Back in February 2014 I asked “Why does it make sense for Comcast and Time Warner to merge?” Now it seems that they won’t. What’s next for our monopoly Internet provider (Comcast) here in Cambridge? Will they retrain some of their lawyers as network engineers?
Is it a victory for advocates of market economics that now each company will have a monopoly only in most of the towns where each operates?
The failure of the merger is a victory for consumers but in an indirect way. As you say, the fact that you will still be dealing with a (semi) monopoly in your town will not change. But breaking up AT&T into smaller companies did help consumers in the long run, even if they still had to deal with a local monopoly.
The bigger impact is on the other end – for people whom Comcast deals with as suppliers. This would include suppliers of network equipment, cable modems, etc. but mainly content providers. As the main content purchaser (and owner of a major content provider itself ) Comcast/Time Warner would have had tremendous leverage over content creators – they would be able to make offers that you couldn’t refuse. They would also (barring net neutrality requirements) have tremendous power to strangle competing technologies such as streaming video that might hurt their cable TV monopoly. Remember the days when AT&T wouldn’t let you physically connect anything to their phone line so the only way to send data was to put the handset in a cradle (it was no problem because every handset was identical)?
Probably what needs to be done in cable TV is to separate the fee for carriage vs. generation, just as has been done in many states for electricity. Comcast / Time Warner would retain their monopoly for transmission and get paid a regulated fee based on a rate of return on their physical infrastructure, but you would contract separately with the content providers (just as you already have a separate contract with Netflix separate from your broadband bill). You wouldn’t have to deal directly with 200 different channels – there would be content packagers who would buy content wholesale and resell you various competing bundles. Some would emphasize sports or ethnic programming or go for bottom feeders or the 1% who wanted everything, etc.
Izzie, what you are describing is called Structural Separation. Unfortunately, given Comcast, like AT&T, is one of the biggest political contributors in Washington, it is unlikely to happen anytime soon.
@Izzy,
Your hypothesis would have been accurate twenty years ago. Now, there is no way a merger of cable titans would have leverage over content providers.
There are advances brewing in satellite transmission capabilities that will make cable TV obsolete within the next decade. Bet on it.
If I had to guess, I would say that cable in general will be superseded by streaming type services. Broadcasting makes sense for live events such as football games (and even then you can just tune into the live stream) but why broadcast movies and other entertainment programs instead of letting people pick which movie they want to watch? Probably 90% of what’s on TV could be replaced by “on demand” type services.
Satellite can’t (absent new capabilities) provide broadband service which seems more important than cable TV. Around here, I mostly see DirectTV dishes in inner city neighborhoods where (I’m guessing) many residents don’t have broadband.
The problem is that Comcast is not only the monopoly provider of cable TV, they are also the monopoly provider of broadband. US broadband service is slower AND more expensive AND the service is worse than in most other countries – that’s a real Comcast triple play for you.