Subscribers of more than 900 independent cable companies may face an unwelcome surprise this summer in the form of a mid-year rate increase.

For years, members of the National Cable Television Cooperative (NCTC) have joined forces to negotiate for the kinds of volume discounts only the largest cable and satellite companies like Comcast, Time Warner Cable, DirecTV, Dish Networks, Charter, and Cablevision have traditionally received. NCTC members range from family owned cable operators, rural co-ops, community-owned providers, independent telephone companies, and small multi-system operators servicing multiple communities. With group-buying power, NCTC-member cable companies used to be able to negotiate volume discounts that could keep their rates competitive with larger providers.

But as consolidation among major network media, cable, satellite, and phone companies marches on, only the largest operators — some directly affiliated with the cable programming networks — are getting the best deals at contract renewal time. All NCTC members combined serve just five million cable TV subscribers. Comcast has 21 million, DirecTV: 20 million, Dish Networks: 14 million, and Time Warner Cable: 11 million.

When NCTC’s contract with Viacom was up for renewal, the owner of networks like MTV and Comedy Central raised the renewal price more than 40 times the rate of inflation. In fact, Viacom’s asking price was so high, operators like Cable ONE pulled the plug on 15 Viacom networks for good and replaced them with other programming. NCTC members eventually compromised on a deal to renew Viacom-owned networks, but customers of companies like Massillon, Ohio-based MCTV are paying the price in the form of a mid-year rate hike Bob Gessner, MCTV’s president, did not want to have to pass on to customers.

“I don’t like to do this because it puts me in a difficult position of raising prices, which no one likes, or reducing the product, which no one likes, or cutting back on the quality of our customer service, which no one likes,” said Gessner. “Large media companies control all the TV programming and they are raising the price.  The cost of TV programming is rising very rapidly and it is causing this rise in retail prices.”

Some facts about cable TV programming:

• Nine media companies control 95% of the paid video content consumed in the U.S.;
• The average household watches only 16 channels, yet networks package their channels to force you to buy those you don’t want to get those that you do want;
• Programming network fees account for the bulk of your monthly cable bill;
• The cost of basic cable has risen 3½ times the rate of inflation over the last 15 years because of demands from networks for higher programming fees;
• One media company honcho recently stated that, “…content is such a fundamental part of daily life that people will give up food and a roof over their heads before they give up TV.” This shows that they have lost their perspective and the demands for huge increases will continue.

Gessner

Gessner has broken ranks with many cable operators that say little more at rate hike time than “increased programming costs.”

Gessner has produced a 20-minute video that carefully explains to his customers what is going on in the cable programming industry and why providers like MCTV are forced to shovel networks onto cable lineups few customers want or watch and how the biggest cable and satellite companies are now negotiating volume-discounted renewal pricing at the expense of smaller providers.

While the largest cable companies in the country secure lower rates through those volume discounts, programmers have found a way to make up the difference: demanding even higher rates for smaller cable companies to cover what they lose from Comcast and other big players.

Gessner, as well as other NCTC member companies, confront huge programmers like Comcast-NBCUniversal, Viacom, Time Warner (Entertainment), Discovery and Disney that first demand 3-7 year renewal contracts with built-in, automatic annual rate increases averaging 5-10 percent, regardless of the ratings of their networks. Most also demand that all of their cable networks be carried on their systems, whether customers are interested in them or not. If these companies dream up new cable networks, like ESPN’s SEC Network and the Longhorn Network, MCTV is committed to carry those channels as well, even though they are of little interest to residents of northeastern Ohio where MCTV operates.

These dream contracts (for cable programmers) are the single biggest reason cable-TV rates are skyrocketing. But Gessner says it gets even worse when those contracts expire. When renewal negotiations begin, programmers these days inevitably demand a “rate reset” which starts rate negotiations at a price 10, 30, even 60 percent higher than under the expiring contract.

Those dollar amounts cover local station retransmission consent agreements nationwide.

Gessner says he doesn’t know how much longer MCTV can afford to carry expensive networks like sports channels. If he drops them, angry subscribers could cancel cable service and switch to a provider willing to pay the asking price. Unless all of his competitors stand together, programmers will maintain the upper hand.

Some cable companies, like Cable ONE, are starting to risk the wrath of their customers by refusing to negotiate for terms they consider unreasonable. When subscribers learned the reasons why Cable ONE dropped more than dozen Viacom channels, many were supportive because the company replaced the networks with other channels and promised to keep rate increases down because they won’t have to pass on Viacom’s higher prices. Viacom retaliated by locking out Cable ONE’s Internet customers from accessing any of Viacom’s free-to-view online programming.

“Viacom lets web surfers from Albania watch Spongebob but Viacom blocks people who live in Alabama, and if you are an advocate of this thing called Net Neutrality, you should be very concerned,” Gessner said. “Viacom is blatantly violating the spirit of Net Neutrality by discriminating against certain Internet users in order to extract higher fees from TV viewers. That’s the sort of vicious bullying behavior many of the content companies use to maintain their stranglehold on the U.S. television industry.”

Gessner and other independent cable operators hope cable operators’ willingness to drop cable networks over their price is the start of something big — a pushback that could eventually force programmers to charge rational rates.

“Hopefully this will serve as a wakeup call to the rest of the industry to stop paying these ridiculous prices for TV rights,” said Gessner. “I have no illusion that sanity will come to the industry overnight — it will take time — but this is a step in the right direction.”

[flv]http://www.phillipdampier.com/video/MCTV Rate Increase 2014.flv[/flv]

MCTV president Bob Gessner hosted this thoughtful presentation to carefully explain why his customers are facing a $1-3 mid-year rate increase for cable television. Gessner breaks with tradition by explaining the cable television business model is effectively broken and needs serious reform, including more choices for customers seeking fewer channels and a lower bill. It’s well worth 20 minutes of your time. (20:11)

Official merger announcement due next month.

Several media reports breaking this evening report Softbank/Sprint is close to a deal to acquire majority interest in Deutsche Telekom’s T-Mobile USA in a deal that will combine the two carriers under the Sprint brand.

Bloomberg News reports Sprint has offered $40 a share for Deutsche Telekom’s T-Mobile USA — 50% in cash and 50% in stock. The deal will leave the German wireless carrier with a 15% minority ownership stake in the combined company. Sprint would still dwarf both Verizon Wireless and AT&T and would continue to be hampered by significant coverage caps in suburban and rural areas that neither Sprint or T-Mobile’s home networks cover.

The deal includes a breakup fee payable by Sprint if the merger is blocked by regulators or fails to be executed. Sprint reportedly offered $1 billion in cash and assets if the deal falls through, but Deutsche Telekom is reportedly seeking as much as $3 billion.

Masayoshi Son

Bloomberg News previously reported a deal would probably be announced in June or July. It’s possible a deal announcement could slip into August, a source told Bloomberg. If no deal is reached by then, the sides are likely to stop negotiations for several years and wait for a new U.S. presidential administration more amenable to consolidation.

Billionaire Masayoshi Son, the founder of Japan-based SoftBank, which owns 80 percent of Sprint, faces skeptical regulators who are wary about eliminating one of four national wireless competitors. But in the last few days, executives at Sprint and Deutsche Telekom believe they can get the deal passed regulators preoccupied with a flurry of merger announcements, including Time Warner Cable and Comcast and AT&T and DirecTV. With a tidal wave of consolidation sweeping across the American telecommunications market, some industry insiders believe groups opposed to such deals will be overwhelmed trying to stop all of them.

More importantly, the issue of wireless spectrum was a key motivator to push the two companies towards a quick deal.

The Wall Street Journal reports the FCC originally considered barring AT&T and Verizon Wireless from bidding on airwaves that would have been set aside for smaller carriers. But a fierce lobbying effort by AT&T successfully nixed that plan and slashed the amount of spectrum available exclusively to smaller carriers. Sprint and T-Mobile believe the FCC’s decision gives them an opening to argue the government needs to allow a merger because it isn’t doing enough to help them compete.

Rosenworcel

Another welcome sign for Sprint and T-Mobile is Democratic FCC commissioner Jessica Rosenworcel, who saw nothing wrong with holding private meetings with Wall Street insiders, telling them she would keep “an open mind” when considering the merger. With both Republican commissioners almost certain to approve a merger and Thomas Wheeler and Mignon Clyburn — both Democrats — likely opposed, Rosenworcel may have signaled she holds the deciding vote.

Prior to 2011, wireless consolidation was rampant, with an FCC predisposed to almost rubber stamping approval of buyouts and mergers. That changed in 2011 when AT&T tried to buy T-Mobile. It was the U.S. Justice Department, not the FCC, that led the charge against the deal, calling it anti-competitive. The Justice Department was vindicated when T-Mobile promptly launched new competitive service plans and pricing that forced price reductions and plan improvements from its competitors. T-Mobile has seen dramatic growth since launching its aggressively competitive service plans.

Sprint will likely claim T-Mobile’s competitive gains are illusory and will never offer a real competitive challenge to AT&T and Verizon’s market dominance. Despite the fact the combined company would still be far smaller than either AT&T or Verizon Wireless, Sprint is expected to argue it will be better positioned to fiercely compete for customers.

That argument is tempered by the fact that competition in the prepaid wireless market — already diminished by AT&T’s acquisition of Leap Wireless’ Cricket — will suffer even more if Sprint and T-Mobile, both major competitors in the prepaid market, are combined.

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Sprint is nearing an agreement on the price, capital structure and termination fee of an acquisition for T-Mobile US that could value the wireless carrier at almost $40 a share, people with knowledge of the matter said. Alex Sherman has more on Bloomberg Television’s “Taking Stock.” (2:34)

Comcast has at least 40 lobbying firms working on its merger deal with Time Warner Cable.

It’s shock and awe time in D.C. as Comcast pulls out all the stops to ram its $45 billion deal with Time Warner Cable down Washington’s throat.

The Hill reports Comcast is assembling one of the biggest lobbying teams ever seen inside the beltway, hiring at least seven additional lobbying firms on top of the 33 it already retains. Their mission: to pressure legislators and overwhelm regulators to accept the merger deal and ignore the critics.

The lobbying firms are loaded to the rafters with D.C.’s frequent revolving-door travelers — former legislators, staffers, regulators and their aides that worked in the Clinton and Bush Administrations who now work on behalf of the companies many used to oversee.

On Comcast’s generous payroll: former aides for the House Energy and Commerce Committee and the House and Senate Judiciary committees, in addition to the Justice Department and the Federal Communications Commission — precisely the agencies that will review the merger for anti-trust concerns.

“If you’ve worked on the committees, or if you’ve worked in an agency overseeing a transaction like this, you’ve got knowledge about how the process works and credibility with the staff — it’s that simple,” one lobbyist told the newspaper.

A quick review of some of the players from The Hill:

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For $48.5 billion, AT&T will vault itself into second place among the nation’s largest pay television providers with the acquisition of DirecTV. The Wall Street Journal reports the executives at AT&T have been looking to for a giant deal for several years. Most executives earn special bonuses and other incentives worth millions for successfully completing these kinds of transactions. (3:03)

AT&T plans to spend $48.5 billion to acquire the nation’s biggest satellite television provider, allowing AT&T to become the second largest pay television company, behind a merged Comcast and Time Warner Cable.

The deal, finalized on Sunday, pays $95 per DirecTV share in a combination of stock and cash, about a 10% premium over DirecTV’s closing price on Friday. Including debt, the acquisition is AT&T’s third-largest deal on record, behind the purchase of BellSouth for $83 billion in 2006 and the deal for Ameritech Corp., which closed in 1999, according to data compiled by Bloomberg.

“This is a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens – mobile devices, TVs, laptops, cars and even airplanes. At the same time, it creates immediate and long-term value for our shareholders,” said Randall Stephenson, AT&T chairman and CEO. “DirecTV is the best option for us because they have the premier brand in pay TV, the best content relationships, and a fast-growing Latin American business. DirecTV is a great fit with AT&T and together we’ll be able to enhance innovation and provide customers new competitive choices for what they want in mobile, video and broadband services. We look forward to welcoming DirecTV’s talented people to the AT&T family.”

The announced acquisition has left some on Wall Street scratching their heads.

“Like any merger born of necessity rather than opportunity, the combination of AT&T and DirecTV calls to mind images of lifeboats and rescues at sea,” telecommunications analyst Craig Moffett of MoffettNathanson Research wrote this week. AT&T, Moffett wrote, is in “dire need of a cash producer to sustain their dividend.”

[flv]http://www.phillipdampier.com/video/Bloomberg ATT DirecTV Deal a Head Scratcher 5-19-14.flv[/flv]

Craig Moffett, founder of MoffettNathanson LLC, talks about AT&T Inc.’s plan to buy DirecTV for $48.5 billion. Moffett speaks with Tom Keene, Scarlet Fu, William Cohan, and Adam Johnson on Bloomberg Television’s “Surveillance.” StockTwits founder Howard Lindzon also speaks. (5:12)

The deal would combine AT&T’s wireless, U-verse, and broadband networks with DirecTV’s television service, creating bundling opportunities for some satellite customers. As broadband becomes the most important component of a package including phone, television, and Internet access, not being able to offer broadband has left satellite TV companies at a competitive disadvantage. AT&T’s U-verse platform – a fiber to the neighborhood network – has given AT&T customers an incremental broadband speed upgrade, but not one that can necessarily compete against fiber to the home or cable broadband.

Some analysts are speculating AT&T will eventually shut down its U-verse television service and dedicate its bandwidth towards a more robust broadband offering. Existing television customers would be offered DirecTV instead.

But deal critics contend AT&T is spending a lot of money to buy its competitors instead of investing enough in network upgrades.

“The amount of cash alone AT&T is spending on this deal — $14.55 billion — is as much as it cost Verizon for its entire FiOS deployment, which reaches more than 17 million homes,” Free Press’ Derek Turner tells Stop the Cap! “Add in the $33 billion in AT&T stock and $18.6 billion in debt, and you can see just how wasteful this merger is.”

In effect, AT&T is spending nearly $50 billion to buy DirecTV’s customer relationships, its satellite platform, and its agreements with programmers, all while removing one competitor from the market. Cable has 54 percent of the pay TV market, satellite has 34 percent, and AT&T and Verizon share 11 percent. AT&T’s U-verse has 5.7 million TV customers. DirecTV has 20.3 million. Combining the two gives AT&T 26 million television customers, second only to Comcast/Time Warner Cable.

Rural Americans will effectively see their choice in competitors drop by one-third, giving them the option of the phone company or Dish Network.

AT&T intends to persuade regulators to approve the deal despite its antitrust implications by offering several commitments the company says are in the public interest and protect consumers:

• 15 Million Customer Locations Get More High Speed Broadband Competition. AT&T will use the merger synergies to expand its plans to build and enhance high-speed broadband service to 15 million customer locations, mostly in rural areas where AT&T does not provide high-speed broadband service today, utilizing a combination of technologies including fiber to the premises and fixed wireless local loop capabilities. This new commitment, to be completed within four years after close, is on top of the fiber and Project VIP broadband expansion plans AT&T has already announced. Customers will be able to buy broadband service stand-alone or as part of a bundle with other AT&T services.
• Stand-Alone Broadband. For customers who only want a broadband service and may choose to consume video through an over-the-top (OTT) service like Netflix or Hulu, the combined company will offer stand-alone wireline broadband service at speeds of at least 6Mbps (where feasible) in areas where AT&T offers wireline IP broadband service today at guaranteed prices for three years after closing.
• Nationwide Package Pricing on DIRECTV. DIRECTV’s TV service will continue to be available on a stand-alone basis at nationwide package prices that are the same for all customers, no matter where they live, for at least three years after closing.
• Net Neutrality Commitment. Continued commitment for three years after closing to the FCC’s Open Internet protections established in 2010, irrespective of whether the FCC re-establishes such protections for other industry participants following the DC Circuit Court of Appeals vacating those rules.
• Spectrum Auction. The transaction does not alter AT&T’s plans to meaningfully participate in the FCC’s planned spectrum auctions later this year and in 2015. AT&T intends to bid at least $9 billion in connection with the 2015 incentive auction provided there is sufficient spectrum available in the auction to provide AT&T a viable path to at least a 2×10 MHz nationwide spectrum footprint.

[flv]http://www.phillipdampier.com/video/CNN ATT DirecTV Merger 5-19-14.flv[/flv]

CNN says AT&T’s buyout of DirecTV is about getting video programming to customers using all types of technology, but public interest groups suspect it’s about reducing competition. (1:17)

A closer look at AT&T’s commitments exposes several loopholes, however.

AT&T U-verse and DirecTV compete head-on in these areas.

• AT&T’s “commitment” to expand broadband to 15 million new locations is in addition to their Project VIP U-verse expansion now underway. However, AT&T does not say how many rural customers will see wired U-verse service finally become available vs. how many will lose their landlines permanently and have to rely on AT&T’s wireless landline replacement and expensive, usage-capped wireless broadband;
• AT&T’s speed commitment is largely unenforceable and falls apart with language like, “where feasible.” Anywhere they don’t deliver 6Mbps DSL speed can easily be explained away as “unfeasible.” AT&T also only commits to providing DSL where it already offers DSL, so no expansion there;
• The FCC’s Net Neutrality protections never covered wireless and three years is a very short time to commit to the “light touch” approach the FCC had with Net Neutrality back in 2010;
• AT&T’s wireless auction commitment comes with loopholes like “meaningfully,” “provided there,” and “a viable path to at least.”

“You can’t justify AT&T buying DirecTV by pointing at Comcast’s grab for Time Warner, because neither one is a good deal for consumers,” said Delara Derakhshani, policy counsel for Consumers Union, the advocacy arm of Consumer Reports. “On the heels of Comcast’s bid for Time Warner Cable, AT&T is going to try to pull off a mega-merger of its own. These could be the start of a wave of mergers that should put federal regulators on high alert.  AT&T’s takeover of DirecTV is just the latest attempt at consolidation in a marketplace where consumers are already saddled with lousy service and price hikes. The rush is on for some of the biggest industry players to get even bigger, with consumers left on the losing end.”

“The captains of our communications industry have clearly run out of ideas,” said Craig Aaron, president of Free Press. “Instead of innovating and investing in their networks, companies like AT&T and Comcast are simply buying up the competition. These takeovers are expensive, and consumers end up footing the bill for merger mania. AT&T is willing to pay $48.5 billion and take on an additional $19 billion in debt to buy DirecTV. That’s a fortune to spend on a satellite-only company at a time when the pay-TV industry is stagnating and broadband is growing. For the amount of money and debt AT&T and Comcast are collectively shelling out for their respective mega-deals, they could deploy super-fast gigabit-fiber broadband service to every single home in America.”

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Sen. Al Franken (D-Minn.) appeared on CNN’s New Day this morning to express his skepticism about the consumer benefits of a merger between AT&T and DirecTV. “We need more competition, not less.” (2:40)

“Comcast Corp.’s bid to buy Time Warner Cable Inc. may be the opening act for a yearlong festival of telecommunications deals that would alter Internet, phone and TV service for tens of millions of Americans.” — Bloomberg News, May 14, 2014

Wall Street analysts remain certain Comcast and Time Warner Cable won’t be the only merger on the table this year as the $45 billion dollar deal is expected to spark a new wave of consolidation, further reducing competitive choice in telecom services for most Americans.

While the industry continues to insist that the current foundation of deregulation is key to investment and competition, the reality on the ground is less certain.

Let’s review history:

For several decades, the cable industry has avoided head-on competition with other cable operators. They argue the costs of “overbuilding” cable systems into territories already serviced by another company is financially impractical and reckless. But that did not stop telephone companies like AT&T and Verizon from overhauling portions of their networks to compete, and in at least some communities another provider has emerged to offer some competition. Some wonder if AT&T was willing to spend billions to upgrade their urban landline network to provide U-verse, why won’t cable companies spend some money and compete directly with one another?

The answer is simple: They can earn a lot more by limiting competition.

When only a few firms account for most of the sales of a product, those firms can sometimes exercise market power by either explicitly or implicitly coordinating their actions. Coordinated interaction is especially suspect where all firms seem to charge very similar prices and few, if any, are willing to challenge the status quo.

Since the 1980s, the telecommunications industry has been deregulated off and on to a degree not seen since the pioneer days of telephone service. That was the era when waves of mergers created near-monopolies in the oil, railroad, energy, tobacco, steel and sugar industries. By the late 1890s, evidence piled up that proved reducing the number of providers in a market leads to higher prices and poor service. The abuses eventually led to the passage of the Sherman Antitrust Act of 1890 and later the Clayton Antitrust Act of 1914.

Here is what happened when the cable industry was reined in during the early 1990s, only to be deregulated again.

The generation of political leaders that dominated Washington during the 1980s developed selective amnesia about economic history and dismantled many of the regulatory protections established to protect consumers, arguing competition would keep markets in check. In the broadband and cable business, that has not proved as successful as the industry represents.

At the heart of the problem is the 1996 Telecommunications Act, signed into law by President Bill Clinton. The sweeping law is littered with lobbyist landmines for consumers and their interests. Under the guise of increasing competition, the 1996 law actually helped reduce competition by removing regulatory oversight and, perhaps unintentionally, sparking an enormous rampage of industry consolidation followed by price increases. The Bush Administration kept the war on consumers going with the appointment of Michael Powell (now the CEO of the cable industry’s lobbying group) to chair the Federal Communications Commission. Under Powell, non-discriminatory access to networks by competitors was curtailed, and Powell’s FCC gave carte blanche to the cable industry’s plan to cluster its territories into large regional monopolies and a tight national oligopoly. The FCC’s own researchers quietly admitted in the early 2000s “clustering raised prices.”

By January 2001, cable operators had settled on rate increases that averaged three times the rate of inflation. While the national inflation rate hovered around 1%, cable companies routinely raised basic cable rates an average of 7% annually. Powell declared rising cable rates were not a consumer problem and adopted the industry’s classic talking point that rate increases reflect the “value of the programming” found on cable. In fact, even as cable customers grew increasingly angry about rate increases, Powell told three different reporters he wanted to further relax the FCC’s involvement in cable pricing. (McClintock, Pamela, “Powell: No Cable Coin Crisis” Variety, April 30, 2001; Hearn, Ted. “Powell: Value Matters in Cable Rates,” Multichannel News, March 13, 2002; Powell Press Conference, February 8, 2001; Dreazen, Yochi. “FCC Chairman Signals Change, Plans to Limit Intervention,” Wall Street Journal, February 7, 2001.)

Economists reviewing data found in publicly available corporate balance sheets soon found evidence that the “increased programming costs”-excuse for rate increases did not hold water. The less competition or number of choices available to consumers in the market unambiguously lead to higher prices. It has remained true since Consumers’ Union revealed the financial trickery in 2003:

The cable industry will claim that programming costs are driving prices up. While programming costs have certainly risen, a close look at the numbers shows that rising program costs account for only a small part of the rising rates.

If costs were really the cause of rising prices, then the cable industries’ operating margins – the difference between its revenues and costs — would not be rising. The facts are just the opposite. Operating margins have been increasing dramatically since 1997. The operating margin for the industry as a whole will reach $18.8 billion per year in 2002, $7 billion more than it was in 1997. Operating revenues per subscriber have increased dramatically over that period, from $208 per year to $273. That is, after taking out all the operating costs, including programming costs, cable operators have increased their take per subscriber by over 30 percent.

[…] The ability of cable operators to raise rates and increase revenues, even with rising programming costs, stems from the market power they have at the point of sale. They would not be able to raise prices and pass program price increases through if they did not have monopoly power.

Consumers’ Union also foreshadows what will happen if another wave of industry consolidation takes hold the way it did over a decade earlier:

While the cable industry has certainly increased capital expenditures to upgrade its plants, it has actually sunk a lot more capital into another activity – mergers and acquisitions.

It is the outrageous prices that have been paid to buy each other out and consolidate the industry that is helping to drive the rate increases. Between 1998, when the first mega merger between cable operators was announced, and 2001, when the last big merger was announced, cable companies spent over a quarter of a trillion dollars buying each other out. In those four years, they spent almost six times as much on mergers and acquisitions as they did on capital expenditures to upgrade their systems. At the same time, the average price paid per subscriber more than doubled.

When a cable operator pays such an outrageous price, the previous owner is reaping the financial rewards of his monopoly power. The acquiring company can only pay such a high price by assuming that his monopoly power will allow him to continue to increase prices. Monopoly power is being bought and sold and borrowed against. The new cable operator, who has paid for market power, may insist that the debt he has incurred to obtain it is a real cost on his books. That may be correct in the literal sense (he owes someone that money) but that does not make it right, or the abuse of market power legal.

Fast-forwarding to 2014, economist and Temple professor Joel Maxcy said the same basic economic truths still exist today with Comcast’s merger with Time Warner Cable.

“My concern is the merger and the consolidation of the cable and internet delivery system for consumers and what will happen to internet and cable rates and choices,” Maxcy said, voicing his hesitancy about a deal that merges the nation’s two largest cable providers. “As that industry has gotten more consolidated over time, we have seen rates go up. The answer from them is that we’ve got more choices. Are we better off or not better off? I don’t know, but certainly rates have gone up at a much faster rate than the inflation rate. The result of more monopoly power is always higher prices and less choices and it seems that this merger moves in that direction.”

“The threat from non-network content providers is a concern for the cable industry,” Maxcy added.

“We’re moving to a situation where we don’t need cable, but we still need the internet and the cable companies are the ones that have control of that,” he said. “Consolidating them together makes them more competitive against the outside forces, but the other argument makes the whole thing less competitive so they’ll have more ability to control the access to Netflix, YouTube and the like. People that may develop other similar sorts of services will have a hard time getting the access they would like to purchase those.”

Chris Stigall spoke with economist and Temple professor Joel Maxcy on Talk Radio 1210 WPHT in Philadelphia about Comcast’s attempt to purchase Time Warner Cable and what that means for consumers. Feb. 18, 2014 (12:10)
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