The deal will combine the nation's top two cable TV companies and make Comcast, which also owns NBCUniversal, a dominant force in both creating and delivering entertainment to U.S. homes.
| What 's The Deal Do?
Tech writer Eric Sherman on CBSMoneywatch.com says.....
The answer is complicated, but the likely outcome is that the deal won't be good for individuals.
The companies claim in their materials that the deal is "pro-consumer, pro-competitive, and will generate substantial public interest benefits." Comcast goes on to list technical upgrades, including improved network speeds, claims that Time Warner customers will get faster Internet service.
Comcast does offer some fast speeds, but those are always couched with the moderating phrase, "up to." Cable companies connect consumers to their offices through loops that go out and return. The more people on a given loop at the same time, the slower the performance for any one person. Start combining operations between companies, and you might end up with more people per loop and, therefore, increased pressure on the actual connection speeds they experience.
Interestingly, according to DSLReports.com, in the past Time Warner's CEO claimed that users didn't want even faster connection speeds because they weren't signing up for the fastest ones the company offered at the time. The criticism is that people didn't want the faster speeds because they were overpriced. It's a reminder that the availability of faster speeds, no matter which cable provider is involved, typically means higher prices. Unless consumers happen to live in one of the areas where the highest speeds are available and are willing to pay more, the technology promises may be immaterial.
For many consumers, cable is a virtual monopoly. Neighborhoods or even entire towns may have contracts with a specific provider, which means a lack of competitive pricing. The long-standing theory is that wiring and maintaining an area is expensive and the provider doesn't want to do so only to have competitors ride off its work without having had to make any infrastructure investment.
In that sense, nothing will change. However, local cable contracts come up for renewal, which is when competition can come into play. The fewer big cable providers competing for that town's business, the fewer potential bidders and the more likely prices will be higher. Collectively, consumers have less leverage.
That could lead to -- if not higher prices -- a potential downgrade in service. Comcast has tested consumer data caps, which can reduce the ability of people to watch as much streamed entertainment over the Internet as they would like. According to The Consumerist, Netflix streaming speeds for Comcast have dropped sharply. If the merger is consummated, Time Warner Cable customers will likely have the same terms as Comcast customers.
Perhaps the biggest unknown is how the merger might affect the range of programming available to customers. Comcast owns NBCUniversal and has an economic interest in pushing use of those programs and web sites over ones from competing sources. Also, both Comcast and Times Warner have gotten into disputes with content providers over so-called carriage agreements. These disagreements sometimes result in cable companies temporarily removing programming from the lineup.
If Comcast, already the No. 1 cable provider joins with the No. 2 provider to becomes the 100-pound gorilla of the industry, it could have more leverage over content providers to force deals.
Suffice it to say, with a market share of close to 30 percent, the combined entity would have a greater ability to put pressure on programmers and push the industry to satisfy its interests and not necessarily those of consumers.
How will the merger effect Western New York subscribers?
"To the average customer, they'll end up writing a check to a different company," said James Fink of Business First.
"The more interesting thing is whether Buffalo remains a Comcast Cable outlet, or if the (Dept. of Justice) turns around and says you have to divest yourself of certain markets. Buffalo, because it's a second-tier mid-market, might be one of those markets that ends up getting sold off by Comcast."
Time Warner is in the midst of converting Sheehan Hospital in Buffalo to a massive call center, as part of a project being spearheaded by McGuire Development. In a statement (below) US Sen. Charles Schumer says he has asssurances from Comcast CEO David Cohen, that the project will continue.
Terms of the Deal: The price is about 17 percent above Time Warner Cable shares' Wednesday closing price of $135.31 and trumps a proposal by Charter Communications Inc. to buy Time Warner for about $132.50 per share, or $38 billion in cash and stock.
Time Warner Cable shareholders will receive 2.57 Comcast shares for every Time Warner Cable share they own. Once the deal is final, they will end up owning about 23 percent of the combined company, one of the people said.
Competitors & Other Suitors: Charter had pursued Time Warner Cable for months but Time Warner Cable CEO Rob Marcus had consistently rejected what he called a lowball offer, saying he'd cut a deal for $160 per share in cash and stock.
For a time, Comcast stayed in the background, waiting to purchase any chunk of subscribers that a combined Charter-Time Warner Cable would sell off. Charter had planned to finance its bid with $25 billion in new debt. As part of a plan to pay off the debt quickly, the company considered selling off some of its territories after a deal had closed. Time Warner Cable's Marcus had also balked at the huge debt burden the Charter takeover represented.
Instead, Comcast now plans to divest 3 million pay TV subscribers after the deal closes. With 22 million of its own pay TV customers and Time Warner Cable's 11.2 million, the combined entity will end up with about 30 million subscribers when the deal is complete, a level believed not to trigger the concern of antitrust authorities. A formal cap was dissolved years ago by regulators, but divesting subscribers could help the deal get approved more quickly.
Comcast is taking the position that because Comcast and Time Warner Cable don't serve overlapping markets, their combination won't reduce competition for consumers. Comcast operates mainly in the northeast including its home base of Philadelphia and places such as Boston, Washington and Chicago. Time Warner Cable has strongholds around its headquarters in New York as well as Los Angeles, Dallas and Milwaukee.
In many of those areas, the combined Comcast/Time Warner Cable will face competition from rivals AT&T and Verizon, which provide both pay TV services and Internet hookups. Both AT&T and Verizon are growing quickly. They ended 2013 with 5.5 million and 5.3 million pay TV subscribers, respectively.
Comcast and Time Warner Cable are expected to save $1.5 billion in annual costs over three years, with half of that realized in the first year, one of the people said.
Comcast also plans to add an additional $10 billion in share buybacks at the close of the deal, on top of a recent plan to boost its share buyback authority to $7.5 billion from $1 billion, the person said.
Conceding that it had lost the takeover battle, Charter issued a statement Wednesday saying, "Charter has always maintained that our greatest opportunity to create value for shareholders is by executing our current business plan, and that we will continue to be disciplined in this and any other (merger and acquisition) activity we pursue."
Even before the deal had been formally announced, it was being denounced. Public Knowledge, a Washington-based consumer rights group, said in a statement Wednesday that regulators must stop the deal, because it would give Comcast "unprecedented gatekeeper power in several important markets."
"An enlarged Comcast would be the bully in the schoolyard," it said.
|SCHUMER SECURES COMMITMENT FROM COMCAST EXECUTIVE THAT COMPANY WILL PRESERVE HUNDREDS OF TIME WARNER CABLE JOBS IN BUFFALO & WILL PROCEED WITH PLANNED EXPANSION
Schumer – Who Successfully Pushed to Bring 250 to 300 Person Call Center to Old Sheehan Hospital Site, Creating 150 New Jobs – Announces Comcast Will Honor that Commitment and Execute Planned Job Additions
Schumer & State Sen. Kennedy Stated That Comcast Commitment to Follow Through on TWC’s Plan to Add New Jobs is Great News for WNY
Schumer, Kennedy: Comcast Won’t be Hitting the Rewind Button on Time Warner’s WNY Job Growth
In light of the recent announcement that Time Warner Cable (TWC) will be purchased by Comcast, U.S. Senator Charles E. Schumer immediately called and secured a commitment from the Executive Vice President of Comcast David Cohen to honor Time Warner Cable’s plan to add jobs in Buffalo and Upstate New York. Currently, TWC employs roughly 1,000 in the Western New York region and over 10,000 in New York, and Schumer has recently worked to bring even more TWC jobs to New York.
Last year, Schumer and N.Y. State Senator Tim Kennedy successfully pushed TWC to locate a new call center at Compass East, the site of the old Sheehan Hospital in Buffalo’s East Side, which would employ between 250 and 300 workers, creating an estimated 150 new jobs over five years. Schumer highlighted in his call with Mr. Cohen that Comcast should maintain the existing TWC workforce in New York and follow-through on the plans to bring new jobs to New York; Schumer received confirmation that Comcast would honor those jobs and job commitments that are already in the works.
“In light of the news of this potential merger, my biggest priority is ensuring that Comcast preserves Time Warner Cable jobs in Buffalo and all of New York. After speaking with Mr. Cohen, a top Comcast executive, I am very pleased with the news that Comcast is fully committed to following-through on previous commitments to jobs, particularly the job additions coming to Buffalo at Compass East,” said Schumer. “I urged Mr. Cohen to maintain the entire TWC workforce in New York and consider adding to their presence – and while there was no guarantee – my expectation is that Comcast will invest in New York – as they did after the merger with NBC – and the results of the merger will be positive for New York.”
State Senator Tim Kennedy said, “We worked hard to get Time Warner to build their new call center in Buffalo and hire 150 Western New Yorkers to work out the new Compass East development. Comcast's commitment to preserve all of Time Warner Cable's jobs in Western New York is tremendous news for our region and its employees. With our strong workforce and affordable cost of living, Buffalo is an ideal place to do business. Time Warner recognized those benefits, and now it's clear Comcast does too.”
“McGuire Development Company and Compass East are thrilled to welcome Comcast to Western New York and look forward to working with them. We are pleased that Comcast has confirmed Time Warner Cable’s commitment to the region through their brand new cutting-edge Business Class customer service center,” says Jim Dentinger, president of McGuire Development Company. “Compass East welcomes Comcast and is excited to provide a state-of-the-art facility to accommodate their expansion into Western New York.”