III. The Framework Of The Deal
Comcast offered to purchase Time Warner Cable for $45 billion. The Comcast-Time Warner Cable footprint will span across the country. According to a Transaction Fact Sheet document released on the Comcast Corporate website, the merger is structured to provide a “world-class technology and media company”. The company will “create operating efficiencies and economies of scale”. The merger will improve the ability of Comcast-Time Warner Cable to compete against its competitors such as satellite providers and telecommunications companies such as Verizon Wireless (Comcast and Time Warner Cable Transaction Fact Sheet, 2014).
The merger will employ innovative ...view middle of the document...
Without substitutions, consumers are limited to fewer choices (Baye, 1997,p. 264). This exclusion allows the provider of the service to control the price and the quantity offered.
As previously mentioned, Comcast Corporation and Time Warner Cable are the top two cable service providers in the country; a merger thus increases the size of the parent Comcast Corporation. The size of a firm is referred to as concentration (Baye, 1997,p.242). Mergers can have competitive effects that may lessen competition or create a monopoly by eliminating competitors (Guide To Antitrust Laws, Federal Trade Commission, 2014). A merger occurs when “two firms at the same stage in the supply chain or who are engaged in the same activity combine forces” (Doyle, 2002, p. 22). Before a merger is official, its details must be analyzed by governmental agencies and must abide by certain guidelines. Hart-Scott-Rodino Act requires that firms desiring to merge must notify the Federal Trade Commission and the Department of Justice before finalizing the merger (Federal Trade Commission: What is the Premerger Notification Program? An Overview, 2009). The Sherman Act of 1890 was created maintain competition among businesses within their industries. The Act prohibited any attempt for firms to develop a monopoly on a product or service (Federal Trade Commission, The Anti-Trust Laws). Several amendments to the law were added in 1914 when Congress passed the Clayton Act and the Federal Trade Commission Act. The Clayton Act outlawed any practice that lessen competition, creates a monopoly or leads to unfair price discrimination. The Federal Trade Act created the Federal Trade Commission and gives it authority to ban “unfair methods of competition” and “unfair or deceptive acts of practices” that affect competition or commerce. The Federal Trade Commission will examine what the merging firms sell and where the respective goods are sold. (Federal Trade Commission, Guide to Anti-trust Laws, 2014).
When cable providers have competition, they are exempt from cable rate regulations. (Regulation of Cable TV Rates, Federal Communications Commission). The regulation of cables rates is controlled by government agencies in the service area. The agency may regulate the price in which customers pay for basic cable services. Local programming, and public or government access channels must be a part of the basic cable package. If the Federal Communications Commission determines that the cable company is subject to “effective competition”, then the government agency cannot regulate the basic service rate (Federal Communications Commission, Regulation of Cable TV Rates, 2014). Most paid-television providers offer services beyond the basic service packages that include pay-per-view programming, premium movie channels, or other broadcast channels.
Rates for a cable system's basic service tier may be regulated only if the cable system is not subject to effective competition. The Federal Communications...