Audio Video News

Speaking with reporters at the recent Western Cable Show, TBS/CNN founder and AOL Time Warner vice president Ted Turner opined that, within a year, consolidation in the cable industry could result in "only two or three" cable companies nationwide.

Whether his comments were the result of prescience or inside information isn't known, but his prediction is coming true. On December 20, Philadelphia-based Comcast Corporation announced that it had emerged victorious in a bidding war for AT&T Corporation's cable operation. The $72 billion acquisition, expected to be approved by federal regulators, would create one of the largest cable empires in the country, with as many as 22 million subscribers. The merger would give only three companies—AT&T Comcast, AOL TimeWarner, and Charter Communications, Inc.—control of 65% of the American cable market.

The prospect may not sit well with executives at Walt Disney Company, who protested vehemently over the AOL–Time Warner merger, fearing that Disney programming would get short shrift in the cable giant's offerings. Some industry observers are predicting that Disney will do the same in regard to the Comcast-AT&T marriage. The company has a long history of opposing every new technological and business development that might threaten the distribution of its products. Longtime video fans may remember that in the early 1980s Disney battled Sony Corporation all the way to the US Supreme Court over the introduction of the VCR into the US market, claiming the device would lead to widespread piracy.

The issue this time around won't be loss of distribution control, but of distribution, period. Despite being a media conglomerate itself—Disney owns ABC Television and the ESPN sports networks—the company has long maintained that consolidation in the cable and satellite industries could interfere with the equitable distribution of its programming. Last year, as federal regulators wrangled with the ramifications of the AOL–Time Warner merger, Disney made an issue of the carriage of its own television stations over Time Warner cable. TW cable responded by pulling Disney programming from its system; the situation escalated to the point where Disney actively opposed the merger.

Similar action may occur with the ongoing discussions of a possible merger of satellite television services EchoStar and DirecTV, thanks to an EchoStar threat to delete Disney fare.

No official word has come forth from Disney regarding the Comcast-AT&T deal, but many in the business expect that it won't be conciliatory when it comes. Comcast has been rumored to have other acquisition plans, perhaps for Disney itself. Comcast president Brian Roberts, like Ted Turner, wants his company to be a content creator, not merely a conduit for it. Acquiring Disney, however, may not be easy. Even with its stock depressed, the company has a market value of more than $40 billion. Roberts, whose family will control 33% of AT&T Comcast stock should the deal be approved, has also made allusions to a sweetheart deal with Microsoft Corporation to gain leverage in the Internet market.

However it plays out, the results may not benefit the average couch potato. As cable companies have consolidated, prices have risen steadily for subscribers, despite frequent protests by consumer advocates. Cable rates have risen 31.9% in the past five years. Satellite services offer the only true competition to cable, a choice not practical for many urban dwellers. "The cable deregulation shows the worst aspects of deregulating an industry when there aren't enough providers to ensure meaningful competition," Gene Kimmelman of the Consumers Union told the Wall Street Journal. "Consumers have paid the price ever since."