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What Mega Mergers Mean for Consumers

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  July 3rd, 2019  By Danika Miller

Sometimes major companies decide that one head is better than two and merge together to combine strengths or streamline operations. In some cases, one of the companies might buy the other company outright. While researching Charter Communications for our Charter Spectrum TV review, we learned that Spectrum is the young child of a pretty big telco marriage after Charter Communications purchased Time Warner Cable in 2016. Around the same time, Charter acquired Bright House Networks, which made the new Time Warner the second-largest cable provider behind Comcast. The united services were rebranded as Spectrum.

These kinds of mergers have to be approved by the Federal Communications Commission, an independent agency responsible for the laws and regulations related to all things related to communication. In the agency’s own words, the FCC’s goals include:

  • Promoting competition, innovation and investment in broadband services and facilities
  • Supporting the nation’s economy by ensuring an appropriate competitive framework for the unfolding of the communications revolution
  • Encouraging the highest and best use of spectrum domestically and internationally
  • Revising media regulations so that new technologies flourish alongside diversity and localism
  • Providing leadership in strengthening the defense of the nation’s communications infrastructure

The FCC’s approval of Charter’s purchase came with a few conditions, including no data caps or usage-based pricing. But was that enough?

Bigger Companies, Less Competition

As more and more mega media conglomerates absorb each other (see: Disney’s acquisition of Fox), industry competition is waning. Market competition is generally good for consumers — lower prices, more options, an incentive for offering better service, accelerated innovation, and expansion. This is particularly relevant to TV and internet providers because reports show that tens of millions of people in the U.S. have access to one or fewer providers. If there are no competing services in your area, there’s little incentive for your provider to offer better service or cheaper rates, and even less reason for them to avoid raising prices.

In fact, the American Customer Satisfaction Index (ACSI), has found that “Mergers and acquisitions have a generally negative effect on customer satisfaction, particularly among service industries.” After a merger, customers typically become a lower priority while the company focuses on reorganization and cutting costs.

For Spectrum specifically, its ACSI service ratings did drop after the merger. In the year before they combined services, Time Warner Cable was rated 66/100 and Charter Communications had earned a 63/100. In 2019, the combined Spectrum service is rated 59/100.

In our review of Spectrum’s internet service, we found Charter had streamlined its package offerings post-merger. Customers can choose from just three internet speeds and channel packages. While three options are still better than one, it’s a move in the wrong direction.

What to Expect

If big telco companies continue to purchase each other, even more customers could face situations where they only have one option (if any) in their area. Providers could raise their prices and implement exclusive deals with networks. For example, if Disney were to purchase a provider like Comcast, it might attempt to make its affiliated programs (like Disney Channel, ABC, ESPN, etc) exclusively available to Comcast customers or people who subscribe to Disney’s upcoming streaming service. So far, the FCC has intervened in such scheming and enforced antitrust laws, but the future of telecommunication services is still unclear — especially with streaming services shaking things up. But as the industry gets more and more consolidated, each additional merger is a bigger loss for consumers.

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