Deal seen as “too big to succeed” for customers in the eyes of Obama Justice Department. Officials cast a wary eye on consumer impact of mega-cable deal.
WASHINGTON, April 17, 2015 – Sources are reporting this afternoon that the Obama administration’s Department of Justice is “nearing a recommendation to block” the massive deal that would unite major cable competitors Comcast (trading symbol: CMCSA) and Time Warner Cable (TWC) into a single mega-giant provider of entertainment, TV and Internet bandwidth.
As rumors and news began to flicker across the wires, investors battered both stocks on an already hugely down day on Wall Street. As of late-afternoon trading Friday, CMCSA was down about 2.5 percent, while TWC was off a whopping 5.3 percent.
Making the merger all the more unlikely, Bloomberg reported, is that DOJ’s legal eagles aren’t even jawboning with Comcast—which initiated the deal—to offer more consumer-friendly terms for the deal. The administration appears convinced that in the already near-monopoly world of cable, Comcast’s acquisition of Time Warner would bring the combined entity close to monopoly status, and for once they’d appear to be on target with that observation.
Making matters even dicier for the proposed merger is the fact that the FCC is looking closely at the consequences as well, given that Comcast also controls the NBC Universal universe, making the company a vertically integrated entertainment giant that in and of itself is tempting for energetic trust busters.
Comcast disagrees, of course, still contending that its deal with Time Warner will result in numerous consumer benefits, including more competition. But how this giant merger will create “more competition” by immensely shrinking the pool of mega-competitors is seriously open to question.
The cable and entertainment industries were also roiled this week with the announcement by Verizon that its FiOS TV/entertainment service will begin to offer something that resembles an à la carte package, something consumers have often demanded but to no avail.
In other words, Verizon will offer smaller packages and channels that can be added piecemeal and on a month-to-month basis as opposed to the overly large-sized packages—even basic packages—of channels all cable users are required to purchase under long- term contracts even if they only watch a fraction of the stations included.
The Verizon move is likely a reaction to announcements by HBO and other popular channels that they’ll make their product available independently via streaming video in addition to their cable TV arrangements.
Adding in increasingly strong competition from Netflix, Amazon Prime and many others, this week’s Verizon initiative, along with the apparent failure of the Comcast-Time Warner merger, are a clear sign that the long-time, expensive and anti-competitive cable TV and entertainment conglomerates may finally be losing their monopolistic hold on the consumer.
That’s something that in and of itself may actually lead at last to those lower prices all these companies have been bragging about but have never delivered. And never will.Click here for reuse options!
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