Most of the early coverage of this morning’s announcement that Comcast plans to buy Time Warner Cable for $45 billion has been focused on its consumer cable business. However, the companies, themselves, are wrapping themselves up in a “this will help small businesses” flag in their spin management.
The companies’ joint press release doesn’t explain how, but claims the acquisition will create “multiple pro-cometitive benefits, including for small and medium-sized businesses.”
There is much to sort out related to who could be the winners and losers if the FCC and Department of Justice approve the acquisition (which is a major topic for debate this morning). One issue that is already having a negative impact on businesses–and could worsen without more competition–is the growing gap between the speed of internet access available to most small businesses in the U.S. vs. other countries in the world where fiber optics networks are more widely available.
On Bloomberg.com, Susan Crawford, a Harvard Law School professor and author of the book, “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age,” explains why she believes the merger is bad for businesses and consumers, alike.
“The reason this deal is scary is that for the vast majority of businesses in 19 of the 20 largest metropolitan areas in the country, their only choice for a high-capacity wired connection will be Comcast. Comcast, in turn, has its own built-in conflicts of interest: It will be serving the interests of its shareholders by keeping investments in its network as low as possible — in particular, making no move to provide the world-class fiber-optic connections that are now standard and cheap in other countries — and extracting as much rent as it can, in all kinds of ways. Comcast, for purposes of today’s public , is calling itself a “cable company.” It no longer is. Comcast sells infrastructure subject to neither competition nor a cop on the beat.
“For a country attempting to compete on the global stage, this is a problem. It’s time to recognize that industrial policy — true leadership, the kinds of initiatives that brought us the federal highway system and national electrification — is called for. If regulating these guys is too difficult, let’s allow mayors to build alternative fiber-optic networks such as the one in Chattanooga, Tennessee, that has lured businesses and spurred economic growth. We can’t allow our future to be captured by the short-term cash flow desires of Comcast’s investors.”
It is somewhat normal for the FCC, DOJ or other regulatory agency, to, as part of the approval of a a merger or acquisition, require certain provisions (like upgrading a network or sell certain properties) if the regulatory agency perceives the leverage that accrues to the combined company will do away with incentives to innovate.