Comcast and Time Warner Cable merger talks

John Soo

Mrs. Straub

02/17/14

AP Economics

Comcast and Time Warner Cable merger talks

            On Wednesday, Time Warner Cable and Comcast revealed their intentions for a merger. These juggernauts in the oligopoly that is internet provider ship plan on merging with a massive $45.2 billion dollar deal, with TWC shareholders receiving $158.62 in Comcast stock. This begs the question; what effect with this have on the industry?

A merger between the largest and fourth largest internet provider could dangerously imbalance the market until it becomes so unstable that the newly merged mega corporation creates a monopoly. However, advocates of this merger state that Comcast and TWC weren’t competing in the same market in the first place so it would only become a corporation with a more expansive, comprehensive plan.  In this possible new merger, would consumers get trampled by the sheer economic power that this mega corporation would wield or would the services simply stay the same? Another possibility is that their services actually are improved due to a larger pool of data, servers, networks, and capital to draw upon.

The next aspect of this merger that must be considered are the anti-trust laws that prevent a monopoly from  taking control of a market. One possible law this merger could run into is the Sherman Act. This anti-trust law prohibits actions that federal government regulators see as a threat to competition. As shown in the graph above, it is extremely likely that this new merger runs across this law as a combination of the two companies would merge a whopping 33.1 million customers into a single mega corporation. With this merger, they would take approximately one third of all customers, giving them a massive advantage over any competitors. Additionally, this merger could come across even more trouble with Section 7 of the Clayton Antitrust Act. This disallows a company from primarily holding the stocks of another company in order to create a monopoly.

Lastly, an aspect that should be considered is the impact this merger will have on the nation’s gross domestic product, or GDP.  Would this merger be considered an economic investment by Comcast as they are expanding their operations? In any case, would this merger create additional GDP or reduce it? On one hand, the economic investment by the company would be calculated into the nation’s GDP. However, on the other hand, would this merging of these two companies actually increase the production that they had been at previously? Advocates of the merger would agree as previously mentioned, arguing that the economic benefits of this merger will be seen through the pooled resources. In any case, only time can tell if the federal government regulators even approve this merger. For now, happy browsing. 

Share this post