Comcast buys Time Warner Cable. What does it mean for customers?

Comcast and Time Warner Cable announced a $45.2 billion deal Thursday that merges the two biggest cable providers in the US. If it can get past antitrust regulation, what will the deal mean for millions of Comcast and Time Warner Cable customers? 

|
Gene J. Puskar/AP/File
The Comcast logo on one of the company's vehicles, in Pittsburgh. Comcast has agreed to buy Time Warner Cable for $45.2 billion in stock, or $158.82 per share, in a deal that would combine the top two cable TV companies in the US.

The country’s two biggest cable television giants just became one behemoth.

Comcast, the largest cable provider in the US, announced on Thursday that it had agreed to buy Time Warner Cable, the second-largest, for $45.2 billion. If approved, the deal will give Comcast a presence in 19 of the nations’ 20 biggest media markets and make it far and away the top provider of broadband Internet in the country. The bid crushed efforts to acquire Time Warner by Charter Communications, which had been trying to engineer a takeover deal for months.

For investors, especially Time Warner Cable shareholders, the merger is cause for celebration. In a tax-free, all-stock deal, Comcast will pay TW investors $159 per share, buying 284.9 million shares in all. Time Warner stock jumped over 9 percent on the announcement Thursday, though Comcast shares are down 3 percent. “It’s good for the industry, because the financial leverage will be better than if Charter had bought Time Warner,” says Laura Martin, a Los Angeles-based media analyst for Needham & Co., an equity research firm based in New York. “And it’s a tax-free deal [for Time Warner shareholders], so that’s great for investors.”

The muddier question, though, is whether one company exerting nearly total dominance in the cable TV realm will be a good thing for customers. Comcast, predictably, says of course. “This transaction will create a leading technology and innovation company, differentiated by its ability to deliver ground-breaking products on a superior network while leveraging a national platform to create operating efficiencies and economies of scale,” the company’s’s announcement of the deal reads.

Ms. Martin argues that Comcast’s omnipresence could give it unparalleled negotiating power with networks and other content providers, which presumably would make channel blackouts like this one a rarity. In theory, that could help keep subscriber fees more stable.

“And it’s good for consumers because Comcast has the most technologically advanced cable systems,” she says. “Consumers want more services and more product offerings, and for Time Warner customers, Comcast can give them that.”

Furthermore, the deal, which will add about 8 million current Time Warner customers to Comcast’s approximately 22 million, won’t mean fewer cable TV options for most consumers because the two companies don’t overlap in any markets. But don’t expect service to get cheaper. “When you take a competitor out of the mix, prices generally go up,” says Jeff Kagan, a media industry analyst based in Atlanta. “[Time Warner] isn’t technically a competitor, because they’re in different local markets, but this does make it easier for them to increase prices if they wanted to.”

Craig Moffett, an industry analyst at MoffettNathanson in New York, predicted in a report Thursday that Comcast’s programming costs would initially increase as a result of the deal, which could affect subscribers.

Mr. Kagan agrees that the merger would mean more up-to-date pay TV services, especially for current Time Warner subscribers. “Customers who are interested in that will benefit,” he says. “But some customers want to save money, or choose a less expansive version of cable TV, and that’s where Comcast and Time Warner and all the rest of them continue to drop the ball.”

As cable companies face an increasing swell of alternatives to their services, including satellite TV, digital subscription services like Netflix, and Internet services from phone companies like AT&T and Verizon Fios, that oversight could (eventually) become a problem. But for now, the deal would make Comcast the strongest force in the market.

If it gets done. The merger still has to win approval from shareholders of both companies and, more importantly, from the US Department of Justice and Federal Communications Commission, which will be looking closely at whether the partnership violates any antitrust laws. Mr. Moffett argues that the problem won’t be the size of the new company’s market share (between 30 and 33 percent of the pay TV market in the US), but Comcast’s near-total control over programming. “It will be argued that a carriage deal with a merged Comcast/TWC would suddenly be an existential requirement for programmers, and that Comcast would, in effect, have unilateral control over what content could and couldn’t be heard by the American public,” he writes. “From a First Amendment perspective, they will argue, that is simply a bridge too far … it is the principle[sic] hurdle this deal will have to clear.”

But Martin thinks the deal will “absolutely” happen. “We’ve never had a cable deal turned down,” she says. Comcast and Time Warner expect to complete the merger by the end of 2014. 

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Comcast buys Time Warner Cable. What does it mean for customers?
Read this article in
https://www.csmonitor.com/Business/2014/0213/Comcast-buys-Time-Warner-Cable.-What-does-it-mean-for-customers
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe