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As citizens of a free nation, we are given many choices on how we can spend our money.
Our government has set in place certain laws that protect us against monopolies in order to preserve a free market, and as early as the Sherman Antitrust Act 1890, our government has sought to keep a fair playing field among companies.
On Thursday, the two largest cable providers, based on market share, announced a merger in which Comcast will be acquiring 100 percent of Time Warner Cable’s stocks for $45.2 billion.
This deal has been questioned by many as potentially creating a monopoly, especially after Comcast completed its acquisition of NBC Universal last year.
Comcast CEO Brian Roberts stated that the deal would be “in the public’s interest” and expressed that it would benefit the shareholders and customers by continuing to provide better services, according to a live interview hosted by CNBC’s David Faber.
Additionally, Roberts stated that Comcast and Time Warner Cable do not compete in any geographical region, so this acquisition will not hinder competition but will only increase the quality of service.
So when does a large company become a monopoly?
Until 2009, the Federal Communications Commission had placed a cap, stating that no company may hold more than 30 percent of cable subscribers.
In a 2009 case in which Comcast was accused of being a monopoly, the U.S. Court of Appeals in the D.C. Circuit ruled in favor of Comcast, saying that the current cap was “arbitrary and capricious.”
Time will only tell if this acquisition is beneficial to the consumer. With no competition, the company may focus on cutting costs to raise profits, neglecting the consumer.
Alternatively, it could turn out that cable coverage and network connections expand to reach more customers and become more reliable.
The past shows us that competition forces companies to increase the quality of products while reducing prices for the consumers, and this acquisition may set a landmark precedent for future large-scale mergers.