also the focus of a bidding war. Recently, the much smaller Charter Communications (7 million customers; $7 billion in revenues)<o:p></o:p></p>
<p class="MsoNormal">tried to swallow Time Warner Cable but couldn’t compete with Comcast’s $45 billion, all-stock offer.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">The merger isn’t a done deal yet; it’s still subject to congressional oversight (or undersight). If you haven’t seen Senator Al Franken’s scathing review<o:p></o:p></p>
<p class="MsoNormal">of the takeover (“bad for consumers, cable TV, and the Internet”), it’s well worth a look on its YouTube
<o:p></o:p></p>
<p class="MsoNormal">page.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">A recent Forbes <o:p></o:p></p>
<p class="MsoNormal">op-ed piece<o:p></o:p></p>
<p class="MsoNormal">by antitrust expert Warren Grimes also summarizes the deal well. He states, “Television distribution in the United States is broken. The system denies<o:p></o:p></p>
<p class="MsoNormal">consumers reasonable choices at affordable prices. Comcast’s proposed acquisition of Time Warner Cable will make a dismally performing and anticompetitive<o:p></o:p></p>
<p class="MsoNormal">industry even worse.”<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Personally, I’m not overly concerned about television. I cut the cord years ago. I’ve become adept at bobbing and weaving around the Web to get what entertainment<o:p></o:p></p>
<p class="MsoNormal">my family and I want. What hasn’t been so clearly discussed is how the merger will impact Comcast’s and Time Warner Cable’s Internet business.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">The case for Comcast and Time Warner<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Comcast claims there are few antitrust concerns, primarily because Comcast and Time Warner Cable (TWC) have very little overlap in customer base; i.e.,<o:p></o:p></p>
<p class="MsoNormal">places with Comcast don’t have TWC, and vice-versa. The takeover thus wouldn’t stifle competition. Moreover, 3 million TWC pay-TV customers would be cut<o:p></o:p></p>
<p class="MsoNormal">loose — moved to rival services — to prove the point.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">If the merger proceeds under those terms, the resulting company would have less than 30 percent of the pay-TV market. That, according to the Comcastians,<o:p></o:p></p>
<p class="MsoNormal">doesn’t constitute a move into monopoly territory.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Still, Comcast sees this as a chance to expand rapidly, pulling in a large chunk of pay-TV market share in what is a relatively slow-moving industry.
<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">For Time Warner Cable, the merger is a chance to clean out the deadwood. The turnaround hasn’t gone as well as expected. Charter Communications has been<o:p></o:p></p>
<p class="MsoNormal">nipping at TWC’s heels and pulling some embarrassing stunts — such as nominating a new set of directors for Time Warner Cable’s board, as reported in a<o:p></o:p></p>
<p class="MsoNormal">New York Times <o:p></o:p></p>
<p class="MsoNormal">story.<o:p></o:p></p>
<p class="MsoNormal">A deal with Comcast would effectively eliminate the threat from Charter along with TWC’s other problems.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Comcast’s liberal donations of money to congressional members might also help consummate the deal. In a recent Politico
<o:p></o:p></p>
<p class="MsoNormal">report,<o:p></o:p></p>
<p class="MsoNormal">Tony Romm described Comcast’s congressional net this way: “In fact, money from Comcast’s political action committee has flowed to all but three members<o:p></o:p></p>
<p class="MsoNormal">of the Senate Judiciary Committee. … the cable giant has donated in some way to 32 of the 39 members of the House Judiciary Committee, which is planning<o:p></o:p></p>
<p class="MsoNormal">a hearing of its own. And Comcast has canvassed the two congressional panels that chiefly regulate cable, broadband, and other telecom issues, donating<o:p></o:p></p>
<p class="MsoNormal">to practically every lawmaker there. …”<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">At this point, if you truly think the U.S. Congress will block the takeover, I have some offshore investments I’d like to discuss with you.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">The merger’s implications for broadband<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">In his Feb. 12 Gigaom <o:p></o:p></p>
<p class="MsoNormal">post,<o:p></o:p></p>
<p class="MsoNormal">“Comcast and Time Warner Cable: Forget TV, it is all about broadband,” Om Malik (one of my favorite tech writers) dissected the deal. He surmises — correctly,<o:p></o:p></p>
<p class="MsoNormal">I believe — that what we’re witnessing isn’t so much a relatively technology-addled cable-TV play; it’s a battle for the future of broadband itself.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Malik quotes one of his analysts, Stacey Higginbotham, as saying, “So the cable industry, if it can consolidate, gets access to the most important pipe<o:p></o:p></p>
<p class="MsoNormal">coming into people’s homes (after power and water), and the fewer cable companies there are, the more unified the rate structure might appear.”<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">It seems obvious that the intention of a combined Comcast/TWC, long-term, is to quickly consolidate control over fast Internet access to about a third of<o:p></o:p></p>
<p class="MsoNormal">U.S. households. And they’ll accomplish that goal in the simplest possible way: they’ll own the digital pipes into the house.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Today, DSL is on the decline and fiber on the rise. AT&T and Verizon are the only companies that have widespread broadband pipes into consumers’ homes —<o:p></o:p></p>
<p class="MsoNormal">and they’re both switching from DSL to fiber as quickly as they can. There’s also a handful of much smaller players — such as Google and regional carriers<o:p></o:p></p>
<p class="MsoNormal">— filling the void.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">In the TV sphere, providers such as DirecTV offer stiff competition. And for wireless, LTE (<o:p></o:p></p>
<p class="MsoNormal">more info)<o:p></o:p></p>
<p class="MsoNormal">gives good speeds at small volumes.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">But for the increasingly important task of stuffing bits into peoples’ houses, a combined Comcast and Time Warner cable could gain a huge advantage.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Let me give you an example of why that worries me. I have a Comcast broadband line (DOCSIS;
<o:p></o:p></p>
<p class="MsoNormal">more info),<o:p></o:p></p>
<p class="MsoNormal">and it works well — up to a point. Comcast has started rolling out data caps. If you go over 300GB per month, you get hit with a $10 surcharge for each<o:p></o:p></p>
<p class="MsoNormal">additional 50GB. The caps started in Nashville about a year ago, moved to Atlanta in December, and are now poised to roll over much of the South. If Comcast<o:p></o:p></p>
<p class="MsoNormal">gave me a warning about data caps when I signed up, I sure missed it. But there’s no missing the fact that the caps are in force.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">(Heaven help you if you want to talk with somebody inside Comcast to ask about your data usage. By reputation and by personal experience, service is not<o:p></o:p></p>
<p class="MsoNormal">Comcast’s strong suit.)<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">If you believe that ISPs have placed data caps in response to network congestion due mostly to customer overuse, a DSLReports.com
<o:p></o:p></p>
<p class="MsoNormal">article<o:p></o:p></p>
<p class="MsoNormal">states that caps are about profits — not congestion. It notes, “Does raising rates on a product that already sees 90 percent profit margins sound like<o:p></o:p></p>
<p class="MsoNormal">‘fairness’ to you?”)<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">If Comcast absorbs Time Warner Cable, more customers might see their Internet use capped. And that might be only the beginning of new limitations.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">So what can you, the consumer, do? If you agree that the merger is not in our best interests, you might want to see whether your congressional reps (both<o:p></o:p></p>
<p class="MsoNormal">senators and representatives) oppose the merger. A quick Google search will usually unmask their proclivities. Better yet, sign up for the Free Press effort<o:p></o:p></p>
<p class="MsoNormal">(<o:p></o:p></p>
<p class="MsoNormal">site<o:p></o:p></p>
<p class="MsoNormal">) to block the merger. You can also join Consumers Union (<o:p></o:p></p>
<p class="MsoNormal">site),<o:p></o:p></p>
<p class="MsoNormal">the group behind Consumer Reports. And check out Senator Al Franken’s
<o:p></o:p></p>
<p class="MsoNormal">video<o:p></o:p></p>
<p class="MsoNormal">— pass it around and give it a thumbs-up.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Finally, if you have a chance to help bring one of the alternate fiber companies to your area — Google Fiber comes immediately to mind, but there are regional<o:p></o:p></p>
<p class="MsoNormal">providers, too — do it!<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">In my next column, I’ll discuss further the consequences of the Comcast/Time Warner Cable merger — and stir in thoughts about the recent Comcast/Netflix<o:p></o:p></p>
<p class="MsoNormal">deal and its impact on net neutrality.<o:p></o:p></p>
</div>
</body>
</html>