In what would be a major victory for consumers, Comcast is reportedly planning to call off its bid to merge with Time Warner. The combined entity would have controlled, according to some estimates, more than 30 percent of U.S. pay-TV subscriptions and more importantly, more than half of the market for broadband service.
According to Bloomberg News, which broke the story, Comcast is walking away from the deal, valued at $45 million. The company could make an announcement as early as tomorrow.
Consumer Reports and Consumers Union have opposed the deal since it was announced, arguing that a combined Comcast-Time Warner Cable would have little incentive to treat customers better than either company did individually. Both typically rank low for customer service in Consumer Reports' annual satisfaction surveys. In fact, the merger could have resulted in higher prices and fewer choices, as well as continued poor service.
Comcast already owns extensive programming through its previous merger with NBC Universal, as well as regional sports networks and other video content. This proposed merger would have given Comcast more control than ever over key programming, along with the pipes to deliver those programs—and the growing amount of Internet-delivered content—into American homes. That market dominance would have made it difficult for newer Internet companies and services to compete.
However, over the past few days, there's been growing speculation that the deal wasn't going to receive regulatory approval. Both the FCC and the U.S Justice department seemed to be leaning toward opposing the deal, with the FCC requesting a special administrative hearing on the merger and the Justice Department rumored to be recommending that the government sue to stop the deal.
The next question for regulators will be whether or not to approve AT&T's proposed acquisition of satellite TV service provider DirecTV, the country's second-largest pay TV service. AT&T contends that the cost savings it would earn by adding DirecTV's customers would allow it to allocate more resources to expand its high-speed GigaPower fiber-optic broadband service. It would also allow it to offer DirecTV TV customers a TV/Internet bundle. AT&T covers about 17 percent of the broadband market, and DirecTV doesn't offer Internet service directly.
Once there's official confirmation from Comcast that it's no longer pursuing the Time Warner merger, we imagine that Consumers Union, our advocacy arm, will have a statement. Keep checking back for updates.
—James K. Willcox
Copyright © 2005-2015 Consumers Union of U.S., Inc. No reproduction, in whole or in part, without written permission. Consumer Reports has no relationship with any advertisers on this site.