Almost a year ago, Charter Communications announced that it would be buying Time Warner Cable for $55 billion dollars. The United States’ government, however, has still not approved the merger and Charter has experienced a large amount of public opposition to this merger due to the large portion of the market share that they will receive if the merger succeeds.
The real concern for the American consumer should be how this merger could potentially affect the market. While it is unlikely that there will ever be a true monopoly in the broadband industry, which provides high-speed internet and cable services, the merger would essentially create a duopoly in the industry. If the merger succeeds Charter Communications would become the second largest cable provider in the United States, holding 23% of the market. They would only follow Comcast who currently holds 47.6% of the market. While neither company would alone hold a majority of the market, the concern becomes their ability to coordinate prices and control over the online video market, which would lead them to essentially act as a monopoly within the market. Their ability to act as a duopoly would be furthered by the innate characteristics of a cable company, which requires large amounts of money, large scales of production, and efficiency in order to provide consumers with a quality experience.
If passed, not only is the cable industry likely to turn into a duopoly, this could have drastic effects on the market. First Charter Communications and Comcast could use their internet service market power in order to determine at what price and what content consumers have access to. Additionally, they could attempt to increase the price of online video providers, such as Netflix, by adding data caps that would increase the user’s overall price. Lastly, they may restrict which online video providers could be watched through their set-top box. While there are other set-top boxes, such as Apple T.V. or Xbox, that can provide this service, these act as an additional cost to the consumer. Therefore, some American households may only be able to afford their cable providers set-top box.
However, Americans may not need to worry quite yet because the chances of this merger passing are not looking good. President Obama, the FCC Chairman Tom Wheeler, Dish Network, USTelecom, and Public Knowledge have all publicly spoken out in opposition of the merger. Only time will tell, but if the merger is passed we could be experiencing some major price changes in both cable and online video providers in the years to come.