Maybe We Should Just Have One Giant Cable Company

Moneybox
A blog about business and economics.
Feb. 14 2014 9:14 AM

One Cable Company to Rule Them All?

469169771-comcast-headquarters-in-downtown-on-february-13-2014-in
My precious.

Photo by Jessica Kourkounis/Getty Images

I'm skeptical that letting Comcast and Time Warner merge will be bad for consumers if only because cable competition is already a total joke. But Matt Klein goes further and says the merger will be good for consumers.

His case starts with the idea that competition is a red herring, and then notes that the larger firm will have some real economies of scale. Some of those savings will flow back to investors in the form of higher profits, but some will flow to consumers in the form of a better price/quality mix as SuperComcast continues to need to compete with nonpurchase of its services.

It's an interesting argument, and I wonder how far he would take it. The logic of this position, after all, isn't so much that Comcast and Time Warner should merge but that we should encourage the merged company to merge with Cox and Charter and Cable One too. That there should be basically one gigantic nationwide cable monopoly. In terms of television, the Cable Monopolist would compete with DirectTV and cord cutting. In terms of broadband, the Cable Monopolist would compete with slow DSL and getting by with your mobile phone. In a handful of markets, the Cable Monopolist would compete with a fiber option. But mostly you'd have one giant Cable Monopolist with a ton of leverage over content providers and huge economies of scale.

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You would basically have a 21st-century version of the old AT&T system. And like the old AT&T system it would need to be really heavily regulated. Which is fine, in principle, but the actual history of how that worked was not so encouraging.

I normally have an opinion about everything, but I think this basic problem—what do you do with utilities policy?—is just really really hard. It's really hard to make competition work (what we're trying now), but it's also really hard to make the regulated monopoly model work, and it's also really hard to make the state-owned utility model work.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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