A highly concentrated Comcast would be nasty medicine for California

7 August 2014 by Steve Blum
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There’s a great analysis by William Conlow of the impact of the Comcast/Time-Warner merger on cable market concentration in Techdirt (h/t to Bud Colligan for the pointer). Using a standard measure of market concentration – the Herfindahl–Hirschman Index (HHI) – the article shows that the result of the merger will be an increase in market concentration in the U.S. as a whole, to the level of a Moderately Concentrated Market. That’s the middle tier of the HHI scale, which is well-explained in the Techdirt piece and in a linked federal department of justice manual on anti-trust assessment.

In California, though, Comcast’s control of Time-Warner and Charter systems would hit the top of the scale – become a Highly Concentrated Market – with a score of more than 5,000 on the HHI. That’s using Comcast’s more conservative numbers, which put its post-merger, post market swap share at just over 70%. Other estimates put the true market control figure at 80%.

But call it 5,000. That’s double the 2,500 point threshold for the Highly Concentrated Market category. Right now, with a 40% share of the Californian cable market, Comcast’s HHI is 1,600, just above the Moderately Concentrated Market bar of 1,500 points.

If the transaction is completed, Comcast will go from being merely resistant to market forces in California, to effectively invulnerable to competition. Which impacts broadband cost, availability and quality even more than it does television service: satellite is still an effective and economical alternative to cable TV.

The California Public Utilities Commission should follow the path recommended in comments filed regarding the Comcast merger/swap, and conduct a broad review of the transactions. Giving a company like Comcast, with its track record of smash mouth marketing and political pocket-stuffing, near monopoly control in California would be a disaster.