Comcast’s proposed $45 billion acquisition of Time Warner Cable — a match of cable behemoths — looms as one of the most controversial deals in recent memory.
And the most provocative angle of all is the question of whether Comcast, which would emerge as the king of cable, would eventually decide to impose a price increase on the former Time Warner Cable customers.
The initial flurry of media analysis suggests that Brian Roberts-led Comcast, which would then own a stranglehold on the cable market in New York City and nationwide, would use its monopoly position to hike prices to its customers.
But at least one observer isn’t so sure.
In fact, “[the idea of] lower rates isn’t entirely crazy,” said Craig Moffett, an analyst at MoffettNathanson. “The reason why people are nervous about this transaction is the concern that Comcast’s size could ultimately have a chilling effect,” Moffett said.
He further pointed out: “The competitive dynamics are very unusual” because Comcast and Time Warner Cable “don’t compete with each other.”
Even if Comcast moved to raise the prices, it would have to tread lightly. Experts point out that the acquirer will have to be tactful because the company doesn’t want to create bad publicity in the national media, much less attract the glare of regulators.
“This is a big deal, and the regulators are going to be watching to see if prices go up,” said James McGlynn, who manages the Calvert Large-Cap Value Fund.
However, Comcast is also under pressure to show Wall Street that it can provide revenue growth for years to come.
And that growth could come from Comcast using its size to get programming costs down while keeping subscriber costs at current levels, some analysts suggest.
“I suspect that the FCC will allow the deal to move forward,” Moffett said.
But “we haven’t begun to hear from the media community yet about their level of support or opposition,” Moffett cautioned. “Media companies are going to be very vocal in opposing the deal, because they aren’t interested in negotiating against a company of Comcast’s size.”