You Might Hate Time Warner Cable, But Would We All Be Worse Off Without It?

While Comcast might have more customers who hate it, we’d be willing to bet that Time Warner Cable is loathed by a higher percentage of its customers. Ask just about any cable-subscribing customer in NYC about the company and prepare to listen to numerous tales of screw-ups, outages, and bad billing. So some are greeting with open arms the news of TWC’s possible sale to one of its competitors. But would the disappearance of TWC just end up costing all of us in the long run?

In an opinion piece for Bloomberg, author and visiting professor in intellectual property at Harvard Law School Susan Crawford makes the case that a world where TWC is swallowed up by Charter, Comcast (or some combination of the two) would only make matters worse for all cable subscribers.

“If merger and acquisitions activity in the telecommunications realm had a soundtrack, this moment would be accompanied by the menacing bass rumble of Jaws,” writes Crawford. “For if this deal goes through, customers of TWC, Charter and also Comcast Corp. — as well as all the content companies that want to reach those customers — will probably see prices rise, with no corresponding improvement in service.”

She contends that while a company like Comcast would lower its per-customer costs by adding the millions of existing TWC subscribers to its base, that savings wouldn’t be passed on to consumers. Instead, Crawford believes the merged entity would “grind away with one price increase after another.”

As we’ve mentioned numerous times over the years, most cable companies already face little to no competition aside from satellite providers, and satellite companies may find themselves irrelevant in a few years since they do not provide Internet services that compare with what most people can get from their local cable company.

Some hold out hope that the slowly growing availability of competing fiberoptic networks will help keep cable companies in check, but the nation’s largest fiber provider, Verizon FiOS only competes in about 23% of the country, says Crawford.

Since it made public its intentions to acquire TWC, Charter (and billionaire John Malone, whose Liberty Media owns 27% of Charter) has said it could run the New York-based cable company better than its current management.

And given that TWC ranks last in customer satisfaction for cable TV and phone service, and next-to-last in Internet service, such improvements may not be hard to make.

However, Crawford contends that Charter is really looking to do two things. First, buying TWC would lower Charter’s costs for content acquisition by inheriting the better deals TWC has with the networks and cable channels. Further consolidation in the cable TV and Internet industry would mean the the remaining Charters and Comcasts of the world would be able to force better deals with content providers (though again, these savings will likely not be passed on to the consumer).

The other way in which a company like Charter would benefit from acquiring TWC, argues Crawford, is by swapping TWC-controlled markets with Comcast-dominated markets.

Charter could take the millions of current TWC customers in New York City — an area virtually untouched by Comcast — and swap those markets with Comcast’s holdings on the West Coast and in the Midwest.

The total subscriber numbers might stay the same post-swap, but such deals would create geographic continuity that doesn’t exist now. For example, Comcast currently has virtual monopolies in Philadelphia and Boston (where it’s so bad the city recently took back its right to regulate cable prices), but nothing in NYC.

If it could get control of that entire I-95 corridor, Crawford contends that it would save the company money and it could market itself better to businesses with multiple locations that currently have to deal with different cable and Internet providers in each region. Charter would then be able to do the same thing with the market it acquired in the swap.

“Both companies could lower their overhead — and raise their prices,” points out Crawford. “Both companies could charge content providers more for access to their data and TV networks and thus access to their subscribers.”