Comcast and Time Warner

NYC-NBC_StudiosI have read many articles on the issue of Comcast buying Time Warner, but I hadn’t written a blog yet about it because I wasn’t entirely sure how I feel about this. After all, Comcast is already huge and so does it really matter if they get even bigger?

After reading the announcement I went to the web to remind myself of all of the things that Comcast owns. In addition to being a cable provider, they also own a lot of TV networks. They own NBC, one of the major broadcast networks. They also own a number of NBC affiliate stations. They own a lot of cable networks including CNBC, MSNBC, Syfy, Chiller, Cloo, E!, USA Networks, Bravo, Oxygen, Universal HD, Sprout, Telemundo and Mun2. They also own a smaller share of other networks like the Weather Channel, TVOne and Esquire TV. They own a number of regional sports networks throughout the northeast, Chicago, the northwest and the Bay Area. They own the Philadelphia Flyers outright. They create programming through Universal Studios and other production affiliates. They own the rights to broadcast the Olympics in the US. They own a piece of Tivo. They even own Fandango, the movie ticket company.

I find myself not so bothered that Comcast is going to get bigger as a cable company. Let’s face it, they have pretty crappy customer service, but so does Time Warner. Cable companies don’t overlap footprints and from the complaints I read all over the web about monopoly cable providers, it doesn’t seem to make a ton of difference which one of them you end up with.

And it’s not like Comcast does everything bad. They provide decent Internet speeds in many markets and are moving to increase speeds in other markets. They have largely upgraded their major markets to a fully digital network allowing them to take advantage of DOCSIS 3.0. In my part of Florida they have speeds up to 107 Mbps. I have their 50 Mbps product and it seems to really be this fast most of the time. They are not going to get into the gigabit race with Google, but over the next decade they probably will offer speeds up to 500 mbps like a few other cable companies are now doing.

But I find that so many people dislike them. I just have to wonder how much bigger they could become in their own markets if they did things right and people started liking them. When I moved to my new house I surveyed the neighbors and hardly any of them use Comcast. People here get satellite TV and suffer with CenturyLink DSL or wireless broadband rather than fight through the Comcast sign-up process. I documented my ordeal of becoming a Comcast customer last year and I think it took a dozen calls to finally get broadband and I was still forced to subscribe to a cable package I don’t want in order to get the broadband I want. So I am certainly not a fan, but I am not sure my experience would be much different with the other monopoly providers.

What bothers me about the merger is the tremendous market power they have as both a cable company and as a programmer. When Comcast and NBC sign a retransmission agreement, the resulting payments from Comcast to NBC are simply funny money and the cash never leaves the parent company. In practical terms this gives them a huge advantage over everybody else in the business. Comcast essentially gets to set the market rate for programming when it makes deals among its own affiliates.

It is that power to control all parts of the supply chain that I find disturbing. So I say, let Comcast buy Time Warner. But the price for doing so should be that they have to sell off a lot of their programming assets over the next few years. I think given that choice they will elect to keep the programming rather than buy a bigger pile of customers. If they really want to be a lot bigger, let them improve customer service and get all of the people in their existing footprint who won’t use them today.

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