Net Neutrality could both help and harm the Comcast-TWC merger

The Comcast-Time Warner Cable merger can be compared to that of Sprint and T-Mobile, or the old T-Mobile/AT&T merger in the United States – both potential mergers that never came to fruition. The number one reason against such mergers concerns competition: the Federal Communications Commission (FCC) disapproved of the Sprint/T-Mobile and T-Mobile/AT&T mergers because they believed these companies would create a “superpower” in the wireless carrier industry that would further consolidate power over the wireless industry among two or three powers (AT&T, Verizon, and Sprint) instead of providing a fourth option (T-Mobile) that’s existed for so long. “And competition is good,” it’s always been said.

Net neutrality is the latest move by the FCC to level the playing field when it comes to websites and online content. Internet providers are allowed to charge some sort of special fees that allow some websites to have faster connections than others, but those rates must be “just and reasonable” and not exorbitant in nature. The FCC’s latest ruling provides both benefits and disadvantages for the Comcast-TWC merger, and the ruling on the merger itself could go either way.


The Good

Comcast and Time Warner Cable (TWC) are both broadband giants, and a merger would give the superpower in the broadband industry a 60% control over high-speed internet. Net neutrality would dictate that the Comcast-TWC superpower would conduct itself reasonably when charging prices for high-speed access.

Netflix is an online content site that is high in demand, so Netflix would be forced to pay interconnection fees so that a number of its customers could watch online content with the best internet connectivity available. It’s possible that Netflix could offload these interconnection fees upon its customer base, but, even then, Comcast-TWC would be limited in the amount it could charge before the FCC would step in. “…the net neutrality rules notionally prevent many of the competitive harms that post-merger Comcast is alleged to be able to cause,” said Sanford C. Bernstein & Co. analyst Paul de Sa.

Usually, when two large giants enter into a merger agreement, overlapping products and services are the overwhelming concern (like the wireless carrier mergers that never took place), but this isn’t the case with Comcast and Time Warner Cable. They don’t overlap in their services, so there wouldn’t be any concerns about stifling or suppression competition (and thus, consumer best interest would remain protected).

The Bad

While Comcast and TWC wouldn’t stifle competition, analysts are concerned about what the Comcast-TWC could create – not in the present, but in the future. Whenever a company grows to the size of a Comcast-TWC merger, there are always consequences that can’t be seen immediately. Antitrust concerns remain the number one reason as to why mergers are denied by the FCC, and, even in cases where many deem merger rejections unwarranted, it all boils down to a matter of “it’s better to be safe than sorry.”

If net neutrality is such a big deal to the FCC (as it seems to be), then Comcast and TWC will face an uphill battle – no matter how innocent the merger appears.