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Time Warner Cable buyout isn't good for innovation

Posting in Technology

The news leaked out late last night: Comcast is acquiring Time Warner Cable for US$45B. That means fewer companies will be providing services to a large swath of the U.S. population, and there will be less competition. There will be even less incentive to innovate or compete on price. Consumers will lose.

There's also the question of what type of Internet millions will be accessing. Comcast is one of the companies that has been accused this week of throttling Netflix ever since a recent Federal Court ruling diminished the FCC's regulatory power to enforce its open Internet rules to establish wireless net neutrality (treating all network traffic equally). There have been denials of any Netflix sabotage all around.

It's also worth noting that the court ruling was specific toward wireless net neutrality - not landlines - and the FCC could be granted its authority under something other than  common carrier law, which a judge rejected. 

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 WikiPedia
 I'm not being a naysayer for the sake of opposition. The state of U.S. broadband competition is dismal. Services are rated poorly (just look at the Yelp reviews), and there's a lack of consumer trust in ISPs.

Major markets in the United States already have few providers to choose from and there's little differentiation among them. Now, Comcast, a single provider has dominion over New York and Philadelphia. Verizon FIOS becomes the only viable competitor, not withstanding satellite TV services.

Verizon is another ISP that has been singled out for lower Netflix streaming speeds in recent days. Whether that's true isn't even the point. Why the broadband networks are failures by international standards should not come as a surprise, because Comcast and Verizon have little incentive to provide a better service.

Enter the duopoly

I worked with Pulitzer Prize-winning journalist David Cay Johnston in October to share the findings of his latest expose, "The Fine Print: How Big companies Use 'Plain English' to Rob You Blind." Johnston was especially critical of the telecommunications industry, which he deemed to be uncompetitive. 

"A growing number of industries are monopolies, duopolies and oligopolies even as they claim to be in highly competitive markets. Cable, Internet and telephone provide a good example of this. In most places you have one phone company and one cable company offering similarly slow, by world standards, Internet speeds and very similar prices," he said. 

Consumers in the United States already pay up to 38 times as much as Japanese consumers per bit of information to access the Internet. And soon, consumers could be paying even more via consolidation.

My social circles aren't representative of the entire east coast population, but no one was happy about the Comcast deal. People are expecting poorer service and are even concerned about net neutrality. Imagine being charged extra by your ISP for a Netflix package every month. It's not outside the of realm of possibility should net neutrality somehow fail. The ISP could hypothetically push its own services instead.

Why do people think this way? They've been taking it on the nose and the market already sucks. More consolidation isn't going to solve the problem, and will likely make it even worse. Thumbs. down.

— By on February 13, 2014, 5:28 AM PST

David Worthington

Contributing Editor

David Worthington has written for BetaNews, eWeek, PC World, Technologizer and ZDNet. Formerly, he was a senior editor at SD Times. He holds a business degree from Temple University. He is based in New York. Follow him on Twitter. Disclosure