John
Soo
Mrs.
Straub
02/17/14
AP
Economics
Comcast and Time Warner Cable
merger talks
On Wednesday, Time Warner Cable and
Comcast revealed their intentions for a merger. These juggernauts in the
oligopoly that is internet provider ship plan on merging with a massive $45.2
billion dollar deal, with TWC shareholders receiving $158.62 in Comcast stock.
This begs the question; what effect with this have on the industry?
A merger between the largest and
fourth largest internet provider could dangerously imbalance the market until
it becomes so unstable that the newly merged mega corporation creates a monopoly.
However, advocates of this merger state that Comcast and TWC weren’t competing
in the same market in the first place so it would only become a corporation
with a more expansive, comprehensive plan. In this possible new merger, would consumers
get trampled by the sheer economic power that this mega corporation would wield
or would the services simply stay the same? Another possibility is that their
services actually are improved due to a larger pool of data, servers, networks,
and capital to draw upon.
The next aspect of this merger
that must be considered are the anti-trust laws that prevent a monopoly
from taking control of a market. One
possible law this merger could run into is the Sherman Act. This anti-trust law
prohibits actions that federal government regulators see as a threat to
competition. As shown in the graph above, it is extremely likely that this new
merger runs across this law as a combination of the two companies would merge a
whopping 33.1 million customers into a single mega corporation. With this
merger, they would take approximately one third of all customers, giving them a
massive advantage over any competitors. Additionally, this merger could come across
even more trouble with Section 7 of the Clayton Antitrust Act. This disallows a
company from primarily holding the stocks of another company in order to create
a monopoly.
Lastly, an aspect that should be
considered is the impact this merger will have on the nation’s gross domestic
product, or GDP. Would this merger be
considered an economic investment by Comcast as they are expanding their
operations? In any case, would this merger create additional GDP or reduce it?
On one hand, the economic investment by the company would be calculated into
the nation’s GDP. However, on the other hand, would this merging of these two
companies actually increase the production that they had been at previously?
Advocates of the merger would agree as previously mentioned, arguing that the
economic benefits of this merger will be seen through the pooled resources. In
any case, only time can tell if the federal government regulators even approve
this merger. For now, happy browsing.
I had recently heard about this and was beginning to wonder the same thing whether or not this would create a monopoly among internet providers. Personally I don't know many people that have comcast in my area so I don't really believe that they are competing but I could be wrong. I think that the merger could benefit the market because with these two superpowers teaming up it will cause more competition which will help the consumer out more by providing better benefits. I don't really know how this will turn out but hopefully it turns out that the product we are paying for will only improve and not deteriorate due to a monopoly forming.
ReplyDeleteThis is actually very interesting and relevant news, John. The American populace typically shudders or applauds the uprising of these superpower companies, mainly because of differing political/economic viewpoints. Would the marginal benefit outweigh the marginal cost when these gargantuan corporations pool their resources together? Personally, whatever can strengthen our nation's GDP is definitely something worth investing in. Luckily we have a string of anti-trust laws that stop these businessmen from conquering the marketplace, just in case this courtship falls to pieces.
ReplyDeleteI remember reading about this a couple of days ago and would have never expected it. Let’s just say that I was shocked to see the number 1 and number 4 largest internet providers talking about a possible merger. This of course, can raise some serious questions. The biggest question may be whether or not this merger would create a monopoly in the industry. There are still other factors to take into consideration like the chance of an increase in GDP and whether or not the results of the merger would interfere with any of the acts. I like how you had tied in Sherman Act and Clayton Antitrust Act to give us a picture of how this might play out. All in all, I really don’t know if this merger is necessarily needed, but on the other hand, could prove to be useful with the amount of resources these two companies would be gaining from each other. In the end, we don’t want a monopoly; we want other competitors to have a chance in this market. Good work on the post.
ReplyDeleteTwo already large companies coming together does seem a little too unfair to other smaller companies, or any companies that want to get started in the field. And even though they don't directly compete it does seem a lot like a monopoly. Although they weren't control the entire market place they will come very close to it. Such a large company would leave people to believe that it might cause a very unbalanced market place in the future
ReplyDeleteThis seems like it's becoming a monopoly between the two companies, even if they do compete in two different markets. If they would combine, they'd be about 30% of the paid television subscribers, which is a large majority considering how many cable companies exist. The U.S. should block this deal on the basis it would hurt competition and consumers.
ReplyDelete