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Northwest Voices

Seattle Times letters to the editor

April 2, 2014 at 6:51 PM

Comcast-Time Warner: Content and device providers hold the cards

The proposed merger between Comcast and Time Warner highlights the vast gap between the world the broadband industry’s critics imagine and the real world in which these companies compete [“Comcast-Time Warner merger would be a calamity,” Editorials, Feb. 18].

Device, app and content companies are capturing most of the benefits created by Internet service providers (ISPs). I recently studied two groups of companies — firms that provide the Internet (from AT&T and Verizon down) and those that use it (like Facebook and Google). The Internet giants earn six to eight times the rate of return of ISPs. ISPs must continually improve their networks to keep pace with rapidly growing bandwidth demands while the device and content providers realize the bulk of the value.

So, while The Seattle Times’ recent editorial describes a post-merger Comcast of “elephantine stature with no restraints,” it’s the content and device providers, not the cable providers, that hold the cards. Content costs drive cable-price increases on consumers because your connection is worthless without them.

Comcast has far faster Internet speeds and more consumer offerings than Time Warner Cable, so their combination would simply amount to a “trade-up” for Time Warner customers.

But more important, the merger would let them compete with Apple, Netflix, Google and the other true “elephantine” companies in the broadband space.

Ev Ehrlich, former undersecretary of commerce in the Clinton administration

Comments | More in Internet, Media | Topics: Apple, Comcast, Google

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