NEW YORK (MainStreet) — Consumers are about to have even fewer options for broadband services than ever before.
In an industry-changing move, Comcast has announced that it will acquire competitor Time Warner Cable in a $45 billion deal, merging the largest and second largest cable companies in America. This is excellent news for Comcast, which will expand its customer base to over 30 million subscribers. The rest of us should start to worry.
In broad strokes, Comcast and TWC will merge their networks and shed approximately 3 million subscribers in an attempt to maintain the illusion of competition. The resulting company will own approximately 30% of the market, and leaving behind second place DirecTV by 10 million customers.
Of course, thinking that the new Comcast will rest on its laurels at one-third of the market is foolishly optimistic.
Still, consumers probably won't feel a thing, at least not right away. The fact is that, however monopolistic this deal, competition in the cable industry is already a polite fiction. The industry works on a mini-monopoly basis, as demonstrated by the FCC's broadband coverage map.
It doesn't even have a label for "multiple options." Nationwide America might have a lot of cable providers, but each city, neighborhood and apartment building only has one.
The result is a perverse marketplace where these companies do compete against each other, but not on the basis of pricing or consumer satisfaction. Comcast wants to outgrow its rivals, but it doesn't have to make its customers happy to do so. The same holds for every other cable company out there.
This industry works on a model of captive audiences. There's a reason that cable and broadband providers rank dead last in customer satisfaction. There's a reason that the products they offer don't match what their customers want. There's a reason Americans pay more for worse service than Slovakia, Estonia or Slovenia. That reason is on the map: we have nowhere else to go.
Cable companies compete for territory. The rest of us just live there. As Matt Yglesias said in an article today on Slate, "in terms of customer–facing competition, you're going from zero to two times zero."
If the short run won't really matter, the long term picture is a very different story.
One of the few areas of genuine competition left among cable companies and broadband providers is over content and market influence. Content carriage is the price that your company pays for its channels and paid services. Expanding the reach of Comcast will give it far more leverage in these negotiations, allowing it a Wal-Mart like ability to shape content based on what it's willing to carry.
There's no reason to think this will be good for the consumers. It could theoretically lead to lower cable bills, but so far industry consolidation and deregulation have only pushed those prices higher. When your company motto can be "Take it or leave it," there's not much push for competitive pricing or services.
The sleeper issue behind all this, and the biggest one, is also last month's D.C. Circuit Court of Appeals court ruling on net neutrality.
This has the potential to matter enormously every Internet user in America. Since the court ruled against the FCC's net neutrality rules, the future of the Internet remains very much in flux. Net neutrality is the question of whether broadband companies can charge websites and customers different prices for different content. Without rules to govern it, companies could charge Microsoft for blocking access to Google or take money from Facebook to make sure the next social network never gets off the ground.
It could also mean a future Netflix/Comcast merger that shuts off Hulu, or streams it at half speed. Since Comcast owns NBC, it means that 30% of American subscribers might see access to abc.com slow to a crawl or disappear altogether. All in the name of customer service, somehow.
Look, let's stop pretending that the Internet is a new or emerging technology. Over the last 20 years it's become an essential service (and for everyone who argues that recent technology can't be "essential," remember it wasn't that long ago that we didn't have plumbing, electricity or central heating either). The Internet is how we communicate, research, look up movie times and phone numbers. For an increasing number of us, it's how we go to work. Handing over so much control of that to one company, especially in a no-rules environment, is just crazy.
Even worse is the fact that the industry defense against net neutrality is to claim that we can trust competition to make sure companies behave. Broadband providers, they argue, will play fair, because otherwise customers will jump ship.
That argument is less convincing when customers have nowhere to go but overboard. If your options are between a lousy Internet connection and none at all, you stick around. No matter how much you hate your service.
Handing over so much control to one company with a proven track record of abusing its power is even crazier. Comcast knows exactly how important monopolies are to its business model and it works hard to maintain them. Just last year, the company poured money into a Seattle mayoral campaign to defeat an incumbent who wanted to introduce a public/private broadband service offering faster Internet connections than Comcast does. The incumbent lost.
Along with the rest of the broadband industry it has poured millions of dollars into lobbying against FCC rules and net neutrality regulations. The only reason net neutrality remains an issue is industry lobbying to make sure the agency doesn't change one arcane regulatory label, and so far it's worked.
Comcast has also not been shy about using its network to interfere with sites to which it objects even without the cover of legality. In fact, it's already been caught and penalized by the FCC for doing so back in 2007.
The Comcast/Time Warner merger won't change the market much in the short term, assuming it gets approved by the FTC. Right now, very few consumers have a choice over their cable providers in the first place, so the most that will happen is 8 million people will get a new logo on their bill. The problems with merging America's two largest cable and broadband companies will show up over the long haul.
If history is any indication, customer satisfaction won't be their priority.
—Written for MainStreet by Eric Reed, a freelance journalist who writes frequently on the subjects of career and travel. You can read more of his work at his website www.wanderinglawyer.com.