November 11, 2015 • 45 mins
How did Comcast become such a huge, powerful company? What happened with the doomed Time Warner deal? And where does the company go next?
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Episode Transcript
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Speaker 1 (00:04):
Get in with technology with tech Stuff from Stuff Tachom.
Hey there, and welcome to tech Stuff. I'm Jonathan Strickland here,
the moved host, and I am bringing to you part
two of the Tromcast story. In part one, you heard
about the founding of the company and the fledgling and
(00:24):
cable industry. Why the cable industry was even a thing
in the first place. It was originally just so people
who could not receive over the air broadcast could still
get some programming, especially as television became a more and
more important means of communication in the dawn of the
digital age, and actually the broadcast age, I should say
precedes the digital age. But we talked about the founding
(00:48):
and the rise of of Brian Roberts, the son of
founder Ralph J. Roberts. I thought i'd pick up specifically
right there. This is going back to nine teen ninety
that's when Ralph J. Roberts named his son, Brian Roberts,
the president of Comcast. Not at the time, Brian was
just thirty years old, and the announcement caused a bit
(01:10):
of a stir because here's this young guy taking over
the role of president of a major cable company. That
had been making some pretty pretty hefty moves in the industry. Now,
Ralph J. Roberts said he would stay on as the
chairman of the company. And while thirty is pretty darn
young to be the president of a rapidly growing company,
(01:32):
Brian had actually been working for Comcast in one way
or another since before he was ten years old. According
to some reports, he was seven when he started working,
which mean they had twenty three years of experience working
for Comcast. I do question exactly what he was doing
at seven years old, but that's the story, at least
in certain Comcast literature. But that would mean that he
(01:53):
was actually one of the more senior employees of Comcast.
He had worked there longer than a lot of other
people there, so at least from the seniority standpoint, it
wasn't that unusual, although some might argue that it was
a little weird for a father to name his son
the president of the company he founded. At any rate,
Brian Roberts definitely dedicated himself to the success of the company,
(02:16):
there was no question about that. Around that time, operations
were continuing to grow in Britain. If you listen to
the last episode, you know that one of the things
Comcast looked at in the eighties was to expand in
in the UK because it was starting to get really
difficult to grow in the United States. They were starting
to reach full penetration of cable service and the few
(02:40):
cable companies that were left were really expensive and limited
in their range, so they looked elsewhere. Well By had
one million customers in the United Kingdom, and Comcast made
additional purchases in the cell phone space as well here
in the United States in order to grow its business
as m CIL was not growing as quickly as the
(03:00):
company had hoped. If you remember, am Cell was the
cable the cell phone service company they purchased in an
effort to get into a new field. But am Cell
kind of suffering the same issues that the cable service
industry was suffering, and that people weren't necessarily flocking to
m Cell to become customers. So instead of trying to
(03:24):
push that business out harder, Comcast looked at acquiring additional
cell phone service companies to bolster its customer base. That way,
so if growth isn't there, you should just go out
and buy it, I guess. In the headquarters for a Comcast,
(03:45):
which were located at one Meridian Plaza in Philadelphia, caught fire.
The building was totally destroyed. The fire took nineteen hours
to extinguish, so Comcast is actually the core headquarters was
shut down for about eight days until they set up
a temporary headquarters four blocks away from their original burnt
(04:07):
out home. Also in Comcast held a bit of a
marketing stunt. They completed a five way international phone call
to demonstrate you don't need a telephone company to make
a call, even a complicated one, and that really prompted
telephone companies to argue that they should be allowed to
enter the cable television business, since the cable television business
(04:31):
was now dominating in the phone business, at least in
cell phone coverage. Also in Comcast bought interest in Store Communications,
the company that had previously sold as Florida Operations to
several years earlier. You remember I mentioned that in the
previous episode. And Comcast became the third largest cable operator
(04:54):
in the United States after it acquired the US cable
operations of McLean Hunter. The company also launched a new
public company in the UK called Comcast UK Cable Partners,
and Comcast made golfers extremely happy when they partnered with
a few other companies and became a founding investor of
the Golf Channel, which, as I recall, was one of
(05:17):
the earliest channels to offer high definition programming. That was
a little bit later, but thank goodness, you could watch
golf and high definition. I find golf very relaxing to watch.
I that's the best thing I can say about it.
I guess I certainly takes skill to play, and I
(05:38):
lack it at any rate. That year, Comcast also entered
a partnership with Sprint UH Telecommunications Incorporated and Cox Communications,
and together they formed the Sprint Telecommunications Venture, which was
later called Sprint Spectrum LP and later still was called
Sprint PCs. So once again Comcast can and used to
(06:00):
try and diversify, expanding into cellular service and wireless service.
Comcast itself would continue to grow mainly through acquisitions. As
we've seen in our previous episode, the company would buy
up other cable operators and mostly expand that way, eliminating
competition along the way, which certainly helped and in Comcast
(06:23):
had more than four point three million customers, mainly through
this tactic of buying up existing companies and converting them
into Comcast, so customers found themselves becoming Comcast customers. Just
through these acquisitions, Comcast bought a sixty three percent share
of the Philadelphia Flyers from a company called Spectacre, which
(06:47):
was created by Flyers founder Ed Snyder. Comcast had created
a new company with this partnership, and it's now called
Comcast Spectacre. The company not only owns and manages the
Flyers and also the Wells Fargo Center in Philadelphia, and
the company has divisions overseeing the venue, ticketing and concessions.
This is not the only sporting franchise that Comcast owns.
(07:10):
There are others in the Philadelphia area as well, which
makes sense. I mean, that's again where Comcast headquarters are.
That's where a couple of the co founders of Comcast
grew up, and uh, they are still very much heavily
involved in the sports area of Philadelphia. Comcast also announced
(07:31):
it would create a new channel in Philadelphia just called
Comcast sports Net, specifically a regional sports channel for the
Philadelphia area. And finally, in nine Comcast got into the
broadband business. The company launched a service called Comcast at Home,
with the at being the at symbol, and they launched
(07:53):
it in Baltimore, Maryland and Sarasota, Florida, kind of as
a sort of prototype. They're there ted sting grounds. They
wanted to see if this business would have any legs,
and the trial run offered a cable modem service to customers,
and as it turned out, and ended up being a
fruitful business which Comcast quickly began to adopt and roll
(08:15):
out in other areas. In nineteen seven, another major company
took interest in Comcast, and that major company is Microsoft.
So Bill Gates's company invested one billion dollars in Comcast
in nine The purpose of that investment was to help
(08:35):
Comcast deploy high speed data and video services through its infrastructure.
So Comcast was starting to look at ways of creating
a fiber optic coaxial sort of system, replacing lots of
copper lines with fiber optic lines to deliver much faster service.
And it was through this investment that Comcast was able
to afford that infrastructure without affecting its operating funds too much.
(09:00):
And in this way, this was a step to move
towards the world we live in now, in which people
in the United States can get high speed Internet streaming
to different devices in the home and not just PCs.
In fact, in the press release that Microsoft VP of
Corporate Development, Greg Maffei had taken part in, MAFE had said,
like Comcast, Microsoft has always believed that increasing network bandwidth
(09:25):
is a key to the eventual convergence of the Internet,
the PC, and the television. So even back then, there
was a look at we're using these pipes in the
parlance of the web. We're using these pipes to deliver
TV and to deliver broadband. Broadband, by the way, is
being delivered over one of those six mega hurts channels
(09:48):
that I talked about in the first episode that cable
can you cable can hold hundreds of mega hurts, So
broadband internet connection is just six mega hurts of a cable.
That's plenty of base available for that. So Microsoft was saying,
we've got this delivery system that's doing both television and Internet.
(10:08):
It's only a matter of time before we start to
see these different technologies start to converge into a single technology.
And as it turns out, that's very much true. It
took a little bit longer than what they were expecting,
I imagine, but that's what we're seeing now. A lot
of people either have smart televisions or they have their
TVs hooked up to one or more set top devices
(10:32):
that allows them to view Internet content on their televisions.
And there are some who argue that eventually that will
be the primary and perhaps only way that will get
content on our TVs. That we won't receive programming from
a cable service directly. It will be through an Internet service.
(10:52):
And that's quite possible. Well, more and more people are
opting for that, as we'll say later in the episode,
and any rate, by this time, cable television wasn't even
the largest division within Comcast. Cable TV was taking a
back seat. Uh So, Comcast had interest in content and
cellular services, and there were growing concerns that the company
(11:15):
in charge of delivering content was also in the business
of creating content, and those concerns would grow over the
following years. This is where you started seeing people make
noise about net neutrality. How can a delivery system remain
unbiased when it also was creating content being delivered on
(11:37):
that system. In other words, if you are a company
that creates content and you're also a company that allows
content to be delivered to customers. How can anyone be
certain that you don't give your own content preferential treatment.
Maybe you slow down other types of content across your network,
maybe you don't allow it to even broadcast on your network.
(12:01):
Maybe you tell your customers, hey, the stuff we have
is the best stuff out there. You don't need anything else.
These were big concerns, and while Comcast was largely playing nice, uh,
it was a it was a worry that perhaps in
the future that would not be the case. And so
we really started getting into the conversations about net neutrality
(12:21):
around this time. I mean they had been around before that,
but this is when it really started to take more
of a spotlight, and that would increase over the years.
Skipping ahead to two thousand one, Comcast bought the Outdoor
Life Network and expanded its investment in the Golf Channel,
which ended up giving Comcast controlling interest in that network,
(12:44):
and it also announced it would purchase a T and
T broadband for a cool seventy two billion dollars. At
that time, a T and T broadband was the largest
cable TV provider in the United States, so Comcast both
eliminate some competition and grows its own cable television services
by buying another service, uh, which no big surprise again
(13:09):
if you're looking back along the history of Comcast, that
was the tactic from day one. Really. In two thousand two,
Comcast unveiled plans for HD television and video on demand services. Again,
the Golf Channel was one of those early HD channels.
As I recall, this was one of those things where
(13:31):
the United States was definitely trailing behind Japan by several years.
But HD television's back in the early two thousand's were
really expensive. I don't know if you guys remember, because
these days, you know, you can go out and buy
an HD television for a relatively low cost, still several
hundred dollars. But you know, when you start looking at
things like four K televisions, they are relatively inexpensive. HD ones,
(13:54):
that is, HD are relatively inexpensive compared to four K.
But just like four K. Now, back then, there were
very few channels that actually offered up h D content.
So you can get an HD television, but there wasn't
much to watch on it at the time. The Golf
Channel was one of those things, so if you really
(14:14):
like golf, you could get a really good, look at it. Uh. Also,
Brian Roberts assumed the role of CEO of the company,
becoming president and CEO in two thousand two. Not long
after that, he would actually also assume the role of chairman,
so became President, CEO and chairman of Comcast. Again, keep
in mind this is the son of the founder, Ralph J. Roberts.
(14:38):
In two thousand four, Comcast made an unsuccessful bid for
a hostile takeover for the Walt Disney Company. Now that
might sound pretty weird, because today Disney is bigger than ever.
Disney owns so much. Disney bought Marvel, Disney bought the
Star Wars franchise. The movie is are doing really well.
(15:01):
But in the early two thousand's Disney was in turmoil.
There were leadership issues. People were disenchanted with Michael Eisner
as the chairman of Walt Disney. The company itself was
not doing as well in the market as it had
been previously. Some people were beginning to feel that Disney
itself had the company had lost its way, and people
(15:23):
like Roy Disney, who had been on the board of directors,
seemed to be in dismay at the state of the company.
So the bid was somewhere in the fifty four billion
dollar range, and it was based on stock price. It
was going to be a stock exchange deal if this
were to actually go through. But it was a hostile
(15:46):
takeover and does that mean well. Originally, Comcast was sending
messages to Disney chairman Michael Eisner, but Eisner refused to
discuss a deal. Then Comcast went over Eisner's head and
sent a letter of intent to directly to the board
of directors, saying, we want to purchase your company. Here
are the here's the deal where we want to do
(16:07):
it in stock. The stock is currently valued at fifty
four billion dollars. Now Disney itself was being valued somewhere
in the sixty six billion dollar range, but again it
was kind of struggling at the time. So comcast hope
was that the board of directors would come and talk
to Comcast and they would be able to work this
(16:27):
out and that uh, you know, maybe the word board
of directors thought this would be the best approach in
order to make money for shareholders, for Disney shareholders, and
the attempt was huge news because the number of properties
that would have been involved were significant. Disney at that
Time was already the parent company of ESPN and ABC,
(16:50):
so those would fall under the role of Comcast. Then
Comcast the delivery system would also be in control of
ABC and ESPN, and people were worried that this would
mean Comcast would be able to leverage that over other providers.
So let's say Time Warner Cable and it comes up
and Comcast says, hey, I own ESPN, And if you
(17:11):
want ESPN to run on your cable networks to your
cable customers, you're gonna have to pay X amount to
have access to that content. Uh. You know, it would
have been a very powerful leveraging tool, but there was
no need to worry about that. The deal actually fell
through when shareholders for both Disney and Comcast were resisting
(17:32):
the move for different reasons. Comcasts stock price fell eleven
percent over the time from when they announced the bid
to the time when they decided to walk away. Now,
because the stock price fell eleven percent, and because their
bid was about an exchange of stock, the value of
(17:55):
the stock they were bidding fell, I mean, it wasn't
as valuable as it used to be. This would be
as if I went up to you and said, hey,
I want to buy your shoes for ten bucks, and
you say, well, I'll think about it, and the next
day I come up to you with a ten dollar bill.
But in that time, the value of ten dollars has decreased,
(18:15):
meaning the buying power of that ten dollars is less.
It's similar, except now we're talking about actual stock, not
the value of currency. But the point being that what
used to be worth fifty four billion dollars was now
worth even less than that, so that made it a
much less attractive deal for the Disney board of directors. Meanwhile,
(18:37):
the board of the Board of Directors are also getting
the message from their shareholders, we don't want you to
sell this company to Comcast. And since both parties were
receiving this kind of resistance, Comcast announced it would drop
the bid just a few months after it had first
announced its intention, and uh and Roberts had said he
(18:57):
was very disappointed in the Disney Board of Directors for
not coming in and communicating with him. He thought that
it was the best deal for both companies. Meanwhile, the
Board of Directors didn't UH didn't really dignify that particular
aunt h statement with a response. Also in two thousand four,
(19:18):
Comcast purchased a little company called tech TV, and who boy,
is this a heck of a story. So Comcast carried
a company a channel called G four which catered to
video game fans. It was mostly content related to video
games in some way, including things like review shows, shows
(19:42):
that just did clips of video games, uh, game shows
that were video game related, lots of stuff like that.
Tech TV, on the other hand, was a more general
technology based channel where they had everything from product reviews
to h question and answer like people could call in
and ask experts how to do certain things with their computers,
(20:04):
like how to install motherboards, that kind of stuff like
actual technical help um as well as shows that were
things like like they had their own video game review shows.
So there were there were competing shows on the two channels.
So Comcast purchases tech TV in two thousand four and
then merges it with G four, creating the G four
(20:25):
tech TV channel, and then kind of letting the two
slates of of programming battle it out to see which
ones would remain and which ones they would get rid of.
And I've got a lot of friends who worked either
for G four or tech TV, and I hope to
do an episode in the future. I've already recorded some
(20:48):
interviews about this. Actually, I hope to do an episode
in the future about tech TV and G four and
the merging of the two, and to include interview segments
that I have gathered over time. So that's something I
want to do in the future, and it will definitely
be a long episode, probably a multi partner because it
was so complicated. It was a venture that people when
(21:12):
when these channels first started, they were really excited about
them because this was Uh, these were industries that were
all getting more and more important over time. People were
getting more interested in technology and computers and video games.
But when you get these big corporations like Comcast involved,
sometimes the ideas that people had when they first founded
(21:32):
the channel end up getting changed or lost or or discarded,
and uh, it creates a very emotional kind of story.
So keep in tune with tech stuff. Let me know
if that sounds interesting to you, because I do hope
to do it in the future. I still have to
do several more interviews in order to get kind of
(21:52):
a full story of it moving on with Comcast. By
the way, G four tech TV doesn't exist anymore. In
case you were wondering if if you weren't aware, G
four tech TV eventually went away and I believe became
the Spike Network. If I'm not mistaken, or it's no,
(22:14):
it's Esquire, I'm sorry, it's the Square Network. I believe
um Esquire would eventually take over for G four tech TV,
and so that channel no longer exists, and uh, a
lot of good people worked for that channel over time. Anyway,
two thousand five, Comcast joins a group of investors, which
included Sony Corporation of America, to purchase a twenty steak
(22:39):
in Metro Goldwyn Meyer better known as MGM Studios, so
the entertainment studios that produced lots of movies, including the
James Bond franchise. It turned out to be a pretty
tough investment, so five years later, in two thousand ten,
MGM would file for Chapter eleven bankruptcy and they would
(23:01):
emerge from bankruptcy after a little more than a month
after entering bankruptcy with the creditors MGMs creditors taking control
of the company. So that was a pretty rough time.
I mean, it was an investment, it was a gamble,
and unfortunately for the investors, the market for DVDs was
really falling out by that point, and that ended up
(23:24):
taking a big hit. MGM took a big hit from that.
That same year two five, that is, Comcast unveiled at
digital phone service and plans to purchase internet businesses, further
getting involved in both the delivery and production of cable
content both on TV and on the Internet. So if
you have ever looked at Comcast ex Affinity, which is
(23:46):
the brand for their digital service to homes, you often
will see that it can be bundled where you get
phone service, cable television, and internet broadband all bundled together. That's,
you know it calculated approach that Comcasts made back in
this time. In two thousand and seven, that's when Comcast
(24:09):
actually acquired Fandango, the movie ticket service, the one that
kind of precipitated this whole discussion about Comcast in the
first place, because if you recall from episode one of
this series, I mentioned that I started looking into this
after I had problems buying Star Wars tickets because the
(24:30):
Fandango service had been overwhelmed by demand and it pretty
much collapsed. By the way, in case you were worried,
I did eventually get Star Wars tickets for opening night.
I just had to wait till the next morning. It's
just I am not a good Jedi. I don't have patience.
So it was a tough, tough twenty four hours or
so at any rate. Comcast purchased Fandango back in two
(24:53):
thousand and seven, and uh, Fandango is one of those
services that I personally find a little frustrating. I much
prefer when movie theaters have their own, uh theater specific
services to to sell tickets to customers, because you don't
(25:16):
have to worry if there's a huge amount of demand
for the overall film, typically speaking, because it's distributed amongst
all those theaters. It's when you have a centralized service
where all that demand is going to a single collection
of servers where you start running into these problems. And
granted the Star Wars issue was a special case, it's
(25:40):
not like that's going to happen with every movie. For example,
Jim and the Holograms. Don't think that one's going to
collapse the system, even though it's truly outrageous, truly truly
truly outrageous. So two thousand seven Fendango acquisition happens, um
I could go on about the case will service companies
(26:01):
that Comcast acquired over the next few years, but by
now you guys are all familiar with that story. It's
the same story over and over. It's just the names
and the prices change from case to case. In an
effort to grow the company and increase the number of customers,
Comcast kept acquiring other businesses, including ones like Patriot Media,
(26:22):
Susquehanna Communications, and others. UH, and Comcast and Time Warner
together would split up the assets of another company called
Adelphia Communications. Adelphia had gone bankrupt and so as part
of the UH, in order to settle the debt that
Adelphia had acquired, they started selling off assets, and Comcast
(26:45):
and Time Warner we're both allowed to buy up some
of those, which not great news necessarily if you want
more competition UH. Since these were the two big players
in the United States at that same time, Comcast continued
to launch channels fear Net and Exercise TV, and so
they were controlling the distribution and content in an effort
(27:07):
to set itself apart from competing cable and satellite services. Also,
the Walt Disney Company, while it was not open to
a hostile takeover bid, it did sell off its thirty
nine share in the E Networks to Comcast, so Comcast
was able to pick up a significant share in those
(27:28):
those uh, those companies, those those networks, they didn't have
controlling interest. But is nothing this sneeze at now. That
doesn't even cover the continued interest in wireless broadband. Comcast
was one of the companies that invested in clear Wire Corporation,
for example, so Comcast was still very much interested in
expanding in that industry as well. And the next really big,
(27:52):
big piece of news dates to two thousand nine, and
that's when it was announced that g E had agreed
to sell controlling eight in NBC Universal to Comcast. Now,
the approval for this deal would take quite some time.
Congress scrutinized this deal and it wasn't until two thousand
eleven that Congress approved the deal, and the acquisition itself
(28:17):
wouldn't be complete until two thousand thirteen. So from two
thousand nine to two thousand thirteen this deal was taking place.
That's how big a deal we're talking about here. And
the approval from Congress was actually conditional. It wasn't yeah,
go ahead and you can buy them. And they actually
had some some specific conditions that the companies had to
adhere to. Comcast had to make assurances that it wouldn't
(28:40):
prevent NBC programming from airing on competing broadcast services. They
couldn't just say, well, now anything that's on NBC can
only air on Comcast, or it can air on other stations,
but only if you pay an outrageous premium for the broadcast.
That was part of the agreement that Comcast would not
make those kind of moves. Um. It also sparked another
(29:03):
round of discussions about net neutrality, making certain delivery services
aren't so wrapped up in programming that they began to
tinker with accessibility. And uh, this is still a big
deal today. I mean, this is a giant thing about
about these distribution companies getting involved in content on this level,
and as they own more and more of it, there's
(29:24):
a greater concern that they will cause real issues for
customers that hurts the customer in the long run. It's
a great business decision, you know, from the business side,
you can't argue it because it's gonna make tons of
money for shareholders, But as a customer, as the person
who comes home and wants to watch television, it's a
(29:46):
negative experience, or it can be. It can certainly lead
to one. So that's why these conditions were built in
to the agreement. And then in two thousand and fourteen,
skipping ahead to that, Comcast made a move to acquire
its competitor, Time Warner Cable and this is when the
Internet totally lost its mind. For very good reason. This action,
(30:09):
more than any other, brought that net neutrality argument into
the spotlight. Comcast was essentially saying that they wanted to
buy its chief competitor, which would drastically reduce options for
customers in numerous markets, which Comcast actually argued was a
benefit to the customer if you can believe it. Now,
(30:29):
keep in mind again, and most markets, customers don't have
that much choice. They might have a choice of one
cable provider and maybe one or two satellite providers, which
is getting fewer and fewer anyway because of other acquisitions
and consolidations. But that's it. They don't necessarily, you know,
it's it's it's rare when you're in an area where
you're like, well, I can get either Time Warner or
(30:51):
I can get Comcast. It may be that you have
either Comcast or a mobile wireless provider or satellite, and
that's it. You don't have options between cable companies, in
other words, and that is problematic. And Comcast was arguing
that by buying Time Warner it would actually be an
(31:12):
improvement to customers by streamlining everything. But when asked about it,
when when people said, well, does this mean that, since
there be no competition, you could lower the customer bill,
they said no, not necessarily, so, in other words, customers
would not see any benefit from this. The the benefits
of competition are that companies will start to offer better
(31:34):
prices and better options for customers in an effort to
win more customers. But when you don't have competition, there's
no reason to do that. In fact, you want to
have higher prices because you can't go anywhere else for
those services. That's the reason why monopolies are frowned upon
and and normally either prevented or broken up. Although, as
(31:56):
we talked about in our A T and T podcast,
even the efforts to break up monopolies don't last forever.
Often these companies will coalesce back together kind of like
kind of like a planet getting broken up into space,
and then the gravity's crushes all the pieces back together,
so you have a planet again. It's almost the same thing. Uh. Anyway,
(32:17):
I don't want to get off on a total rant there,
but if you listen to episodes about A T and
T about net neutrality, those sort of discussions go into
greater detail about this sort of stuff. Anyway. Uh, there
are only a few markets that really allow you to
have some choice in the United States, and that's a
real problem. And people opposed to the Time Warner deal
(32:39):
argued that if it went through, there'd be a true
monopoly in cable service in the United States. It would
belong to Comcast. Now, there were also numerous examples of
regions that were passing laws restricting public broadband initiatives. In
other words, lobbyists for the cable industry we're working with
(33:02):
politicians to make it difficult or even illegal for a
government to offer broadband service as a utility. And there
are certain areas in the United States where this was
a big deal, specifically in places like Chattanooga. If Joe
McCormick was in here, he's from Chattanooga, he could tell
you about the crazy fast Internet service that people in
(33:22):
Chattanooga can get through municipal WiFi, and cable companies really
battle against that. They say it's unfair, which blows my mind,
but that would be an entirely different episode for me
to go into all of those details. At any rate,
municipal broadband service became a battleground which continues to this day.
(33:44):
The Federal Communications Commission has ruled that states are allowed
to offer up broadband services, but cable interests are still
fighting that decision and appealing it and arguing that the
FCC doesn't really have the authority to make that statement
in the first place, just as they resist other competitors
like Google Fiber entering their turf. So what cable companies
(34:07):
have done is they've divided up the United States into
into neighborhoods that they can effectively control because they're the
only party in town, and then they do their best
to keep everybody else out. And again, this makes perfect
sense from a business perspective. You don't want competition to
come in and shake things up. But for customers it's
(34:29):
not such a great story. So it gets pretty ugly
and a lot of people, especially on my side of this,
have a lot of harsh things to say, and I
will again, try to avoid editorializing anymore than I already have. Uh,
and it's it's entirely possible that I have blinders on here.
(34:50):
It's not like I think that the other companies are
necessarily altruistic, but I always like to see more competition
rather than less. Anyway, back to Time Warner, That's what
started this whole digression in the first place was the
proposal for Comcast to acquire Time Warner. The deal would
involve around forty five billion dollars in stock, and Congress
(35:13):
began to scrutinize the deal and a lot of advocacy
groups were calling for the deal to just be outright rejected.
Comcast agreed to divest itself of nearly four million subscribers,
essentially handing them over to Charter Communications, and this was
supposed to be a sign of good faith, saying Comcast
had no plan on taking over the entire industry. Charter
(35:34):
Communications would still be there and they had three point
nine million more subscribers than they had before because Comcast
was giving them up. So see, there's competition. There's still
Charter Communications. It's not like by buying Time Warner all
cable would be Comcast for now, never mind the fact
that once again there's not true competition in most markets anyway,
(36:00):
While the deal was being considered, a T and T
also announced its plans to acquire Direct TV for forty
nine billion dollars, which added fuel to the fire of
people worried about net neutrality and about media consolidation. There
were tons of people now looking at these two major
deals saying, we really need to think about this because
(36:24):
if we go down this pathway, customers could be really
hurt by the lack of choice Further down the road.
In April two fifteen, Comcast and Time Warner announced that
they were dropping the deal after numerous challenges and delays
were brought up against it, and it was also rumored
that the Department of Justice in the United States was
(36:46):
leaning towards denying the deal in the first place, so
walking away might have also been an attempt to make
it seem as though the two companies had arrived at
this decision themselves, rather than it being forced upon them
by another party. The ongoing and just for Comcast today
include the FCC wanting to reclassify broad band as a
title to utility, which Comcast and other cable companies are challenging.
(37:10):
And also this is really troubling for cable companies, especially
well specifically cable TV companies. There's a flagging interest in
cable television. This is not a big surprise for most
of my listeners. I'm sure I bet there are a
lot of you out there who are cable chord cutters.
You know, you've you've cut the chord for cable TV,
(37:30):
and you get your entertainment through the Internet, but not
through television. You might feed the Internet to your TV,
but you're not getting it through cable TV. I'm sure
there are a lot of you out there who are
doing that right now. And I bet there's some of
you out there who are fall into the category that
is now being called cord never's. Cord never's are people
(37:53):
who have never subscribed to cable television. So we're talking
about young adults who have never taken it upon themselves
to get cable TV. They're not interested. It's not how
they consume entertainment. They get everything they want through the
Internet or through over the air broadcast, but they've never
seen the value of subscribing to a cable television service.
(38:14):
We're seeing both of those populations grow over time. Now
that means that cable television providers are experiencing a crunch.
They're losing customers who are cutting the cord, and they're
not gaining new customers fast enough because more and more
people are choosing not to ever subscribe to cable TV
in the first place. So you're getting a narrowing band
(38:35):
of customers for cable television, which is really created an
error of desperation in that industry. And it means that
you're getting some some pretty hard moves in that that industry,
And it could ultimately mean that in the future, our
television content will primarily come through the Internet, and cable
(38:57):
TV as a thing will no longer exist. The industry
itself will cease, and we'll have a totally different model
for delivering television and creating television. That's a possibility, it's
still going to take some time for that to happen.
I mean, it's not like cable tv is in so
much trouble that it could crumble at any second. It's
(39:18):
still a huge, multibillion dollar industry. It's just a multibillion
dollar industry that already is seeing loss of customers on
either side of it people leaving and new people not
coming in, so it'll be really interesting to see where
that goes over the next I'd say decade decade um.
(39:40):
I think we're gonna see more and more people turn
to the Internet. We're gonna see more services like Netflix, Hulu,
Amazon offering up their own original content that you can
only get through those services. I know that Disney is
looking at the possibility of launching its own streaming services
as well, So it may be that in the future,
(40:03):
instead of subscribing to a cable company and then picking
a package that gives you certain channels, you may have
to pick between different streaming video services. In fact, you
already do for certain things, like you might not be
an Amazon Prime member, which means you don't get certain
Amazon shows, or you might not be a Netflix subscriber,
(40:27):
which means you don't get certain Netflix shows or Hulu.
All of these have original content and in order to
access it, you have to subscribe to the to the services,
generally speaking, So maybe in the future we have more
and more of those, which puts the burden still on
the customer. You have to decide what you're willing to
pay for and what you don't you feel is not
(40:49):
worth the money. You just you just don't see it,
but it's bad news for cable TV providers. Comcasts, however,
of course, is in the position where it's not a
cable TV provider, it's a content provider and its Internet
broadband provider, so it has some other businesses that it
(41:10):
wants to protect, and it may be that in the
next few years we see Comcast double down on Internet
content and broadband delivery. We'll probably also see Comcast continue
to fight competition in those spaces, specifically things like the
entrance of Google Fiber into different regions. So that's what
(41:31):
I think we're going to see in the future for Comcast.
It's gonna be more of a focus on broadband UM
and and Internet content, and we'll price see some pretty
tough battles for municipal WiFi, for municipal broadband, for um
stuff like Google Fiber to be allowed to come into
(41:53):
neighborhoods and personally encouraged by the direction I've seen over
the last year or two where it looks like the
general consensus is that competition is a good thing. I
don't even hate Comcast specifically, I I I have very
(42:17):
strong opinions because of my own personal experience with this company.
But that's my own personal experience and it's not a
universal experience, and I would never suggest that my experience
is the same that everyone else has had. But I
love to see competition because it means that customers have choice,
and I would much prefer to have choice than to
(42:39):
be forced into using a specific provider because there is
no other option, because that means that I can't weigh
my options and make a decision. I have no deciding power.
Um By creating that sort of competition, I can make
those decisions. And maybe I stay with Comcast. Maybe I
(43:00):
decided that's the best way for UH for me to
get the access I need, or maybe I switched to
a competitor like Google Fiber, which is rolling out service
in Atlanta as I record this UM, and it will
probably take another couple of years before that's complete. But
the fact is that I think the more choice you have,
(43:21):
the better better off you are as a consumer. Up
to a point. Obviously, if you have five hundred choices,
then you have another problem ahead of you, which is
how do you decide among five hundred candidates which one
is the best. But for something like cable where you
may have one or two options, it makes it a
(43:42):
lot easier, especially if you have to. I mean, if
you have one, there's no decision to make, but you
have to, you can at least weigh them against each
other and make an informed decision that way. And I
personally am looking forward to a world where we do
have that kind of choice and aren't forced into it.
But I'm curious what you guys think. Do you guys?
(44:03):
First of all, do you live in a place where
you have lots of options? Because there are a few.
There are some regions that do have options when it
comes to cable providers. I just don't happen to live
in one of them. Or are you frustrated by this?
Is this something that you feel has gone unaddressed too long,
or is it totally cool? I'm curious to hear what
(44:26):
your thoughts are. Right to me let me know. And
also if you have suggestions for future topics of future episodes,
or maybe someone I should interview or someone I should
have on as a guest host, right to me let
me know your thoughts. The email address is text stuff
at how stuff works dot com, or you can drop
(44:48):
me a line on Facebook, Twitter, or Tumbler. At all.
Three of those use the handle text stuff h SW.
That message will get to me, and I'll talk to
you again. Really. See for more on this and thousands
of other topics because it has stuff works dot com
Get in with technology with tech Stuff from Stuff Tachom.
Hey there, and welcome to tech Stuff. I'm Jonathan Strickland here,
the moved host, and I am bringing to you part
two of the Tromcast story. In part one, you heard
about the founding of the company and the fledgling and
(00:24):
cable industry. Why the cable industry was even a thing
in the first place. It was originally just so people
who could not receive over the air broadcast could still
get some programming, especially as television became a more and
more important means of communication in the dawn of the
digital age, and actually the broadcast age, I should say
precedes the digital age. But we talked about the founding
(00:48):
and the rise of of Brian Roberts, the son of
founder Ralph J. Roberts. I thought i'd pick up specifically
right there. This is going back to nine teen ninety
that's when Ralph J. Roberts named his son, Brian Roberts,
the president of Comcast. Not at the time, Brian was
just thirty years old, and the announcement caused a bit
(01:10):
of a stir because here's this young guy taking over
the role of president of a major cable company. That
had been making some pretty pretty hefty moves in the industry. Now,
Ralph J. Roberts said he would stay on as the
chairman of the company. And while thirty is pretty darn
young to be the president of a rapidly growing company,
(01:32):
Brian had actually been working for Comcast in one way
or another since before he was ten years old. According
to some reports, he was seven when he started working,
which mean they had twenty three years of experience working
for Comcast. I do question exactly what he was doing
at seven years old, but that's the story, at least
in certain Comcast literature. But that would mean that he
(01:53):
was actually one of the more senior employees of Comcast.
He had worked there longer than a lot of other
people there, so at least from the seniority standpoint, it
wasn't that unusual, although some might argue that it was
a little weird for a father to name his son
the president of the company he founded. At any rate,
Brian Roberts definitely dedicated himself to the success of the company,
(02:16):
there was no question about that. Around that time, operations
were continuing to grow in Britain. If you listen to
the last episode, you know that one of the things
Comcast looked at in the eighties was to expand in
in the UK because it was starting to get really
difficult to grow in the United States. They were starting
to reach full penetration of cable service and the few
(02:40):
cable companies that were left were really expensive and limited
in their range, so they looked elsewhere. Well By had
one million customers in the United Kingdom, and Comcast made
additional purchases in the cell phone space as well here
in the United States in order to grow its business
as m CIL was not growing as quickly as the
(03:00):
company had hoped. If you remember, am Cell was the
cable the cell phone service company they purchased in an
effort to get into a new field. But am Cell
kind of suffering the same issues that the cable service
industry was suffering, and that people weren't necessarily flocking to
m Cell to become customers. So instead of trying to
(03:24):
push that business out harder, Comcast looked at acquiring additional
cell phone service companies to bolster its customer base. That way,
so if growth isn't there, you should just go out
and buy it, I guess. In the headquarters for a Comcast,
(03:45):
which were located at one Meridian Plaza in Philadelphia, caught fire.
The building was totally destroyed. The fire took nineteen hours
to extinguish, so Comcast is actually the core headquarters was
shut down for about eight days until they set up
a temporary headquarters four blocks away from their original burnt
(04:07):
out home. Also in Comcast held a bit of a
marketing stunt. They completed a five way international phone call
to demonstrate you don't need a telephone company to make
a call, even a complicated one, and that really prompted
telephone companies to argue that they should be allowed to
enter the cable television business, since the cable television business
(04:31):
was now dominating in the phone business, at least in
cell phone coverage. Also in Comcast bought interest in Store Communications,
the company that had previously sold as Florida Operations to
several years earlier. You remember I mentioned that in the
previous episode. And Comcast became the third largest cable operator
(04:54):
in the United States after it acquired the US cable
operations of McLean Hunter. The company also launched a new
public company in the UK called Comcast UK Cable Partners,
and Comcast made golfers extremely happy when they partnered with
a few other companies and became a founding investor of
the Golf Channel, which, as I recall, was one of
(05:17):
the earliest channels to offer high definition programming. That was
a little bit later, but thank goodness, you could watch
golf and high definition. I find golf very relaxing to watch.
I that's the best thing I can say about it.
I guess I certainly takes skill to play, and I
(05:38):
lack it at any rate. That year, Comcast also entered
a partnership with Sprint UH Telecommunications Incorporated and Cox Communications,
and together they formed the Sprint Telecommunications Venture, which was
later called Sprint Spectrum LP and later still was called
Sprint PCs. So once again Comcast can and used to
(06:00):
try and diversify, expanding into cellular service and wireless service.
Comcast itself would continue to grow mainly through acquisitions. As
we've seen in our previous episode, the company would buy
up other cable operators and mostly expand that way, eliminating
competition along the way, which certainly helped and in Comcast
(06:23):
had more than four point three million customers, mainly through
this tactic of buying up existing companies and converting them
into Comcast, so customers found themselves becoming Comcast customers. Just
through these acquisitions, Comcast bought a sixty three percent share
of the Philadelphia Flyers from a company called Spectacre, which
(06:47):
was created by Flyers founder Ed Snyder. Comcast had created
a new company with this partnership, and it's now called
Comcast Spectacre. The company not only owns and manages the
Flyers and also the Wells Fargo Center in Philadelphia, and
the company has divisions overseeing the venue, ticketing and concessions.
This is not the only sporting franchise that Comcast owns.
(07:10):
There are others in the Philadelphia area as well, which
makes sense. I mean, that's again where Comcast headquarters are.
That's where a couple of the co founders of Comcast
grew up, and uh, they are still very much heavily
involved in the sports area of Philadelphia. Comcast also announced
(07:31):
it would create a new channel in Philadelphia just called
Comcast sports Net, specifically a regional sports channel for the
Philadelphia area. And finally, in nine Comcast got into the
broadband business. The company launched a service called Comcast at Home,
with the at being the at symbol, and they launched
(07:53):
it in Baltimore, Maryland and Sarasota, Florida, kind of as
a sort of prototype. They're there ted sting grounds. They
wanted to see if this business would have any legs,
and the trial run offered a cable modem service to customers,
and as it turned out, and ended up being a
fruitful business which Comcast quickly began to adopt and roll
(08:15):
out in other areas. In nineteen seven, another major company
took interest in Comcast, and that major company is Microsoft.
So Bill Gates's company invested one billion dollars in Comcast
in nine The purpose of that investment was to help
(08:35):
Comcast deploy high speed data and video services through its infrastructure.
So Comcast was starting to look at ways of creating
a fiber optic coaxial sort of system, replacing lots of
copper lines with fiber optic lines to deliver much faster service.
And it was through this investment that Comcast was able
to afford that infrastructure without affecting its operating funds too much.
(09:00):
And in this way, this was a step to move
towards the world we live in now, in which people
in the United States can get high speed Internet streaming
to different devices in the home and not just PCs.
In fact, in the press release that Microsoft VP of
Corporate Development, Greg Maffei had taken part in, MAFE had said,
like Comcast, Microsoft has always believed that increasing network bandwidth
(09:25):
is a key to the eventual convergence of the Internet,
the PC, and the television. So even back then, there
was a look at we're using these pipes in the
parlance of the web. We're using these pipes to deliver
TV and to deliver broadband. Broadband, by the way, is
being delivered over one of those six mega hurts channels
(09:48):
that I talked about in the first episode that cable
can you cable can hold hundreds of mega hurts, So
broadband internet connection is just six mega hurts of a cable.
That's plenty of base available for that. So Microsoft was saying,
we've got this delivery system that's doing both television and Internet.
(10:08):
It's only a matter of time before we start to
see these different technologies start to converge into a single technology.
And as it turns out, that's very much true. It
took a little bit longer than what they were expecting,
I imagine, but that's what we're seeing now. A lot
of people either have smart televisions or they have their
TVs hooked up to one or more set top devices
(10:32):
that allows them to view Internet content on their televisions.
And there are some who argue that eventually that will
be the primary and perhaps only way that will get
content on our TVs. That we won't receive programming from
a cable service directly. It will be through an Internet service.
(10:52):
And that's quite possible. Well, more and more people are
opting for that, as we'll say later in the episode,
and any rate, by this time, cable television wasn't even
the largest division within Comcast. Cable TV was taking a
back seat. Uh So, Comcast had interest in content and
cellular services, and there were growing concerns that the company
(11:15):
in charge of delivering content was also in the business
of creating content, and those concerns would grow over the
following years. This is where you started seeing people make
noise about net neutrality. How can a delivery system remain
unbiased when it also was creating content being delivered on
(11:37):
that system. In other words, if you are a company
that creates content and you're also a company that allows
content to be delivered to customers. How can anyone be
certain that you don't give your own content preferential treatment.
Maybe you slow down other types of content across your network,
maybe you don't allow it to even broadcast on your network.
(12:01):
Maybe you tell your customers, hey, the stuff we have
is the best stuff out there. You don't need anything else.
These were big concerns, and while Comcast was largely playing nice, uh,
it was a it was a worry that perhaps in
the future that would not be the case. And so
we really started getting into the conversations about net neutrality
(12:21):
around this time. I mean they had been around before that,
but this is when it really started to take more
of a spotlight, and that would increase over the years.
Skipping ahead to two thousand one, Comcast bought the Outdoor
Life Network and expanded its investment in the Golf Channel,
which ended up giving Comcast controlling interest in that network,
(12:44):
and it also announced it would purchase a T and
T broadband for a cool seventy two billion dollars. At
that time, a T and T broadband was the largest
cable TV provider in the United States, so Comcast both
eliminate some competition and grows its own cable television services
by buying another service, uh, which no big surprise again
(13:09):
if you're looking back along the history of Comcast, that
was the tactic from day one. Really. In two thousand two,
Comcast unveiled plans for HD television and video on demand services. Again,
the Golf Channel was one of those early HD channels.
As I recall, this was one of those things where
(13:31):
the United States was definitely trailing behind Japan by several years.
But HD television's back in the early two thousand's were
really expensive. I don't know if you guys remember, because
these days, you know, you can go out and buy
an HD television for a relatively low cost, still several
hundred dollars. But you know, when you start looking at
things like four K televisions, they are relatively inexpensive. HD ones,
(13:54):
that is, HD are relatively inexpensive compared to four K.
But just like four K. Now, back then, there were
very few channels that actually offered up h D content.
So you can get an HD television, but there wasn't
much to watch on it at the time. The Golf
Channel was one of those things, so if you really
(14:14):
like golf, you could get a really good, look at it. Uh. Also,
Brian Roberts assumed the role of CEO of the company,
becoming president and CEO in two thousand two. Not long
after that, he would actually also assume the role of chairman,
so became President, CEO and chairman of Comcast. Again, keep
in mind this is the son of the founder, Ralph J. Roberts.
(14:38):
In two thousand four, Comcast made an unsuccessful bid for
a hostile takeover for the Walt Disney Company. Now that
might sound pretty weird, because today Disney is bigger than ever.
Disney owns so much. Disney bought Marvel, Disney bought the
Star Wars franchise. The movie is are doing really well.
(15:01):
But in the early two thousand's Disney was in turmoil.
There were leadership issues. People were disenchanted with Michael Eisner
as the chairman of Walt Disney. The company itself was
not doing as well in the market as it had
been previously. Some people were beginning to feel that Disney
itself had the company had lost its way, and people
(15:23):
like Roy Disney, who had been on the board of directors,
seemed to be in dismay at the state of the company.
So the bid was somewhere in the fifty four billion
dollar range, and it was based on stock price. It
was going to be a stock exchange deal if this
were to actually go through. But it was a hostile
(15:46):
takeover and does that mean well. Originally, Comcast was sending
messages to Disney chairman Michael Eisner, but Eisner refused to
discuss a deal. Then Comcast went over Eisner's head and
sent a letter of intent to directly to the board
of directors, saying, we want to purchase your company. Here
are the here's the deal where we want to do
(16:07):
it in stock. The stock is currently valued at fifty
four billion dollars. Now Disney itself was being valued somewhere
in the sixty six billion dollar range, but again it
was kind of struggling at the time. So comcast hope
was that the board of directors would come and talk
to Comcast and they would be able to work this
(16:27):
out and that uh, you know, maybe the word board
of directors thought this would be the best approach in
order to make money for shareholders, for Disney shareholders, and
the attempt was huge news because the number of properties
that would have been involved were significant. Disney at that
Time was already the parent company of ESPN and ABC,
(16:50):
so those would fall under the role of Comcast. Then
Comcast the delivery system would also be in control of
ABC and ESPN, and people were worried that this would
mean Comcast would be able to leverage that over other providers.
So let's say Time Warner Cable and it comes up
and Comcast says, hey, I own ESPN, And if you
(17:11):
want ESPN to run on your cable networks to your
cable customers, you're gonna have to pay X amount to
have access to that content. Uh. You know, it would
have been a very powerful leveraging tool, but there was
no need to worry about that. The deal actually fell
through when shareholders for both Disney and Comcast were resisting
(17:32):
the move for different reasons. Comcasts stock price fell eleven
percent over the time from when they announced the bid
to the time when they decided to walk away. Now,
because the stock price fell eleven percent, and because their
bid was about an exchange of stock, the value of
(17:55):
the stock they were bidding fell, I mean, it wasn't
as valuable as it used to be. This would be
as if I went up to you and said, hey,
I want to buy your shoes for ten bucks, and
you say, well, I'll think about it, and the next
day I come up to you with a ten dollar bill.
But in that time, the value of ten dollars has decreased,
(18:15):
meaning the buying power of that ten dollars is less.
It's similar, except now we're talking about actual stock, not
the value of currency. But the point being that what
used to be worth fifty four billion dollars was now
worth even less than that, so that made it a
much less attractive deal for the Disney board of directors. Meanwhile,
(18:37):
the board of the Board of Directors are also getting
the message from their shareholders, we don't want you to
sell this company to Comcast. And since both parties were
receiving this kind of resistance, Comcast announced it would drop
the bid just a few months after it had first
announced its intention, and uh and Roberts had said he
(18:57):
was very disappointed in the Disney Board of Directors for
not coming in and communicating with him. He thought that
it was the best deal for both companies. Meanwhile, the
Board of Directors didn't UH didn't really dignify that particular
aunt h statement with a response. Also in two thousand four,
(19:18):
Comcast purchased a little company called tech TV, and who boy,
is this a heck of a story. So Comcast carried
a company a channel called G four which catered to
video game fans. It was mostly content related to video
games in some way, including things like review shows, shows
(19:42):
that just did clips of video games, uh, game shows
that were video game related, lots of stuff like that.
Tech TV, on the other hand, was a more general
technology based channel where they had everything from product reviews
to h question and answer like people could call in
and ask experts how to do certain things with their computers,
(20:04):
like how to install motherboards, that kind of stuff like
actual technical help um as well as shows that were
things like like they had their own video game review shows.
So there were there were competing shows on the two channels.
So Comcast purchases tech TV in two thousand four and
then merges it with G four, creating the G four
(20:25):
tech TV channel, and then kind of letting the two
slates of of programming battle it out to see which
ones would remain and which ones they would get rid of.
And I've got a lot of friends who worked either
for G four or tech TV, and I hope to
do an episode in the future. I've already recorded some
(20:48):
interviews about this. Actually, I hope to do an episode
in the future about tech TV and G four and
the merging of the two, and to include interview segments
that I have gathered over time. So that's something I
want to do in the future, and it will definitely
be a long episode, probably a multi partner because it
was so complicated. It was a venture that people when
(21:12):
when these channels first started, they were really excited about
them because this was Uh, these were industries that were
all getting more and more important over time. People were
getting more interested in technology and computers and video games.
But when you get these big corporations like Comcast involved,
sometimes the ideas that people had when they first founded
(21:32):
the channel end up getting changed or lost or or discarded,
and uh, it creates a very emotional kind of story.
So keep in tune with tech stuff. Let me know
if that sounds interesting to you, because I do hope
to do it in the future. I still have to
do several more interviews in order to get kind of
(21:52):
a full story of it moving on with Comcast. By
the way, G four tech TV doesn't exist anymore. In
case you were wondering if if you weren't aware, G
four tech TV eventually went away and I believe became
the Spike Network. If I'm not mistaken, or it's no,
(22:14):
it's Esquire, I'm sorry, it's the Square Network. I believe
um Esquire would eventually take over for G four tech TV,
and so that channel no longer exists, and uh, a
lot of good people worked for that channel over time. Anyway,
two thousand five, Comcast joins a group of investors, which
included Sony Corporation of America, to purchase a twenty steak
(22:39):
in Metro Goldwyn Meyer better known as MGM Studios, so
the entertainment studios that produced lots of movies, including the
James Bond franchise. It turned out to be a pretty
tough investment, so five years later, in two thousand ten,
MGM would file for Chapter eleven bankruptcy and they would
(23:01):
emerge from bankruptcy after a little more than a month
after entering bankruptcy with the creditors MGMs creditors taking control
of the company. So that was a pretty rough time.
I mean, it was an investment, it was a gamble,
and unfortunately for the investors, the market for DVDs was
really falling out by that point, and that ended up
(23:24):
taking a big hit. MGM took a big hit from that.
That same year two five, that is, Comcast unveiled at
digital phone service and plans to purchase internet businesses, further
getting involved in both the delivery and production of cable
content both on TV and on the Internet. So if
you have ever looked at Comcast ex Affinity, which is
(23:46):
the brand for their digital service to homes, you often
will see that it can be bundled where you get
phone service, cable television, and internet broadband all bundled together. That's,
you know it calculated approach that Comcasts made back in
this time. In two thousand and seven, that's when Comcast
(24:09):
actually acquired Fandango, the movie ticket service, the one that
kind of precipitated this whole discussion about Comcast in the
first place, because if you recall from episode one of
this series, I mentioned that I started looking into this
after I had problems buying Star Wars tickets because the
(24:30):
Fandango service had been overwhelmed by demand and it pretty
much collapsed. By the way, in case you were worried,
I did eventually get Star Wars tickets for opening night.
I just had to wait till the next morning. It's
just I am not a good Jedi. I don't have patience.
So it was a tough, tough twenty four hours or
so at any rate. Comcast purchased Fandango back in two
(24:53):
thousand and seven, and uh, Fandango is one of those
services that I personally find a little frustrating. I much
prefer when movie theaters have their own, uh theater specific
services to to sell tickets to customers, because you don't
(25:16):
have to worry if there's a huge amount of demand
for the overall film, typically speaking, because it's distributed amongst
all those theaters. It's when you have a centralized service
where all that demand is going to a single collection
of servers where you start running into these problems. And
granted the Star Wars issue was a special case, it's
(25:40):
not like that's going to happen with every movie. For example,
Jim and the Holograms. Don't think that one's going to
collapse the system, even though it's truly outrageous, truly truly
truly outrageous. So two thousand seven Fendango acquisition happens, um
I could go on about the case will service companies
(26:01):
that Comcast acquired over the next few years, but by
now you guys are all familiar with that story. It's
the same story over and over. It's just the names
and the prices change from case to case. In an
effort to grow the company and increase the number of customers,
Comcast kept acquiring other businesses, including ones like Patriot Media,
(26:22):
Susquehanna Communications, and others. UH, and Comcast and Time Warner
together would split up the assets of another company called
Adelphia Communications. Adelphia had gone bankrupt and so as part
of the UH, in order to settle the debt that
Adelphia had acquired, they started selling off assets, and Comcast
(26:45):
and Time Warner we're both allowed to buy up some
of those, which not great news necessarily if you want
more competition UH. Since these were the two big players
in the United States at that same time, Comcast continued
to launch channels fear Net and Exercise TV, and so
they were controlling the distribution and content in an effort
(27:07):
to set itself apart from competing cable and satellite services. Also,
the Walt Disney Company, while it was not open to
a hostile takeover bid, it did sell off its thirty
nine share in the E Networks to Comcast, so Comcast
was able to pick up a significant share in those
(27:28):
those uh, those companies, those those networks, they didn't have
controlling interest. But is nothing this sneeze at now. That
doesn't even cover the continued interest in wireless broadband. Comcast
was one of the companies that invested in clear Wire Corporation,
for example, so Comcast was still very much interested in
expanding in that industry as well. And the next really big,
(27:52):
big piece of news dates to two thousand nine, and
that's when it was announced that g E had agreed
to sell controlling eight in NBC Universal to Comcast. Now,
the approval for this deal would take quite some time.
Congress scrutinized this deal and it wasn't until two thousand
eleven that Congress approved the deal, and the acquisition itself
(28:17):
wouldn't be complete until two thousand thirteen. So from two
thousand nine to two thousand thirteen this deal was taking place.
That's how big a deal we're talking about here. And
the approval from Congress was actually conditional. It wasn't yeah,
go ahead and you can buy them. And they actually
had some some specific conditions that the companies had to
adhere to. Comcast had to make assurances that it wouldn't
(28:40):
prevent NBC programming from airing on competing broadcast services. They
couldn't just say, well, now anything that's on NBC can
only air on Comcast, or it can air on other stations,
but only if you pay an outrageous premium for the broadcast.
That was part of the agreement that Comcast would not
make those kind of moves. Um. It also sparked another
(29:03):
round of discussions about net neutrality, making certain delivery services
aren't so wrapped up in programming that they began to
tinker with accessibility. And uh, this is still a big
deal today. I mean, this is a giant thing about
about these distribution companies getting involved in content on this level,
and as they own more and more of it, there's
(29:24):
a greater concern that they will cause real issues for
customers that hurts the customer in the long run. It's
a great business decision, you know, from the business side,
you can't argue it because it's gonna make tons of
money for shareholders, But as a customer, as the person
who comes home and wants to watch television, it's a
(29:46):
negative experience, or it can be. It can certainly lead
to one. So that's why these conditions were built in
to the agreement. And then in two thousand and fourteen,
skipping ahead to that, Comcast made a move to acquire
its competitor, Time Warner Cable and this is when the
Internet totally lost its mind. For very good reason. This action,
(30:09):
more than any other, brought that net neutrality argument into
the spotlight. Comcast was essentially saying that they wanted to
buy its chief competitor, which would drastically reduce options for
customers in numerous markets, which Comcast actually argued was a
benefit to the customer if you can believe it. Now,
(30:29):
keep in mind again, and most markets, customers don't have
that much choice. They might have a choice of one
cable provider and maybe one or two satellite providers, which
is getting fewer and fewer anyway because of other acquisitions
and consolidations. But that's it. They don't necessarily, you know,
it's it's it's rare when you're in an area where
you're like, well, I can get either Time Warner or
(30:51):
I can get Comcast. It may be that you have
either Comcast or a mobile wireless provider or satellite, and
that's it. You don't have options between cable companies, in
other words, and that is problematic. And Comcast was arguing
that by buying Time Warner it would actually be an
(31:12):
improvement to customers by streamlining everything. But when asked about it,
when when people said, well, does this mean that, since
there be no competition, you could lower the customer bill,
they said no, not necessarily, so, in other words, customers
would not see any benefit from this. The the benefits
of competition are that companies will start to offer better
(31:34):
prices and better options for customers in an effort to
win more customers. But when you don't have competition, there's
no reason to do that. In fact, you want to
have higher prices because you can't go anywhere else for
those services. That's the reason why monopolies are frowned upon
and and normally either prevented or broken up. Although, as
(31:56):
we talked about in our A T and T podcast,
even the efforts to break up monopolies don't last forever.
Often these companies will coalesce back together kind of like
kind of like a planet getting broken up into space,
and then the gravity's crushes all the pieces back together,
so you have a planet again. It's almost the same thing. Uh. Anyway,
(32:17):
I don't want to get off on a total rant there,
but if you listen to episodes about A T and
T about net neutrality, those sort of discussions go into
greater detail about this sort of stuff. Anyway. Uh, there
are only a few markets that really allow you to
have some choice in the United States, and that's a
real problem. And people opposed to the Time Warner deal
(32:39):
argued that if it went through, there'd be a true
monopoly in cable service in the United States. It would
belong to Comcast. Now, there were also numerous examples of
regions that were passing laws restricting public broadband initiatives. In
other words, lobbyists for the cable industry we're working with
(33:02):
politicians to make it difficult or even illegal for a
government to offer broadband service as a utility. And there
are certain areas in the United States where this was
a big deal, specifically in places like Chattanooga. If Joe
McCormick was in here, he's from Chattanooga, he could tell
you about the crazy fast Internet service that people in
(33:22):
Chattanooga can get through municipal WiFi, and cable companies really
battle against that. They say it's unfair, which blows my mind,
but that would be an entirely different episode for me
to go into all of those details. At any rate,
municipal broadband service became a battleground which continues to this day.
(33:44):
The Federal Communications Commission has ruled that states are allowed
to offer up broadband services, but cable interests are still
fighting that decision and appealing it and arguing that the
FCC doesn't really have the authority to make that statement
in the first place, just as they resist other competitors
like Google Fiber entering their turf. So what cable companies
(34:07):
have done is they've divided up the United States into
into neighborhoods that they can effectively control because they're the
only party in town, and then they do their best
to keep everybody else out. And again, this makes perfect
sense from a business perspective. You don't want competition to
come in and shake things up. But for customers it's
(34:29):
not such a great story. So it gets pretty ugly
and a lot of people, especially on my side of this,
have a lot of harsh things to say, and I
will again, try to avoid editorializing anymore than I already have. Uh,
and it's it's entirely possible that I have blinders on here.
(34:50):
It's not like I think that the other companies are
necessarily altruistic, but I always like to see more competition
rather than less. Anyway, back to Time Warner, That's what
started this whole digression in the first place was the
proposal for Comcast to acquire Time Warner. The deal would
involve around forty five billion dollars in stock, and Congress
(35:13):
began to scrutinize the deal and a lot of advocacy
groups were calling for the deal to just be outright rejected.
Comcast agreed to divest itself of nearly four million subscribers,
essentially handing them over to Charter Communications, and this was
supposed to be a sign of good faith, saying Comcast
had no plan on taking over the entire industry. Charter
(35:34):
Communications would still be there and they had three point
nine million more subscribers than they had before because Comcast
was giving them up. So see, there's competition. There's still
Charter Communications. It's not like by buying Time Warner all
cable would be Comcast for now, never mind the fact
that once again there's not true competition in most markets anyway,
(36:00):
While the deal was being considered, a T and T
also announced its plans to acquire Direct TV for forty
nine billion dollars, which added fuel to the fire of
people worried about net neutrality and about media consolidation. There
were tons of people now looking at these two major
deals saying, we really need to think about this because
(36:24):
if we go down this pathway, customers could be really
hurt by the lack of choice Further down the road.
In April two fifteen, Comcast and Time Warner announced that
they were dropping the deal after numerous challenges and delays
were brought up against it, and it was also rumored
that the Department of Justice in the United States was
(36:46):
leaning towards denying the deal in the first place, so
walking away might have also been an attempt to make
it seem as though the two companies had arrived at
this decision themselves, rather than it being forced upon them
by another party. The ongoing and just for Comcast today
include the FCC wanting to reclassify broad band as a
title to utility, which Comcast and other cable companies are challenging.
(37:10):
And also this is really troubling for cable companies, especially
well specifically cable TV companies. There's a flagging interest in
cable television. This is not a big surprise for most
of my listeners. I'm sure I bet there are a
lot of you out there who are cable chord cutters.
You know, you've you've cut the chord for cable TV,
(37:30):
and you get your entertainment through the Internet, but not
through television. You might feed the Internet to your TV,
but you're not getting it through cable TV. I'm sure
there are a lot of you out there who are
doing that right now. And I bet there's some of
you out there who are fall into the category that
is now being called cord never's. Cord never's are people
(37:53):
who have never subscribed to cable television. So we're talking
about young adults who have never taken it upon themselves
to get cable TV. They're not interested. It's not how
they consume entertainment. They get everything they want through the
Internet or through over the air broadcast, but they've never
seen the value of subscribing to a cable television service.
(38:14):
We're seeing both of those populations grow over time. Now
that means that cable television providers are experiencing a crunch.
They're losing customers who are cutting the cord, and they're
not gaining new customers fast enough because more and more
people are choosing not to ever subscribe to cable TV
in the first place. So you're getting a narrowing band
(38:35):
of customers for cable television, which is really created an
error of desperation in that industry. And it means that
you're getting some some pretty hard moves in that that industry,
And it could ultimately mean that in the future, our
television content will primarily come through the Internet, and cable
(38:57):
TV as a thing will no longer exist. The industry
itself will cease, and we'll have a totally different model
for delivering television and creating television. That's a possibility, it's
still going to take some time for that to happen.
I mean, it's not like cable tv is in so
much trouble that it could crumble at any second. It's
(39:18):
still a huge, multibillion dollar industry. It's just a multibillion
dollar industry that already is seeing loss of customers on
either side of it people leaving and new people not
coming in, so it'll be really interesting to see where
that goes over the next I'd say decade decade um.
(39:40):
I think we're gonna see more and more people turn
to the Internet. We're gonna see more services like Netflix, Hulu,
Amazon offering up their own original content that you can
only get through those services. I know that Disney is
looking at the possibility of launching its own streaming services
as well, So it may be that in the future,
(40:03):
instead of subscribing to a cable company and then picking
a package that gives you certain channels, you may have
to pick between different streaming video services. In fact, you
already do for certain things, like you might not be
an Amazon Prime member, which means you don't get certain
Amazon shows, or you might not be a Netflix subscriber,
(40:27):
which means you don't get certain Netflix shows or Hulu.
All of these have original content and in order to
access it, you have to subscribe to the to the services,
generally speaking, So maybe in the future we have more
and more of those, which puts the burden still on
the customer. You have to decide what you're willing to
pay for and what you don't you feel is not
(40:49):
worth the money. You just you just don't see it,
but it's bad news for cable TV providers. Comcasts, however,
of course, is in the position where it's not a
cable TV provider, it's a content provider and its Internet
broadband provider, so it has some other businesses that it
(41:10):
wants to protect, and it may be that in the
next few years we see Comcast double down on Internet
content and broadband delivery. We'll probably also see Comcast continue
to fight competition in those spaces, specifically things like the
entrance of Google Fiber into different regions. So that's what
(41:31):
I think we're going to see in the future for Comcast.
It's gonna be more of a focus on broadband UM
and and Internet content, and we'll price see some pretty
tough battles for municipal WiFi, for municipal broadband, for um
stuff like Google Fiber to be allowed to come into
(41:53):
neighborhoods and personally encouraged by the direction I've seen over
the last year or two where it looks like the
general consensus is that competition is a good thing. I
don't even hate Comcast specifically, I I I have very
(42:17):
strong opinions because of my own personal experience with this company.
But that's my own personal experience and it's not a
universal experience, and I would never suggest that my experience
is the same that everyone else has had. But I
love to see competition because it means that customers have choice,
and I would much prefer to have choice than to
(42:39):
be forced into using a specific provider because there is
no other option, because that means that I can't weigh
my options and make a decision. I have no deciding power.
Um By creating that sort of competition, I can make
those decisions. And maybe I stay with Comcast. Maybe I
(43:00):
decided that's the best way for UH for me to
get the access I need, or maybe I switched to
a competitor like Google Fiber, which is rolling out service
in Atlanta as I record this UM, and it will
probably take another couple of years before that's complete. But
the fact is that I think the more choice you have,
(43:21):
the better better off you are as a consumer. Up
to a point. Obviously, if you have five hundred choices,
then you have another problem ahead of you, which is
how do you decide among five hundred candidates which one
is the best. But for something like cable where you
may have one or two options, it makes it a
(43:42):
lot easier, especially if you have to. I mean, if
you have one, there's no decision to make, but you
have to, you can at least weigh them against each
other and make an informed decision that way. And I
personally am looking forward to a world where we do
have that kind of choice and aren't forced into it.
But I'm curious what you guys think. Do you guys?
(44:03):
First of all, do you live in a place where
you have lots of options? Because there are a few.
There are some regions that do have options when it
comes to cable providers. I just don't happen to live
in one of them. Or are you frustrated by this?
Is this something that you feel has gone unaddressed too long,
or is it totally cool? I'm curious to hear what
(44:26):
your thoughts are. Right to me let me know. And
also if you have suggestions for future topics of future episodes,
or maybe someone I should interview or someone I should
have on as a guest host, right to me let
me know your thoughts. The email address is text stuff
at how stuff works dot com, or you can drop
(44:48):
me a line on Facebook, Twitter, or Tumbler. At all.
Three of those use the handle text stuff h SW.
That message will get to me, and I'll talk to
you again. Really. See for more on this and thousands
of other topics because it has stuff works dot com
TechStuff News
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Oz Woloshyn
Karah Preiss
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