Will Comcast's Time Warner deal mean higher bills?

Comcast (CMSCA) couldn't win any popularity contests before Wednesday's Senate Judiciary Committee hearing on its controversial $45.2 billion acquisition of Time Warner Cable (TWC) -- and it won't gain any friends after it.

The dilemma facing the world's largest cable company was evident in the testimony of Comcast Senior Vice President David Cohen, who as The New York Times noted, "played down the likelihood of higher prices for consumers" while also declining to back off earlier comments that the Philadelphia-based company couldn't promise that cable bills will go down or increase less rapidly because of the merger.

However, he also emphasized to the Committee: "There is absolutely nothing in this transaction that will result in increase in prices for Comcast customers. Nothing." He said that's partly because Comcast's and Time Warner's service territories don't overlap.

Unfortunately, cable prices have been skyrocketing even as the industry consolidates. Data from the Federal Communications Commission (FCC), showed that prices rose 5.8 percent in the one-year period ending in July. That's more than five times the rate of inflation over that period.

"Consumers are beginning to see exciting new online services that give meaningful alternatives to the excessive prices and poor service they've come to expect from Comcast and other providers," said Gene Kimmelman, CEO of Public Knowledge, in a press release. Public Knowledge is an advocacy group backed by Comcast critics such as DirecTV (DTV), Dish Network (DISH) and Google (GOOG) that's fighting the merger.

Added Kimmelman: "However, this merger would give Comcast the incentive and ability to stifle competition, thwart innovation from online services, and impose higher costs on rival video and online services, which will eventually be paid for by consumers."

The other area of concern for critics such as Sen. Al Franken (D-Minn.) is Comcacst's customer service, which has been dismal for years. In his testimony, Cohen noted that it "bothers" the company that it has difficulty providing consistently good service though he stressed, as the company has before, that its internal metrics show it's making progress.

If the merger is approved, the combined company will control roughly 30 percent of the pay-TV market, with more than 30 million video customers. The two companies will also have a formidable presence in broadband, controlling up to 40 percent of that market.

Both the Justice Department and the FCC need to approve the deal.
  • Jonathan Berr

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