With Internet outage, anger rises over proposed Time Warner-Comcast merger

It was bad timing for Time Warner Cable's Internet outage.

Coming immediately on the heels of Time Warner's agreement to pay the Federal Trade Commission's $1.1 million fine for improperly reporting multiple network outages last year, millions across the country were unable to access Time Warner's Internet and on-demand services early Wednesday morning. 

"An issue with our Internet backbone created disruption with our Internet and On Demand services," Time Warner Cable said in a statement. 

The outage was first discovered around 4:30 a.m. and disrupted Internet service across all of Time Warner Cable's markets, the company says. Service was mainly restored by 6 a.m. But that didn't stop consumers from taking to social media to vent their frustration, using the Twitter hashtag #timewarnercable.

This collision comes at a time when Time Warner Cable is currently seeking federal approval to be acquired by fellow cable provider Comcast for $45 billion. 

Detractors of the proposed deal have said that cable consolidation would be bad for users in an age when access to reliable Internet is essential for everyday life. For this reason, Time Warner's recent outage has added fuel to an already-simmering fire surrounding a merger between the two companies.

Specifically, critics note that consolidation between these two cable giants would mean even more people could fall victim to problems that arise when something goes wrong – such as a cable outage. With fewer options on the table, subscribers would have little choice should they decide they want a more reliable service.  

Gov. Andrew Cuomo of New York has told the New York State Department of Public Service to look into the outage in conjunction with its review of the proposed merger. 

"Today’s widespread Internet outage that has apparently impacted more than 11 million customers at Time Warner - which is based in New York - is a stark reminder that our economy is increasingly dependent on a reliable broadband network," Governor Cuomo said in an e-mailed statement to Bloomberg. 

Neither Comcast nor Time Warner Cable have fared well in the eyes of consumers in recent years. According to a May report from the American Customer Satisfaction Index, Time Warner and Comcast ranked last and second-to-last in customer satisfaction for Internet service, itself the lowest-ranked industry included in the survey, after subscription television service and Internet social media. 

Since both companies are already the focus of consumer ire for poor service, a merger would only continue to erode customer satisfaction, says Forrest Morgeson, director of research at ACSI. 

Internet service, he says, is itself a difficult field in which to operate: "[These companies] are servicing a huge number of people and trying to be profitable at the same time." 

But Mr. Morgeson adds that both Comcast and Time Warner Cable have traditionally maintained monopolies within their markets, facing remarkably little competition. Though that may be beginning to change with new challengers such as Google entering the fray, for most Internet users, Comcast and Time Warner are the only two logical options. Consequently, neither company feels a strong need to respond to customer satisfaction or innovation from competitors in the industry, he says. 

And he says that means that should a merger go through, customers would likely be more unhappy. 

"When you’ve got two companies merging, neither of which are particularly good, then they tend to do an even worse job providing a satisfying experience," he says.

Similarly, a recent survey earlier this summer by the management consulting firm CG42 found that Time Warner Cable and Comcast have the highest levels of brand vulnerability due to customer frustrations. Further, CG42's Cable Industry Brand Vulnerability Study showed that the top 5 US cable providers stand to lose a combined $6.9 billion in revenues over the next year should existing customer frustrations persist. 

"This is just another challenge that Time Warner and Comcast face in overcoming a customer environment that is fraught with frustration and misery," Steve Beck, founder CG42, told the Los Angeles Times.

"People are questioning whether this merger will be good for consumers," Mr. Beck added.