There are good reasons the Justice Department and the Federal Communications Commission should block Comcast’s $45 billion acquisition of Time Warner Cable. The merger will concentrate too much market power in the hands of one company, creating a telecommunications colossus the likes of which the country has not seen since 1984 when the government forced the breakup of the original AT&T telephone monopoly.
The combined company would provide cable-TV service to nearly 30 percent of American homes and high-speed Internet service to nearly 40 percent. Even without this merger and the proposed AT&T-DirecTV deal, the telecommunications industry has limited competition, especially in the critical market for high-speed Internet service, or broadband, where consumer choice usually means picking between the local cable or phone company.
By buying Time Warner Cable, Comcast would become a gatekeeper over what consumers watch, read and listen to. The company would have more power to compel Internet content companies like Netflix and Google, which owns YouTube, to pay Comcast for better access to its broadband network. Netflix, a dominant player in video streaming, has already signed such an agreement with the company. This could put startups and smaller companies without deep pockets at a competitive disadvantage.
There are also worries that a bigger Comcast would have more power to refuse to carry channels that compete with programming owned by NBC Universal, which it owns. Comcast executives say that they would not favor content the company controls at the expense of other media businesses.
The company argues that this deal would not reduce choice because the company does not directly compete with Time Warner Cable anywhere.
The reality is far different. At the end of 2012, according to the FCC, 64 percent of American homes had only one or at most two choices for Internet service that most people would consider broadband. Wireless services can handle streaming video, but many customers of Verizon or AT&T would blow through their monthly wireless data plan by streaming just one two-hour high-definition movie.
Comcast executives argue that companies like Sprint are planning to provide very fast Internet service that will compete with wired broadband.
The Justice Department and the FCC could try to address some of the problems with the Comcast-Time Warner Cable deal by imposing conditions, like requiring the company not to give favored treatment to established content providers like Netflix and Google at the expense of smaller companies.
Even so, this merger would fundamentally change the structure of this important industry and give one company too much control over what information, shows, movies and sports Americans can access on TVs and the Internet. Federal regulators should challenge this deal.
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