Failed Comcast Deal Would Hurt Cable’s Competitiveness
Comcast, the Cable Provider Industry’s largest player, had planned to acquire its strongest rival, Time Warner Cable, the second-largest player in the industry rendering the industry even more concentrated than it already is. Yesterday, after meeting with the Justice Department and the Federal Communications Commission, and sensing that the deal would face heavy opposition, Comcast is expected to abandon its plan. The deal would have significantly increased market share concentration within the Cable Provider industry, strengthening Comcast’s position vis-à-vis its internal and external competitors. However, if the deal falls through, Comcast will have to reposition itself to better compete with its external competitors.
In acquiring Time Warner, Comcast hoped to better position itself in the face of changing consumer technology trends and to fend off mounting competition from online streaming services. Cable providers offer video, high-speed internet and voice services, often as a bundle, sold in large part to residential customers as well as businesses. As the number of wired telephone subscribers and cable TV customers declines steadily, the cable providers industry faces rising external competition, threatening its main products. An increasing number of consumers have disconnected their wired telephones opting to rely exclusively on wireless providers, increasing the percentage of wireless-only households to 41.0%, as of December 2013 according to the National Health Interview Survey released by the National Center for Health Statistics. Meanwhile, online streaming companies, such as Hulu and Netflix, have been threatening the industry’s video services, offering their own lower-cost alternatives. Companies operating in the industry are thus more reliant than ever on high-speed internet services to provide a steady source of revenue.
Meanwhile, the FCC’s recent reclassification of high-speed internet as a telecommunication service, instead of information service, has created an additional roadblock for the industry’s plans for further monetizing high-speed internet. In essence, the ruling allows the FCC to ensure that no content is blocked and that the internet is not divided into express lanes and slow lanes. Consequently, this blocks Comcast and other industry leaders’ ability to charge companies, such as Netflix, for access to higher speed internet.
In the face of shifting consumer preferences, rising competition and regulatory oversight, the failure of this deal would further limit Comcast and Time Warner’s ability to control their market, potentially limiting the company’s revenue growth.