The Norman Transcript

Columns

April 12, 2014

Why Comcast-Time Warner deal makes sense

NORMAN — Say this about the deal announced Thursday for Comcast to buy Time Warner Cable: It’s big. Big price tag of $45 billion. Big combined subscriber base of 30 million households. And big risk of a veto from government antitrust regulators.

Remember when AT&T wanted to acquire T-Mobile in a similarly big acquisition? President Barack Obama’s administration blocked that merger in 2011. In our view, that transaction should have won approval. Combining the wireless carriers made business sense and would have helped consumers receive improved services.

For the same reasons, we’re inclined to favor a tie-up between the No. 1 and No. 2 cable operators. There’s another reason why such a combo play doesn’t bother us, even though it looks like a classic case of a big new company with more pricing power and market dominance:

American consumers have never had so many options for digital video, news and entertainment, and those options are growing. As this diversity of service options expands, the reflexive distrust of big-company mergers loses its oomph. In this realm consumers rule: They have the freedom to abandon any provider that tries to gouge them.

In sum, the initial worries about a Comcast-Time Warner deal seem overblown. We doubt that consumers would be stuck paying more for cable and broadband service, as some critics fear. We also doubt that content providers such as ESPN or The Weather Channel (now in a standoff with satellite provider DirecTV) would lose bargaining power in their future negotiations with a combined cable behemoth.

How so? For starters, Comcast and Time Warner operate cable systems with little overlap. In most of their markets, the two giants don’t compete. Time Warner is big in New York City, for instance, and Comcast in New Jersey and Connecticut. Anticipating an objection from federal antitrust lawyers, Comcast said Thursday it would divest about 3 million subscribers in competitive markets if the deal wins approval. The government might reasonably require more divestitures — but probably not many more.

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