In February 2014, Comcast announced an agreement to purchase Time Warner and create the largest cable TV company in the US. They announced the end of the effort on April 23, 2015. Following the acquisition of NBC Universal two years earlier, Comcast sought an enormous competitive advantage. Many analysts concluded that the proposed Time Warner acquisition would have reduced competition and consolidated too many content businesses and cable assets in one company. The proposed purchase would have combined the top two cable companies and large Internet providers into one large entity. It had the appearance of monopoly control; one company with near total command of the broadband, cable TV, and broadcast markets. Further, Time Warner is a major provider of content, both new and in its extensive vaults.
Costs and Competition
The proposed Time Warner purchase would have created one company with more than half of the broadband customers. Comcast demonstrated that there would be cost savings due to economies of scale. Comcast would save from less duplication of infrastructure as one company took over a subscriber base formerly served by two companies. Comcast could cut the number of managers and supervisors and consolidate maintenance and system upkeep in areas in which both Time Warner and Comcast had full operations. However, there would be no reason to lower the fees charged to customers, and the operating savings would not automatically lower rates. Some analyst stated, and the FCC agreed that the opposite could occur. Rates would likely stay the same or rise in the absence of competition.
Impact on Consumers
The proposed acquisition would have cut off or reduced competition in most of the major US markets,and that included the big cities and surrounding metropolitan areas. The impact goes beyond mere market share, fees, and programming; it involves the importance of growth and innovation. Too much consolidation removes the incentive for adding new services and seeking creative approaches to consumer demands. Broadband and broadcast were consolidated when Comcast took over NBC-Universal. With Time Warner, Comcast would have little incentive to innovate in either its broadcast, content, and broadband functions.
Comcast Recognizes Public Opinion
The decision to withdraw from the proposed purchase, Comcast acknowledged it would not receive federal regulatory approval. The companies spent millions providing information to Congress and shaping the public debate. The prospect of stifling competition and raising broadband rates across the US was not popular with the public. Federal regulators heard the public on the issue of net neutrality, and a strong policy emerged along with the federal rejection of state laws aimed at blocking competition. There was an unprecedented wave of public support for keeping the Internet open and free for competition, and it followed into the area of broadband and cable because the same companies provide Internet services too.
Popularity Begins with Happy Consumers
Time Warner and Comcast ranked near the bottom in consumer satisfaction. That included assessments of price and value for services received. In 2013, cable prices rose 6.5 percent or nearly three times the rate of inflation. The merger of these unpopular companies into a behemoth that could continue the run of increased annual costs would not resonate with the public. There was no countervailing argument to suggest benefits for the public. The prospect of continued levels of consumer dissatisfaction and high prices was a drag on the deal from the inception. The applicable federal policies aim at protecting consumers and promoting beneficial competition and innovation
Charter Merges and Grows
Soon after the failure of the Comcast purchase, Charter announced plans to merge with Brighthouse and purchase Time Warner. The differences in the transaction relate primarily to the size and market dominance of the eventual merged companies after acquiring Time Warner. Charter will be the second largest cable company in the US, and it will add competition in many markets and provide improved services and options in some under served markets.