The Latest Media Merger Panic

The initial reaction to media mega-mergers is typically a mix of fear and dread with calls for regulatory intervention - and that's certainly true of Comcast's recently announced acquisition of Time Warner Cable. The proposed $45.2 billion combination of these two cable and Internet giants already set off waves of panic.

But if there's one thing previous mega-mergers teach us, it's that the worst fears never materialize. Unforeseen competition, platforms and technologies emerge that disrupt five-year business plans, or the deals just unravel when elusive "synergies" fail to develop.

For example, 14 years ago, predictions of doom surrounded the merger of AOL and Time Warner, which critics like Norman Solomon of media watchdog group Fairness & Accuracy In Reporting described in terms of "servitude," "ministries of propaganda," and "new totalitarianisms." Fearing that AOL might soon monopolize instant messaging and Internet connectivity, regulators strapped the deal with various conditions.

Within just a few years of consummating the marriage, however, the deal ended in abject failure and eventual divorce after shareholders absorbed over $100 billion in losses. New networking technologies and broadband platforms caught AOL off guard, but AOL wasn't the only loser in the merger sweepstakes at the time. In 1999, with acquisitions totaling more than $100 billion, AT&T Broadband was the largest cable operator in the country. Three years later, after hemorrhaging billions, it sold off the cable unit for less than half that. Any high-profile merger could fail, just as AT&T Broadband and AOL-Time Warner did.

While every merging party predicts huge savings from combination, nothing is certain in competitive markets. NBC, which Comcast acquired in a high-profile deal just three years ago, is still struggling. During last year's February sweeps it finished fifth - behind Spanish-language Univision. "The network's prime-time record," according to The New York Times, "is a litany of ratings sorrows." Clearly, Comcast's ostensible ability to leverage its power to boost NBC hasn't helped much here.

Cable company service territories generally don't overlap, so the combination of Comcast and TWC doesn't diminish cable competition, per se. In the short term, however, there will still be fears about the Time Warner Cable deal, especially what the merger means for the broadband landscape. But the competition we should really care about isn't between Comcast and TWC, rather it's between completely different modes of delivering service to consumers.

Today's competition comes from wireless broadband networks owned by telecom giants such as AT&T, Verizon, Sprint and others. According to the Pew Research Internet Project, "As of May 2013, 63 percent of adult cell owners use their phones to go online. 34 percent of cell Internet users go online mostly using their phones, and not using some other device such as a desktop or laptop computer."

For young people in particular, a smartphone is their screen of choice. Further, telecom operators also continue to upgrade their wireline networks with fiber, like Verizon's FiOS and AT&T's U-verse, and with G.fast - a new technology standard that brings gigabit speeds to DSL. In addition, Google's growing presence in this market cannot be overlooked. The Silicon Valley giant is investing in major fiber and wireless broadband systems across the country.

Merger review is an important process, but regulators may stymie competition if they get bogged down in the 20th century's market divisions. The digital convergence means traditional telephone, television and Internet operators are entering each other's markets. Market power in high technology has never been more precarious, particularly as companies like Netflix, Google, and broadcast and cable programmers gain leverage over Internet Service Providers and cable companies by offering popular content. Regulators should embrace these dynamics because - as AOL-Time Warner and AT&T Broadband made clear - markets are unpredictable. Doomsaying should not be a substitute for regulatory humility.