Too Big to Fail - But Not Too Big to Suck
On a recent "Real Time With Bill Maher" show, Maher responded to the announcement that Time Warner Cable would merge with Comcast Corp. in a $45 billion purchase. He noted that, combined, the two cable systems represent 19 of the 20 largest U.S. markets; and, apart from suppliers like Dish and DirecTV, they have no competitors in these metros. Further, Maher said, the two companies have the lowest customer satisfaction ratings of any cable system. So, as he asked his panelists, where is the value for customers in this merger if both companies are known to have questionable service performance?
The Federal Communications Commission (FCC) will, of course, have a great deal to say about whether this merger goes through or not. During the past couple of decades, we've seen a steady decline in the number of cable companies, from 53 at one point to only six now. Addressing some of the early negative reaction to its planned purchase of TWC-which would increase Comcast's cable base to 30 million subscribers from the 22 million it currently has (a bit less than 30 percent of the overall market)-Comcast has already stated that it will make some concessions to have the merger approved. But, that said, according to company executives, the proposed cost savings and efficiencies that will "ultimately benefit customers" are not likely to either reduce monthly subscription prices or even cause them to rise less rapidly.
Comcast executives have stated that the value to consumers will come via "quality of service, by quality of offerings and by technological innovations." David Cohen, their Executive VP, said: "Putting these two companies together will not deprive a single customer in America of a choice he or she will have today." (Opens as a PDF) He also said, "I don't believe there's any way to argue that consumers are going to be hurt from a price perspective as a result of this transaction." But, that said, he also admitted, "Frankly, most of the factors that go into customer bills are beyond our control." Not very encouraging.
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