Salmon: Monopolizing Bandwidth

NEW YORK (Reuters Blogs) -- Paul Krugman makes a simple but powerful point about Comcast's acquisition of Time Warner Cable:

One puzzle about recent U.S. experience has been the disconnect between profits and investment. Profits are at a record high as a share of GDP, yet corporations aren't reinvesting their returns in their businesses. Instead, they're buying back shares, or accumulating huge piles of cash. This is exactly what you'd expect to see if a lot of those record profits represent monopoly rents.

Broadband is the area which Krugman, and most other opponents of the Comcast-Time Warner tie-up, are most worried about. It can't be a good idea to give a single company 37% of the market in broadband, especially when its real monopoly power would be much stronger still:

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.

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