Time Warner Cable customers who have complained over the years about pricing, bad service or lack of choices would probably hate a bigger, more powerful Comcast-Time Warner just as much, analysts said Thursday.
Comcast Corp.’s $45.2 billion deal to buy Time Warner Cable Inc. and combine the nation’s two largest cable TV operators could mean higher prices, lingering service problems, and limited choices in programming and technology, the analysts said.
The purchase, first reported late Wednesday, still needs approval from the U.S. Department of Justice, which enforces federal antitrust regulations. Opposition to the merger is likely to be intense.
“If Comcast and Time Warner combine, then it’s not good news for customers,” said Bruce Temkin, managing partner of the Temkin Group, a Boston-based market research firm.
The two companies are often at the bottom of the pack in national customer service surveys of the largest cable TV and Internet providers, with Comcast usually rated only slightly higher than Time Warner Cable.
In the 2013 Temkin Experience Ratings, a national survey of 10,000 people about their customer service experiences with 246 companies in a range of industries, Comcast was ranked 222 and Time Warner was at 244.
“The combination of these customer experience laggards will likely cause additional problems for customers,” Temkin said. “The silver lining is that Comcast has shown some improvement in its experience ratings over the last year while Time Warner has been on a decline, so hopefully customers in Maine will see those improvements kick in after the merger transition period.”
Temkin said the merger’s effect on choices and prices would depend on how the companies handled the merger. He said he thinks that, over time, the consolidation would likely increase prices. In the short run, he expects more customer service problems.
“Given the endemically poor customer experience from these companies, customers will likely face poor communications about changes, surprises in bills, changes to support processes that will be difficult to navigate, and a host of other inconveniences,” said Temkin.
Time Warner Cable customers could also be surprised by Comcast’s monthly limit on broadband data. The cap, which analysts expect to be applied to Time Warner Cable markets, means customers pay more for using more than 300 gigabytes per month. Streaming an average movie ranges from 1.5 to 5 gigabytes, analysts said.
CUSTOMERS EXPECT BAD THINGS
David Ezhaya of Windham, a Time Warner Cable customer, has been irked over the years by new and increasing fees. They make him worry that someday he’ll have to pay extra for every service and every channel he really wants. He said Thursday that the proposed merger doesn’t ease those worries.
“As the telecommunications industry continues to shrink in (the number of companies), these monopolies will continue to squeeze the consumer price-wise and choice-wise,” said Ezhaya.
Howard Faulkner of Gorham, another Time Warner Cable customer, said he thinks the merger would bring higher prices and requirements to buy “bundled” services, including channels that customers don’t want.
“The combination of these two companies will unlikely address or resolve the underlying issues with cable,” said Faulkner.
By making the purchase, Comcast could gain access to key markets such as New York City, and access to more businesses and homes, which are increasingly using Internet connections to access programming alternatives such as Hulu, Netflix and Amazon Prime, analysts said.
Comcast and Time Warner Cable are the Internet providers that transmit those programs, so they stand to benefit even with the number of traditional cable TV customers expected to shrink over time, analysts said.
The companies would not say whether the deal would increase prices for consumers.
A spokeswoman for Time Warner Cable said in an emailed statement, “Through the course of the merger this year, we proactively will communicate to our customers about any changes in their services and our offerings.”
Comcast said the current price for a package for voice, cable and data services is about $100 a month.
Time Warner Cable said it offers dozens of packages and service choices so it could not provide a specific price that would be accurate for the majority of customers. It said its TV service starts at $19.99 per month, Internet service starts at $14.99 per month and home phone service starts at $19.99 per month.
COMCAST ALREADY IN MAINE MARKETS
Regulatory scrutiny of the deal is expected to be intense, said Christopher King, an analyst for St. Louis-based Stifel Nicolaus & Co. The combined company would control about 30 million subscribers in markets ranging from Maine to New York, Chicago and Los Angeles.
Comcast has 22 million pay TV customers, and Time Warner Cable would contribute 11.2 million customers. Comcast has said the combined company would divest about 3 million customers, reducing its customer base to about 30 million – a level that regulators have been sensitive to in the past.
Divesting subscribers could help the deal win regulatory approval, but small cable companies are likely to protest the purchase, analysts said. The merged company would have about half of all paying cable-TV-phone customers in the United States.
Comcast said that since the companies don’t serve overlapping markets, the merger wouldn’t reduce competition.
In Maine, Comcast has operations in more than a dozen communities, including Brunswick, Bath, Kittery, Eliot, Berwick and South Berwick. Time Warner Cable has a larger presence in the state, serving more than 300,000 subscribers.
Comcast and Time Warner Cable are expected to save $1.5 billion in annual costs over three years, half of that in the first year. Comcast would not say what the savings would mean in terms of layoffs.
In a prepared statement, Time Warner Cable said, “There will be very little impact on the vast majority of employees. Comcast will need talented, motivated employees to operate the cable systems.”
Time Warner Cable has about 880 employees throughout New England. It did not disclose how many are in Maine.
SIZE WOULD GIVE COMPANY LEVERAGE
The deal also has broad implications for business customers, programmers and distributors, which would have to deal with a much larger, more powerful company, analysts said.
“An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content,” said officials with Public Knowledge, a Washington-based consumer rights group.
The group, which said regulators must stop the merger because it would give Comcast “unprecedented gatekeeper power in several important markets,” said that by raising the costs of its rivals and business partners, a more powerful Comcast would likely raise costs for consumers.
“It would be able to keep others from innovating, while facing little pressure to improve its own service,” Public Knowledge said.
The deal would force others in the cable and telecommunications industry to consolidate, as companies face pressure to compete for customers and programming strength, said Timothy Horan, an analyst with Oppenheimer & Co.
The merger could cause some long-term effects for companies that own Maine’s TV stations and get fees from cable companies for the right to retransmit their programming on cable systems. A combined Time Warner and Comcast would reach more homes and therefore have more negotiating muscle.
In the past few years, disputes over retransmission fees have caused some stations to be taken out of cable lineups temporarily.
The purchase agreement follows Comcast’s acquisition last year of NBC Universal, owner of NBC, MSNBC, CNBC, Telemundo and The Weather Channel. Comcast also owns 26 local TV stations in major U.S. markets, as well as 14 sports channels and cable channels including Oxygen Media, Syfy and USA Network. It also owns Universal Pictures, as well as a theme park, Universal Parks and Resorts.
Ray Routhier can be contacted at 791-6454 or at:
Jessica Hall can be contacted at 791-6316 or at: