What do Charter Communications’ swallowing of Time Warner Cable, rules outlawing fast-lane internet tollways and a zombie TV show all have in common?
They’re all landmarks in a constantly consolidating, evermore crucial communications landscape being remade regularly by fast-changing technology.
Together, they represent a blending of industries angling for the business of lighting up your TV, your tablet, your phone and the gee-whiz gadget of the near future.
Consumers increasingly pick a single company — in Kansas City the choice is relatively rich — to plug into our evermore digital universe.
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Google Fiber’s debut of its high-speed internet service in Kansas City nearly four years ago has meant there may be no other place where consumers can buy industrial-strength bandwidth so cheaply. AT&T and Consolidated Communications now roughly match Google’s gigabit-speed hookups and prices — at least in select neighborhoods — and Time Warner Cable fattened its bandwidth in response.
And because humans gravitate toward simplicity, we bundle our services whenever we can.
Competition to land the job of full-service portal in the digital age drives ongoing consolidation of the companies that deliver internet and TV service, challenging whether the availability of cheap bandwidth seen in Kansas City will emerge elsewhere.
“Every advance in technology … has been followed by a period of consolidation,” said Larry Gerbrandt, a cable industry analyst and a principal at Media Valuation Partners. “These companies want efficiency. The closer those services work together, the better they work and the more efficient they are. More and more, you’re seeing more things happening under a single umbrella.”
And bigger umbrellas.
Consumer groups, innately distrustful of big business, see consolidation as quashing choice for customers while it smothers innovation and snuffs out the creative makers of the next “Breaking Bad.”
Some fear that Google Fiber’s expansion to markets across the country gets harder as the already-there competitors get larger. They say consolidation might also make it harder for newcomers to offer low-cost, high-speed internet, or for cities to build their own robust networks.
That in turn could stifle the construction of broadband-rich networks needed to supply our seemingly insatiable desire for more digital content.
We’re a people on the go who now expect our media to always come along for the ride. That means we tap into various Wi-Fi and cellular networks to keep us plugged in. Constantly.
Without upgrades in the country’s internet capacity, mind-blowing virtual reality games or the ability to stream a 360-degree view of a Royals game would remain possible but not practical.
That’s partly why federal regulators signaled they would block a Time Warner Cable merger with Comcast before giving a reluctant OK to a Time Warner Cable meld with Charter.
The earlier proposed deal “would have posed an unacceptable risk to competition and innovation, especially given the growing importance of high-speed broadband to online video and innovative new services,” said Federal Communications Commission chairman Tom Wheeler.
With the subsequent Charter-Time Warner Cable deal, wrote two officials of the Writers Guild of America, West, “we can expect a future that looks very much like the past, with the same cable gatekeepers controlling Internet-delivered video.”
While cable companies have seen challenges from the direct sale of programming through Netflix, Hulu and Amazon, critics of the industry argue it will be harder for other players to get in the game when telecoms and cable companies get bigger and more powerful.
Yet cable and telecommunications officials equate large-scale with high-efficiency and the wherewithal to deliver something better to whatever screen you want whenever you want it.
Spectrum, the new company emerging from the latest cable megamerger, will be able to buy more programming for less and deliver niftier technology to its customers, said Charter spokesman Justin Venech.
“This will be beneficial to customers,” he said.
Time Warner Cable customers in the Kansas City market won’t see much difference for a year or so, Venech said. But soon they’ll “see greater value than what they are currently,” he said, notably new pricing tiers with the option to stick with existing plans.
Google Fiber declined an interview about how cable consolidation would affect its ability to compete, thrive in new markets and push bandwidth availability across the country.
In the past, the company has explicitly said part of its goal has been to prod other companies to boost their upload and download speeds. After all, Google’s billions come from advertising to web surfers. The company argues that its entry into Kansas City and some other small markets has created competition that increased bandwidth while keeping prices in check. Analysts largely agree.
Those industry watchers also see ongoing cable mergers in Darwinian terms, assuming that the players either get bigger or go extinct. There’s less consensus over whether that consolidation will deliver more consumer bandwidth and content.
Government regulators, meanwhile, search for ways to ensure that if bigger doesn’t necessarily mean better, that at least it won’t mean worse.
For instance, the FCC insisted that the Charter-Time Warner Cable deal go through only if the operator was banned for seven years from imposing monthly data caps on customers. It also demanded that companies delivering content connect to the systems for free and that its network expand to 2 million more homes while offering discounts to low-income households.
Analysts see an inevitable trend toward one-stop shopping for everything short of face-to-face conversation. After all, the binary computer packets of 1s and 0s are how we make phone calls, exchange texts, post to Instagram or stream “Orange Is the New Black.”
With AT&T, for instance, you can get pay TV, landline phone, internet and cell service. From virtually every other provider, you can get the first three. Google Fiber doesn’t sell cell service, but you can buy it from one of its corporate cousins, Google Fi (which, in turn, patches together coverage with Wi-Fi signals and the networks of T-Mobile, U.S. Cellular and Overland Park-based Sprint).
The promise of an all-encompassing bundle helped drive AT&T’s acquisition of DirecTV last year, analysts said, in the ongoing search to streamline costs through growth. The company said that grew from 6 million pay TV subscribers in 21 states to about 45 million across the U.S. and Latin America.
“With more TV customers, we can provide more opportunities for content for customers at scale,” the company said in a statement.
Every time someone from the company scampers up a utility pole, knuckles down in negotiations with programmers or fields a call from a customer when service craps out, there’s a chance to save money by bundling services.
“It is absolutely economies of scale,” said Glen Friedman, a broadband consultant and president of Ideas & Solutions. “Both in terms of content acquisition and technology, consolidation makes sense.”
Which brings us back to the common thread running through cable mergers, net neutrality and “The Walking Dead.”
In June, Google Fiber TV customers got AMC and its beloved show of zombie gore.
You know who had long offered AMC programming to Kansas City customers? For starters, Time Warner Cable. Know who else has long carried the network? AT&T, which, since acquiring DirecTV, likes to call itself “the premier integrated communications company in the world.”
Know why they could sell AMC to their pay TV customers? Because they’re both huge and AMC badly needed to be on their channel lineup.
Alphabet, Google’s parent company, certainly isn’t tiny. But in the internet-TV-phone hookup business, its Google Fiber division is a relative runt.
That’s why, industry analysts speculate, Google needed years to negotiate a deal with AMC Networks, which owns the AMC, IFC and Sundance TV channels. It was a deal that AMC could afford to walk away from. That small-player position could make it harder for Google Fiber to challenge in other markets and pressure competition there to boost bandwidth.
“As the cable companies get bigger, the programmers get a worse deal. And the savings aren’t passed on to consumers,” said John Bergmayer, a senior staff attorney at Public Knowledge, a liberal group that pushes for net neutrality and more internet access.
“So the programmers get bigger” by grouping in ever-larger networks. Nearly all of your cable channels come from Viacom, Disney, NBCUniversal, CBS and Time Warner (which split with Time Warner Cable in 2009).
Bergmayer and others see a landmark appeals court ruling in June that found in favor of the FCC’s net neutrality rules as a win for consumers and protection against the growing power of cable and telecom firms.
The net neutrality rules, which remain under challenge, insist that all online traffic travel across commercial networks at the same rate. That means internet service companies such as Google Fiber, AT&T and Time Warner Cable can’t set aside fast lanes for traffic for their own special services or for providers willing to pay so their stuff downloads quicker to their customers. Instead, the FCC rules insist that Netflix movies move at the same speed as the video of Grandma’s birthday party.
That, said Bergmayer, could give consumers more power because it allows them to buy “over the top” programming through Netflix or other companies independent of their cable provider.
“Over-the-top is inherently more competitive than cable packaging,” he said, because consumers can more easily pick and choose what they want to buy.
Still, he and others note that such services still rely on buying an internet service.
“Broadband is becoming the most important part of any bundle,” said Washington, D.C., attorney Drew Clark, whose firm, Best Best & Krieger, represents cities wanting to build high-bandwidth networks.
“(Telephone) landlines and television are becoming less important. … And when people aren’t as tied to that video package, it makes it all the more important to be the company selling them internet connections.”
To watch “Game of Thrones,” you don’t necessarily need a cable subscription. HBO sells subscriptions separate from your cable company. But you need the internet.
Some analysts argue that as the companies plugging you into the internet get bigger, options could improve. A company making money on its phone service or internet service can subsidize other offerings in its bundles.
“That makes sense for the firm because they can attract more customers, and it gives the consumer more than they would get at the same price piecemeal,” said Roslyn Layton, a visiting fellow with the conservative American Enterprise Institute.
That push to offer everything raises the stakes to grasp more of the market.
“There’s a merger of the technologies going on,” said Steve Effros, a cable industry analyst. “Whether its a hard line, Wi-Fi, cellular … people don’t care as much. They just want to be connected. And there’s a fight to be that connection.”