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Earlier this year, Comcast Corporation was planning on taking over Time Warner Cable Inc., a deal that was met with harsh reactions from the public as well as many media companies and organizations. The fear was that a merger between two of the biggest media conglomerates in the United States would significantly reduce competition in the telecommunications industry. After the Department of Justice threatened an antitrust lawsuit against the companies, the merger plan was canceled about a month ago. Now Charter Communications Inc. has taken Comcast's place, having proposed a $56.7 billion plan for the takeover of Time Warner Cable. This time, the deal seems to be different and has gathered more support. Here is a closer look at the potential benefits and ramifications of this proposal.
One of the biggest differences between Charter's deal and Comcast's deal is that Charter does not plan to concentrate its merger with Time Warner into a single entity, and will still exist as both Charter and Time Warner, with Charter in control. One of the major concerns with the Comcast/Time Warner deal was that a single corporation formed of two of the biggest telecommunication companies would control over half of the media and telecommunications market. Charter is planning on merging with Bright House Networks in addition to Time Warner, which will make it the second largest cable provider and internet operator in the country; even then it will still be significantly smaller than Comcast in terms of revenue and customers. Charter does not own any of the media organizations and interests that Comcast has a claim to, automatically making its cut of market share much smaller. This being the case, fair competition will still exist in the telecommunications market.
However, big concerns about the merger are what is motivating the deal and what benefits are available for customers. What is driving many business deals from cable companies is the increasing popularity of internet subscriptions relative to cable subscriptions. As subscriptions to cable services are falling, there is more demand for online streaming and broadband service. However, as these companies have mainly provided cable services, they struggle to reinvent themselves for a changing market. Charter has stated that its deal with Time Warner will improve customer service by adding more jobs in that sector, improving prices of offers, and increasing overall product quality. However, analysts are skeptical about these offers considering the consistently increasing prices associated with the internet. The Charter/Time Warner deal will most likely cause an increase in prices for broadband service. Charter increasing its size and control with the merger would give it more control over prices and what it chooses to charge more for, including many popular and essential services like online streaming. Plus, many critics of the former Comcast/Time Warner deal are concerned about corporate consolidation in general, arguing that the merging of any two companies will be too powerful for the economic market, regardless of the size of the companies.
It remains to be seen whether the Charter/Time Warner Cable deal will go through, but signs so far are more promising then they were for the Comcast/Time Warner merger. Do you think this deal will get approved? If so, what will be the implications?
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