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11:06 am ET
Feb 13, 2014


Q&A: What the Comcast Deal Means For You

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  • business

  • cable

  • Comcast

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  • entertainment

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  • time warner cable

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  • By
  • Tom Gara
    • @tomgara
    • tom.gara@wsj.com
    • Tom Gara
    • Biography
      • @tomgara
      • tom.gara@wsj.com
      • Tom Gara
      • Biography
    Brian Roberts, chairman and chief executive officer of Comcast Corp., speaks during a news conference.

    Comcast says it will buy Time Warner Cable , in a $45 billion megadeal that will cement its position atop the American cable industry. Here’s a quick Q&A on the deal. 

    What does Comcast already own?

    Comcast is the biggest cable TV and internet provider in the country, and it packages its “triple play” cable, TV and phone service under the Xfinity brand name.

    Since 2011, Comcast has also owned NBCUniversal, itself a giant sprawling entertainment business. That means the company owns TV channels including NBC, MSNBC, Spanish-language Telemundo, CNBC and E!, and Universal Studios, which makes films and TV shows. (Recent hits: the Fast & Furious films, Les Miserables, Law & Order: SVU, Parks & Recreation).

    It also owns a major chunk of 30 Rockefeller Plaza in Manhattan.

    Was Comcast the inspiration for Kabletown, the Pennyslvania-based cable company that bought NBC in 30 Rock?


    What does Time Warner Cable own?

    Time Warner Cable is the second-biggest cable and internet business in the country, but it’s nowhere near as sprawling as Comcast — the business is pretty much focussed on cable. Until 2009 it was part of Time Warner — itself a Comcast-style sprawling giant — but it was spun off into an independent company and no longer has anything to do with Time Warner except the use of the brand name.

    What does this mean for Time Warner Cable or Comcast customers?

    For the time being, not much — this deal will take a long time to complete, especially given the expected government scrutiny (more on that later). Comcast says getting regulatory approval will take 9-12 months.

    If and when it is completed, there are a few things to watch for:

    - Comcast has said it will “divest” of about three million cable subscribers to ease competition concerns. It’s not yet clear exactly where those customers are (we’ll update this as details come in) but if you are one of those three million, it means you’ll be getting a new cable company.

    - If you are a Time Warner Cable customer, it means you’ll probably be getting a new set-top box. Comcast has used its massive scale to invest in a next generation internet-enabled cable box called X1, which it says offers a way better experience for watching video on demand and browsing channels. Time Warner Cable has been losing video customers, with some pinning the blame on its underinvestment in this kind of technology, while Comcast has been outperforming the wider industry in keeping its video subscribers, which it credits partially to the new X1 boxes.

    - In terms of prices and service quality, things could go either way. In theory, a larger provider would have the purchasing power and efficiencies needed to keep prices down, and invest more in technology and service improvements. But for subscribers who have seen decades of consolidation take place alongside rising prices and infuriatingly poor service, it’s easy to remain skeptical on these claims.

    Will the government approve this merger?

    It’s definitely not a sure thing — this would be a major consolidation of an industry that is already top-heavy, and in 2011 the Obama administration moved to block a major communications deal — the merger of AT&T and T-Mobile — on competition grounds.

    This deal is different on one important level: while AT&T and T-Mobile directly competed for the same customers in the national mobile market, Comcast and Time Warner Cable do not overlap. On a conference call discussing the deal this morning, Comcast said the two companies do not compete in a single zip code anywhere in America. That’s pretty typical of cable operators, which tend to operate in defined geographic territories that don’t overlap with other cable companies. But both Comcast and Time Warner Cable compete with satellite TV providers like Dish and DirecTV, as well as phone companies like Verizon and AT&T.

    And as MoneyBeat reported late last year when talk of this deal first emerged, many believe there are other competition concerns, particularly around the combined company’s ability to pressure content providers. The FCC also applies a “public interest” test on these kind of deals, and will need to agree that this merger is in the public interest.

    How consolidated is the American cable industry today?

    Very. Here’s a graphic from the WSJ’s Rani Molla showing how beginning in the early 1990s, dozens of cable companies merged and re-merged and narrowed down to four today: Time Warner Cable, Comcast, Charter and Cox. If this deal happens, four become three.

    Some recommended reading on the deal:

    - The Comcast Megadeal: Out of Chaos, More Chaos
    - Would Combine Nation’s Top Two Cable Operators but Faces Lengthy Regulatory Review
    - Comcast, Time Warner Deal to Spark Regulatory Debate
    - Recap: The Comcast/Time Warner Cable Conference Call
    - A Comcast-Time Warner Cable Deal Would Face Serious Antitrust Scrutiny



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