By now you know last week's big cable news: giant Comcast (CMCSA) is acquiring lesser giant Time Warner Cable (TWC) in a $45 billion stock deal. It will add about 11 million new subscribers to Comcast's current cache of 22 million customers. The combined base represents more than a third of all cable subscribers in the U.S. But there's more to the story than just TV service.
First and foremost, the merger will reshape the broadband landscape in the U.S. Since Comcast and Time Warner Cable don't have overlapping markets, this will dramatically increase Comcast's reach into new cities across the country. With those additional subscribers, Comcast will have new power to negotiate with companies like streaming-video service Netflix (NFLX), which currently accounts for between a third and a half of all the network traffic in the country.It should also help Comcast build a defense against rival broadband providers like Verizon's (VZ) FiOS and Dish Network (DISH), which operate within Comcast's territories and compete directly against it.
How will this affect consumers? In the short term, Time Warner Cable customers should expect to see changes to their service that mirror how Comcast operates. For example, Comcast currently imposes data caps (around 300 GB per month) on residential customers. Time Warner Cable doesn't, but a post-merger Time Warner Cable will likely match that cap, degrading service to existing customers.
This is akin to the blackout power that cable companies have today for TV broadcasts. When operators and content providers can't reach licensing agreements, the cable companies can remove certain content or even entire channels. This happened last year, for example, when Time Warner Cable blocked CBS (CBS) for several months. A larger cable operator with broader national reach will only increase this kind of leverage, both for TV and Internet service.
Longer term, fewer major players in broadband and TV mean fewer customers for hardware manufacturers selling routers and set-top boxes directly to cable companies -- and that's likely to mean higher prices passed on to consumers in a few years.
Here's another important element of the deal few people are talking about: The cable companies' Wi-Fi networks. Both Comcast and Time Warner Cable have built out their own network of Wi-Fi hotspots in major cities around the U.S. Interestingly, they've also partnered with other cable providers (notably, Cox Communications) on a project called CableWiFi, which operates about 200,000 hotspots today. Subscribers to any of the cable company members get free access to any hotspot in the network.
What's notable is that Comcast has recently started leveraging its customers' routers as publicly accessible hotspots (though strangers can't access the customers' personal Wi-Fi networks). With the merger, that means Comcast will be able to build out this unique residential hotspot network using Time Warner Cable customers as well. The legality of this is still largely untested.
Do consumers have options? Not many: It's really up to the feds if this merger will go through, and the Federal Communications Commission and Department of Justice have a history of being relatively insensitive to consumer feedback on issues like this. If you live in a region where you have cable competition, you can investigate alternatives to Comcast or Time Warner Cable.
Another, more realistic option: Cut the cord entirely. If you're concerned about the rising costs and fewer innovations in TV service, it's entirely possible to eliminate your cable and rely on the Internet to get your entertainment using devices like Google Chromecast, Apple TV and Roku. Unfortunately, that's a bit of a Catch-22 because you'll likely rely on a cable provider for the Internet service to take advantage of those gadgets.