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Saturday, 4 October 2014

Comcast and TWC again...

The media mega-merger of the fall is far from being a forgone conclusion. And it will coincide with FCC rulings on net-neutrality, a topic closely related to the debate on whether Comcast should be allowed (or not) to acquire TWC. The core issues are nicely summarized in a recent article by The Economist, that paints a particularly worrying picture of Comcast's lobbying techniques. Yet is this really such a big deal?

Nobody doubts that Comcast will have even more power than before. But, it is not clear how much more. It has too much power already today. But where is this power coming from? Its size? Hard to believe. 40% share is not that large even if it dominates 10 of the largest metropolitan markets. Some content providers have much higher shares (think of ESPN). Moreover, cable providers have always been local monopolies for it doesn't make sense to duplicate infrastructure. Is Comcast's power coming from the fact that it is backward integrated? Again, not clear. While it owns all kind of content assets, there are powerful channels outside Comcast with huge negotiation power. And let's not forget that vertical integration should lead to lower consumer prices as double marginalization is solved. Then, what is the problem? I think that the problem is the lack of competing technology to cable. Telecom firms have terrible infrastructures in the U.S. and this, even in large cities. AT&T, and its (few and large) competitors have failed to invest in broadband as did satellite (although the technical difficulties are bigger here). The real solution to curbing Comcast is to make sure that there are proper incentives to invest in alternative broadband technologies.

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