Time Warner Cable

Large-scale mergers between media companies be fair more and more commonplace in recent years causing outrage to consumers and labor analysts. The result of these mergers has been a integration of market competitors causing media ownership and sour to be chastenessled by a small-mindedr and less diverse group of firms, the upshot of anti-competitiveness. Most recently, campaign announced its jailed to acquire Time Warner Cable (ETC) which, if approved, exit unite the ii biggest companies in the product line telecasting clearr market (Steelers, 2014).The merger would bound unprecedented big strainman to the newly co-ordinated gild which would over 30 part of the pay telecasting indorsers (Baker, 2014). The fact is that separately, shrink and ETC already stick market power in numerous local geographic markets. beseech is the nations largest provider of pay television with 22 million stomachrs (41 portion of each(prenominal) homes and businesses in the geog raphic aras in which abbreviate operates). ETC is the second largest parentage television company with 1 1. 2 million subscribers.After the merger, most 1 third of all bank line television service television bickerers pull up stakes be nip customers sparking concern astir(predicate) the amount of leverage and influence one(a) company should control (Rhombohedra &038 Camilla, 2014). in that respect are varying opinions about the kind of economic constancy seam system television market operates in. Many implore that contrast television is a inhering monopoly (source). Economics professor, Thomas Delivered, explains, congenital monopolies betide when production technology, such as relatively spunky fixed costs, causes long-run average out total costs to decline as output expands.In such industries, the theory goes, a single reducer leave ultimately be able to produce at lower cost than any devil different producers, thitherby creating a natural monopoly. hi gh(prenominal) bells allow for result if more than one producer supplies the market. (Delivered, 1996, p. 43) Natural monopolies are created when the initial investment in the framework and basis required to enter the market are so high that it discourages early(a) firms from glide slope into the market. Installing cable lines is an example of the high cost of starting a business in the television intentness and a first come, first serve mind-set for natural monopolies.Implementing the cable lines is considered a drop cost and is one reason wherefore thither are such provoke difficulties to entry in the cable industry. With natural monopolies, economies of scale are also in truth significant so that minimum competent scale is not reached until the firm has contract very large in congenator to the total size of the market allowing it to reimburse its investment. The graph below shows the demand cut off of a natural market scrimping (Economics Online, 2014). When price is allowed to be set by the company (P), it results in higher take aims of earnings and manipulation of the market.The companys main concern is in the bottom line and maximizing its profits. The graph also shows a potential price (Pl) that would result if there was some ruler for example, politics imposes a price thug and the company operates at a loss. The cable television industry has also been describe as a patchwork of micro-monopolies (Honda, 2011, p. 1). Since there are a fiddling egress of large companies that compete on the study scale, some argue that the industry cannot be classified as a monopoly or natural monopoly.However, the market body structure, permitted and/or support by the presidency, is set up so that Hess companies do not compete on the local level which results in subatomic scale monopolies and little to no plectrum for the consumers. A 2011 survey by the federal official Communications Commission concluded that 61. 5 percent of customers had be sides one pickaxe of cable provider in their locality (Marten, 2012). The theory is that by local government legislation and result in around non-existent competition on the local level between cable companies has led to a non-competitive oligopoly (Shafer, 2014).Although the cable industry natural monopoly whitethorn have made sense initially, the companies that have been able to benefit from this market structure have exploited the consumer and been able to beam high prices for mediocre products. Many of the government regulations that were initially implemented at the invasion on the industry were controversial firms pay franchise fees enabling them to obtain decisions by means of broadens of building national access studios and regularisation the rates of the politicians Jurisdiction (Shafer, 2014).Notwithstanding the exact classification, there is a prevalent consensus that too hardly a(prenominal) companies in the cable television industry hold too frequently pow er. It is unambiguous when comparing the service that the American public receives in terms of cable television and broadband from these companies to other developed nations that we consumers receive far less. Americans pay more for their personal service that in any other industrialized country except Chile, Mexico and dud (Crawford, 2014).In the United Kingdom, the government forces the cable companies which loom the market to lease their ne iirks to competitors at cost. This enfeebling of one of the major barriers to entry in the system has created competition and brought prices down well to the UK population (Caddis, 2014). There are umpteen negative consequences for consumers when industries operate in noncompetitive or near monopolistic competition. This is oddly true when the industry is related to the media and has a great deal of influence on what the public is seeing and hearing.First, the media market will be too reliant on and loyal to large corporate sponsors. T he industry will develop singularly pore on what it can get from the consumer earlier than concern with public interest. Second, a small number of colossal companies will deliver the interests of their stockholders, usually Americas upper-class. Third, there is a inadequacy of competition in the marketplace which leads to higher prices to the consumer and a lack of innovation in the products offered. These problems are exemplified by both ETC and constringe.In 2012, ETC spent Just 9 percent of its $41 billion revenue on maintaining and upgrading their equipment and networks (Hilt, 2013). ram spent even less, 3. 7 percent of its $118. 3 billion revenue. There is little reason to believe that two companies expenditure such a small function of their revenue on making improvements to their products and serve would change their strategy cost-merger. Consumers are already troubled with the possibility that the merger will be approved. Cable television companies already have cr itically low expiation scores among their clients.ETC and Compact are the two worst offenders in the industry. In 2013, the American Consumer Satisfaction Index gave the two companies the enigmatical distinction of having the lowest rated television and net services in the United States (Ezra, 2014). harmonize to Yogurts Barehanded, Americans do not want ETC and Compact to merge (Including, 2014). The television cable industry is notoriously retrieved by consumers in general and the announcement of the merger has caused the perception of the two companies to drop even further. The following graph shows how consumers are reacting to the $45 billion deal.In umteen cases, customers have no recourse other than cutting the cable cord whole if they do not choose Compact or ETC. There are many non-cable media options for the public to patron however, one major section of the population has no excerption but to subscribe to cable sports fans. This is of particular concern to the Dodge rs and Lasers fans in Los Angles. Currently, ETC spent billions to obtain eradicating right to both massively lucrative sports franchises (Baker, 2014). This allows ETC to extract steep subscriber fees to its non-cable competition.When the negotiations between the companies stall or are incomplete, ETC blacks out the games to those who do not subscribe to ETC. This is especially problematic for sports fans who do not have the choice to become customers of ETC since the company does not even offer services in their region. Additionally, those customers who cut the cable cord are likely only able to access internet through the same company that was already overcharging for their television service. They will be able to encounter Nettling or Hull instead of cable television but will button up have to pay Compact in order to do so.It creates a catch-22 in the industry and very little choice for consumers in terms of who they select as their service provider. The merger between Compact and ETC will have a much greater impact than simply in the cable television industry alone. There will be a blither effect in internet and call off service as well as the other media that these companies own such as NBC Universal and Sportsmen. The merged companys control will be more widespread because of their sundry(a) endures making it all the more potentially harmful to the consumer.