Three Mergers that will Dip into the Consumers Pocketbook
Consumers are likely to get it stuck to them again. Big mergers are being considered in Congress that will take away the little guy and install a monopoly in its place. It doesn’t seem that long ago that Congress split up Ma Bell to enhance competition. Now that is all forgotten.
Now, 30 years later we find that the marketplace is reassembling into large monopolies that will price gouge the consumer. Even members of Congress, who can stop this if they knew how, are questioning these tactics. John Conyers, ranking member of the House Judiciary was quoted as saying, “Where does this end?”
I have an answer for that. I would say it could end NOW.
Let’s look at the three most imminent mergers and what they are saying, how it is a bonus for regulators, what the catch to it is and what are the odds to passage.
#1- Comcast/Time Warner
Money on the Table– $45.2 billion
The Pitch: Comcast is the largest cable company and broadband provider in the United States. They are saying they are not big enough and wants to compete with the Big Boys like Verizon, Google, Facebook and AT&T. They state to compete they must get bigger and they go on to say they don’t compete with Time Warner in any of the same zip code areas.
Regulators: The company has announced it will divest $3.9 million video subscribers to Charter Communications and one unnamed company. They state they will honor the FCC’s 2010 open internet rules for three years.
What is the Catch: They may not overlap with Time Warner but putting the #1 and #2 cable companies will allow them unmatched control and they will have about one third of the video market in their control along with 40% of the broadband business. Without conditions they can run amuck over the consumers.
Odds: This has a strong chance to get approved. The reason is consumers will still have the same number of choices for their broadband and video provider.
Deal #2- AT&T/DirectV
Money on the Table: $48.5 billion
The Pitch: This is all about consumer bundle to compete with Comcast. If they can add AT&T to the bundle they now have the famous “triple play” that can be offered. Each will say they can’t compete with the other.
Regulators: AT&T has stated that it can add 13 million underserved rural households and give fiber to 2 million others in the next four years with approval of the deal. They also state they will honor the FCC’s 2010 internet rules for three years.
What is the Catch: Instead of buying the U-Verse video service, AT&T and Directv will combine to add the Sunday NFL Ticket and then have too much control over programming distribution.
Odds: It has a good chance of approval due to the rural additions it can provide. Critics will tell you that 64 markets will have fewer choices if approved.
Deal #3- Sprint/T-Mobile
Money on the Table: nearly $40 billion
The Pitch: The CEO of Sprint argues that is it better to have a strong #3 company that a weak #3 and #4. With this argument they wish to combine and attempt to compete with the bigger companies. They promise lower prices and faster speeds.
Regulators: It is likely these promises will have to be put in writing along with agreeing to honor the FCC ruling of 2010 for at least three years.
What is the Catch: There will be one less competitor if they combine. This type of deal (proposed AT&T/T-Mobile) was denied by the Feds in 2011.
Odds: This is not likely to happen. Odds are given that it has less than a 10% chance of success. Look for this to end up in a courtroom somewhere in the United States to get it resolved.
So the big get bigger and more powerful. This sets up the consumer to pay more and be at their mercy to live with decisions that are detrimental.
I can’t say I am happy about any of these mergers.
The opinions stated in this blog are those of Tom Knuppel