First things first: Comcast (Nasdaq: CMCA) and Time Warner Cable (NYSE: TWC) are not rivals. I understand why some of the initial coverage of Comcast's proposed takeover of Time Warner Cable has characterized the companies in that way. They are definitely the two largest U.S. cable operators. But the only thing Comcast and Time Warner Cable directly compete over today is talent. If you work in the cable industry, the pool of prospective employers is about to get smaller.
For everyone else, the market for broadband and cable service won't change much. But it will change in important ways. Comcast is going to get bigger, and it will soon be the gatekeeper to broadband customers and TV viewers in nearly every major market.
That means if video programmers--be they Viacom (Nasdaq: VIA), Disney (NYSE: DIS) or Netflix (Nasdaq: NFLX)--want to reach mass audiences in New York, Los Angeles, Chicago, Philadelphia, Washington or nearly any other major city, they will have to go through Comcast. Arguably, this was already the case. Comcast has been the largest cable operator in the U.S. for years. But adding Time Warner Cable's New York and Los Angeles systems (Nielsen DMAs 1 and 2) solidifies its position as the nation's cable operator.
That's why consumer advocates immediately raised the alarm when the deal was announced. The federal government, through the Department of Justice and the FCC, will review the deal. Expectations seem high that they will ultimately approve it. But the government may leave its own stamp on the deal in the form of conditions of approval, and that's where online video could come into play.
Comcast has already committed to following so-called Net Neutrality rules--the same rules it agreed to abide by when the government approved its takeover of NBCUniversal. But recent reports suggest a showdown looms in Washington over the deal. Consumer groups and trade associations will probably lead the charge against it.
What's less clear is whether individual companies with an interest in online video will follow. Google (Nadaq: GOOG), Netflix and Amazon (Nasdaq: AMZN) are all obvious candidates for making some sort of stink about the transaction. Other companies like Apple (Nadaq: AAPL), Sony and DreamWorks Animation may also find aspects of the transaction not to like.
So far, they're on the sidelines. According to The Wall Street Journal, Netflix "is said to be considering" whether to pursue peering conditions to the merger, but it hasn't decided yet. Other companies have been even quieter on the topic.
That may change soon. On Wednesday, the FCC said it will take another shot at adopting Open Internet rules. A federal appeals court tossed the bulk of the agency's rules in this area last year but affirmed the government's authority to adopt new rules. The agency won't appeal that ruling, opting instead to try to craft new rules that fit within the boundaries set by the court.
I'll be surprised if online video companies demand strict conditions on the merger. It doesn't fit with the industry's Silicon Valley image to overtly ask the government to step in. But the Open Internet proceeding might and should draw out more participation from the online video providers. Video is at the heart of the issues raised by this proceeding and it would be irresponsible of online video companies to ignore this important policy battle. --Josh