California’s Five Stages of Grief over Losing Control of Cable Industry

Friday, July 04, 2014

It has only been a few months since Comcast, the nation’s No. 1 cable provider, announced it wanted government approval of a proposed $45-billion merger with its chief competitor, Time Warner Cable, but perhaps not too early for California to reflect on how its communications landscape is about to change.

While the biggest decisions will be made at the federal level, the state has a special interest in the merger and some potential avenues of legal involvement. The deal is not a foregone conclusion but it’s been a long time since Washington cared much about mega-mergers and monopolies.

For those who believe they see the writing on the wall, the five stages of grief have already begun and are at varying levels of progression.

Denial—The process just started. The U.S. Department of Justice (DOJ) and the Federal Communications Commission (FCC) will address issues of anti-trust law, services and quality, and Congress will certainly be heard from. Time reports that Comcast had about 76 lobbyists in 24 firms working Washington over the merger back in April, so lawmakers and bureaucrats will certainly be well-informed about the issues. But midterm elections approach and consumers can have their input at the ballot box.

California’s Public Utilities Commission (PUC) is not in a position to reject the merger, but will have regulatory oversight over various aspects of the deal. It could tie up the merger for a year if it gets aggressive, like New York’s Public Service Commission, and holds full hearings. But its authority is centered on the merging companies as telephone service providers, not cable companies.

Anger—The merger would bring together the two worst-rated cable companies in America, according to American Customer Satisfaction Index (ACSI). Comcast, which currently has about 40% of the California market, would control somewhere between 72% and 80%.

“ACSI data consistently show that mergers in service industries usually result in lower customer satisfaction, at least in the short term,” ACSI Director David VanAmberg said. “It’s hard to see how combining two negatives will be a positive for consumers.”

Comcast and Time Warner aren’t the only cable companies in California. But the competition would thin even further as a result of the merger. Charter Communications, a major player in some communities, has agreed to exit the state as part of the deal in return for receiving Comcast and Time Warner properties in the Midwest and Southeast.

Bargaining—There is no bargaining.

Depression—The merger is playing out against a backdrop of tectonic changes in Internet accessibility. In February, Comcast forced Netflix to pay extra to deliver its bandwidth-hogging video stream, a first step, critics say, to abandoning net neutrality. Before you know it, Internet access will be metered and billed like the tiered structure that has endeared the cable television industry to its viewers.

Comcast owns NBCUniversal and is a major content producer as well as a broadcaster. It clearly has a stake in controlling who has access to the Internet and at what cost. Last November, President Barack Obama picked venture capitalist and cable/wireless industry lobbyist Tom Wheeler as chairman of the FCC.

In May, the FCC wiggled and wobbled before starting a process of reviewing the use of Internet “fast lanes.” More than 100 companies that would be at Comcast’s mercy, including Facebook, Google and Microsoft, protested the proposal as a “grave threat to the Internet.”

Acceptance—Comcast won the 2014 “Worst Company in America” tournament at Consumerist, beating out 31 other worthy contenders. Its bracket included McDonald’s, Verizon, Chase, SeaWorld and Facebook. After knocking off Verizon in the semi-finals, it took on Monsanto for the top prize after the chemical company beat Time Warner in its semi-final match. But in the end, it was all Comcast, 51.5%-48.5%.

Although Monsanto is rightly reviled throughout the world for its contributions to environmental degradation and bad health, almost everyone eats their genetically-modified (GMO) food products, whether they know it or not. Resistance may not be futile, but it could be a tougher row to hoe day-to-day than acceptance.

–Ken Broder


To Learn More:

Comcast-Time Warner Merger: Dramatic Impact on California (by Connor Grubaugh, Capitol Weekly)

Consumer Reports Poll: Majority Oppose Comcast-Time Warner Cable Merger (by Ted Johnson, Variety)

Comcast to Swap Customers with Charter in an Effort to Ease TWC Deal (by Meg James, Los Angeles Times)

Comcast Acquires Full Ownership of NBCUniversal Ahead of Schedule (by Timothy B. Lee, Ars Technica)

Match Made in Hell: Comcast and Time Warner Cable Earn Industry’s Worst Consumer Satisfaction Ratings (by Noel Brinkerhoff, AllGov)

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