Comcast this morning announced that it's abandoning its merger with Time Warner, making this the third major telecom merger the Obama administration has shot down after massive consumer pressure.
First AT&T/T-Mobile, then Sprint/T-Mobile, and now Comcast/Time Warner have collapsed. This might also put AT&T/DirecTV in jeopardy.
What all of these have in common is that they involved a service that's essential for participating in the modern economy, and they totally failed to make the case that their mergers would make consumers' lives better. In the case of AT&T/T-Mobile, AT&T claimed it wouldn't be able to invest in its network if the merger didn't go through. A few years later, AT&T has invested in its network and pivoted its business in really interesting ways, and T-Mobile is a vibrant competitor.
Before we declare that the Obama administration is against all major mergers in uncompetitive industries, remember that Obama's DOJ has approved Comcast/NBCUniversal, Continental Airlines/United, and American Airlines/US Airways.
Nobody trusts Comcast to do right by this power, and unlike with the airlines, telecom companies haven't been able to convince regulators that they'll go out of business if they aren't allowed to merge. The LA Times has some very smart analysis of this. Because the general opinion of Comcast's service is so low, "it's been easy for opponents of the deal to shift the debate to the hypothetical world of bad things that Comcast might do with the clout it would theoretically gain in certain markets," the paper says.
One thing is clear: all of these companies are going to be pouring money into whoever the 2016 Republican presidential nominee. As writer Jon Brodkin said on Twitter, "if a Republican was president there would be no Title II net neutrality, no challenges to anti-muni broadband laws, and a Comcast/TWC merger."
Down With the Shareholders!
The best outcome of putting the brakes on these mergers would be for companies to stop focusing on their entirely stockholder-centric theories of value and to go back to older, broader ideas of who they serve.
Washington Post columnist Steven Pearlstein wrote a great piece in 2013 about how the "cult of shareholder value" has turned corporations into rapacious, rent-seeking monsters which see nothing beyond their next-quarter stock price. The Comcast failure is a perfect example of this. Comcast's merger was stopped not because of any statistical analysis of negative competitive effects (like we saw in the stat-heavy DOJ report on the AT&T/T-Mobile merger) but because Comcast is seen as having a powerful role in society and delivering lousy service.
That isn't to say that shareholders shouldn't matter at all. They need profits so they continue to invest. But if shareholder value is the only thing that matters, an uncompetitive industry with high barriers to entry will end up with shareholders who are simply sucking money out of everybody else and laughing all the way to the bank.
It's clear what companies need to do if they want these kinds of mergers to go through: shape up, or wait until their industries are more competitive (which would cause them to shape up, anyway.) If Comcast provided world-class service, was seen as a fair dealer, and was broadly loved by its customers, perhaps things would have gone differently. But Comcast execs seem unperturbed, even defensive, about things like its repeated "Worst Company in America" awards from Consumerist. That's not actually the price of doing business, it turns out. This is.
Or, it could just get a Republican elected in 2016, and it'll be a merger-fest for the next four years.