In the hot debate over the proposed Comcast-Time Warner Cable merger, there are two competing versions of reality.
In one, increasingly massive communications firms gobble up ever-larger shares of various, increasingly interrelated markets, magnifying the power they wield against innovators who threaten the old business model and against customers already suffering from high bills and poor service. In that world, stopping the Comcast merger would prevent a bad situation from getting worse.
In the other, traditional cable television and wired broadband providers are in increasingly dire competition with online video services, wireless Internet providers and a cash-flush Google expanding its installation of high-speed fiber-optic cable across the country. Consolidation is the only way to ensure these companies have enough capital to invest in new and better technology that will keep their customers happy — or, at least, satisfied enough not to cancel their subscriptions.
In the real world, the outlook for the future of communications and entertainment is foggier than either scenario suggests. That uncertainty recommends a degree of regulatory caution. The government’s smartest move is not to block the merger, but to make clear that regulators will respond if big industry players begin to violate basic principles of market fairness.
Some criticism of the merger is misleading or speculative. Cable subscribers will not lose flexibility to get their television service from another company. The market is split geographically: Comcast and Time Warner Cable do not compete for customers. Will Comcast find ways to use its strengthened position to promote its own content (from NBC, for example) or services (such as its Netflix competitor, Streampix)? It may well gain more leverage in negotiations with content creators, some of which are in pretty strong positions at the moment. But it would take a much more drastic change in practice to start discriminating heavily against other players interacting with the company.
By the same token, some merger supporters overstate the extent of competition the cable industry faces. At the moment, there are few broadband services as attractive as the wired connections cable companies sell. That might change, but it is not clear how fast and in what way. Merger defenders also downplay the conflicts of interest that might encourage firms such as Comcast to promote their products on the wires they own, about which critics are speculating.
That is not grounds to take the severe step of blocking a proposed merger. But it is reason for federal regulators to keep a close eye on what cable companies, still huge players in how we communicate and consume culture, end up doing to competitors and upstarts – and to set clear conditions that allow a crackdown, if necessary.
Editorial by The Washington Post