Beneficence is Beside the Point: The Antitrust Realities of the Comcast/Time Warner Cable Merger

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Geoffrey Manne, Apr 14, 2014

Critics of Comcast have long discussed the cable company as if it were sinister monster aiming at complete dominance of American media by consuming all competitors.The merger between Comcast and NBCUniversal was thought to be a tipping point in consolidation that would allow Comcast to choke competition in the cable, content, and broadband markets. All evidence indicates these fears were exaggerated, to say the least.

Nonetheless, and keeping with tradition, the “big-is-bad” critics have again come out against Comcast’s proposed acquisition of Time Warner Cable. But while the merger is significant in size, it doesn’t give rise to any plausible theory of anticompetitive harm under modern antitrust analysis.

In a recent essay, Allan Grunes & Maurice Stucke pose a thought experiment: If Comcast can acquire TWC, what’s to stop it acquiring all cable companies? The authors’ assertion is that the arguments being put forward to support the merger contain no “limiting principle,” and that the same arguments, if accepted here, would unjustifiably permit further consolidation. In a second essay in this volume, Grunes & Stucke anticipate defenses of the merger, and argue each fails to give good reason to allow it. But there is a limiting principle: competitive harm. Size doesn’t matter, as courts have repeatedly reiterated.

This overwhelming concern about Comcast’s apparent dominance is indicative of a troubling status quo bias. We need to take a longer view of the market. In 2008, everyone worried about fiber’s dominance, dismissing the threat of cable. Now the concern is about the dominance of cable. Five years from now it will be wireless-or something we haven’t even heard of yet. Apocalyptic visions about market dominance have nearly always been proved wrong in time. And with the remarkable pace and extent of technological innovation in broadband and video markets in particular DOCSIS 3.0, DSL vectoring and bonding, LTE Advanced, IP multicasting, and perhaps even satellite broadband-the relentless focus on historical market conditions and the status quo to make claims regarding competitive effects in these markets is simply unjustified.

As always, understanding the competitive effects of economic activity requires understanding extremely complex market dynamics that extend far beyond the simplistic counting of similar competitors. Properly understood, the proposed Comcast/TWC merger presents no competitive concerns.