What Comcast Giving Up on Time Warner Cable Could Mean for You

(Photo: WSJ Live)

Comcast did something out of character last week: It gave up. The nation’s largest cable company backed out on an agreement to buy the second-largest cable company, Time Warner Cable. It saw government regulators preparing to quash the deal, and it walked away.

Comcast had gotten used to getting its way in Washington, most recently in its 2011 takeover of NBC Universal. And after its announcement last February of plans to buy TWC for $45.2 billion in stock, much of the smart money expected that winning streak to continue.

Just as it had with the NBC transaction, Comcast doubtlessly planned to work the refs at the Federal Communications Commission, and the Department of Justice, negotiating conditions on the merged company’s conduct that wouldn’t fundamentally restrain its power.

Even some opponents of the deal didn’t think it would be easy to stop: “The FCC recognized that it wasn’t a good thing, but didn’t really know how or when to try to prevent it,” recalled Evan Engstrom, policy director of the tech-policy group Engine.

Losing an Unpopularity Contest

What went wrong? The company we habitually think of as a cable-TV company is better seen as a broadband provider, and regulators ignored Comcast’s wish to be seen as anything but. That mattered.

It’s a story of two numbers. Comcast wanted everybody to think that it would sell off enough customer accounts to other cable systems to keep its share of the pay-TV market below 30 percent.

But if you looked at its share of the broadband market, Comcast plus TWC would have added up to 40 to 57 percent, CNet’s Marguerite Reardon observed. And regulators were going to see that as too much market power for one company,

Comcast hoped to get past that with lobbying expenses that totaled $32 million, Politico calculated, plus letters of support from politicians, interest groups and activists across America.

That lobbying and those letters — many obviously ghostwritten by Comcast —could not, however, overcome a bigger problem. Comcast is, to put it gently, not many people’s favorite company.

After announcing the TWC acquisition plans, Comcast’s public image endured a long year of customer-service debacles that ranged from a phone rep haranguing a departing customer for 20 minutes to subscribers learning they’d been renamed with such unflattering monikers as “Whore Julia” on their Comcast bills.

And by some measures, TWC was even worse than Comcast. In other words, for some TWC customers, the Comcast buyout might have led to better customer service for them, according to a New York Times report.

Regulators and politicians would not have been popular if they had combined these two customer service catastrophes into one company.

What Now for Comcast?

Now that Comcast is done with its TWC dreams, it has one advantage: It won’t spend the next year or two in the corporate equivalent of a food coma induced by ingesting that company.

Fixing its customer-service issues should be at the top of its to-do list. I keep seeing the same pattern: A local affiliate does something wrong, and then taking one’s case to a higher authority — sometimes going to Comcast’s Twitter account, sometimes asking a journalist who then contacts its PR staff —gets things fixed. Or at least it gets them fixed temporarily.

Comcast also has a chance now to attack pay TV’s larger problem: its steadily escalating prices.

Back when the TWC deal was being announced as a sure thing, Comcast didn’t even try to suggest that it could help drive costs down. Here’s the remarkably ineffective sales pitch public-policy vice president David Cohen gave on a conference call: “We’re certainly not promising that customer bills are going to go down, or even that they’re going to increase less rapidly.”

But now, it might be driven to compete on price. Comcast — which has been losing video subscribers even as it continues to gain broadband Internet accounts — would do well to imitate two of its smaller competitors.

One is Verizon: I don’t like the way add-on fees inflate the cost of its Custom TV, but I do like the idea of FiOS TV subscribers getting to choose packs of channels grouped by interests. Why can’t Comcast do something like this?

(If Comcast, like Verizon, then got sued by ESPN for allegedly violating carriage agreements, so much the better. If you make the sports-industrial complex angry, you’re doing something right.)

The other is Dish Network, whose Sling TV Web-only service shows you can make pay TV an appealing, $20/month proposition online. That’s a price I’ll have no problem paying when my comped account runs out.

Forrester Research analyst James McQuivey all but begged Comcast to follow Sling TV’s example in a post at Re/code: “spend less than a billion to offer a lower-cost, lower-margin pay TV product that can scale up to serve all U.S. households.”

But if Comcast won’t, other companies will. And Comcast giving up on TWC may itself help, another critic of the deal suggested.

“It’s just good to show that Comcast is not omnipotent,” said Public Knowledge senior staff attorney John Bergmayer, as he noted the rise of alternative TV bundles not just from Verizon and Dish but also Sony and potentially Apple. “That’s an upside that goes beyond… just keeping the market the way it was, which wasn’t that great.”

Email Rob at rob@robpegoraro.com; follow him on Twitter at @robpegoraro.