Comcast: The Quest for Global Dominance
Morgan Lloyd
Dawn Parra
Peggy McGill
Queens University
Introduction
As the mergers and acquisitions of media companies continue at lightning speed, creating and
expanding several Transnational Corporations, Perhaps the most fascinating issue is that no one
government, education institution or corporation owns the entire internet and can therefor control it.
As we move into the unknown territory regarding the creation and growth of Transnational
Corporations, there is a question that must be asked of this vast amalgamation called the World Wide
Web, “Who controls the internet? The question itself is startling and there is no concrete answer.
However there are multiple avenues through access to the internet and its content can be affected.
Traditionally there has been a balance of control over the internet by both market and regulatory forces
that engendered high levels of innovation and profit.” (Holofcener, 2012, p. 403) In February of 2013,
Comcast Corporation announced its intention to purchase Time Warner Cable. This has caused much
consternation within the media industry with concerns of a new monopoly being created and the fear
that Comcast will be the one controlling the internet. However if we look at the current state of
Comcast Corporation and how its organizational structure is related to its performance outcomes, we
get a preview of what Comcast would be like as an even larger Transnational Corporation who controls
an unprecedented amount of the internet.
Structural contingency theory examines the current state of constraints on a particular media
organization to present a structure that will optimize its production and growth. The relationship
between organizational structure and performance outcomes varies depending on the organization
under review, and contingency theories offer a framework that targets the preexisting constraints within
an organization. According to Deuze (2011), structural contingency theory is “grounded in assumptions
of economic rationality” (Dueze, 2011, p. 16). Under these assumptions, the theory proposes that
organizations select or endorse organizational frameworks that will increase the performance of the
company in relationship to its financial growth and functionality of its daily operations.
Thesis
In the past, Structural Contingency theory has primarily been applied to the newspaper industry.
Organizations have not applied or fully optimized structural contingency theory. However, the
foreseeable changes in media ownership reveal a need for this type of research. The growth and
changes associated with media ownership “grow increasingly complex through media
consolidation and as variances in performance across seemingly similar media corporations
become more evident. (Deuze, 2011, p.16).
Using Structural Contingency Theory to provide a framework that analyzes the current
constraints of Comcast in order to increase the organization's global market, The researchers
therefor posit that the way in which Comcast chooses to compete globally is through mergers
and acquisitions of its opponents, allowing it to operate a global network that connects to every
part of the internet.
Literature Review
Cakir (2012) presents the first use of contingency theory as applied to international organizations. In his article, Cakir outlines the four areas
in which contingencies exist. According to Cakir, “The contingencies usually related to structure of the organization are environment,
organizational size, strategy, and technology” (Cakir, 2012, p.8). Based on Cakir’s findings, contingency theory models were designed to
“analyze entities that bear organizational characteristics in international relations” (Cakir, 2012, p.19). With that said, structural contingency
theory will aid in analyzing the possible contingencies that will arrive as Comcast ventures into the global market. However, structural
contingency theory was developed with smaller organizations in mind, so the amount of research applying the theory to larger corporations
is scarce.
Contingency theory has been successfully applied in a variety of contexts. In order to advocate its relevance in regard to Comcast’s global
ventures, other research must be examined. Scholars, Di Salvo and Larsen (1987) and Bae and Park (2011) have published research regarding
the importance of communication within an organization and how the contingencies can offer insight into the flow of an organization. Di
Salvo and Larsen use the contingencies of an organization to examine their influence on communication throughout company hierarchy.
According to Di Salvo and Larsen, “Contradictions may be due to varying communication skill importance because of one’s position in the
organization” (Bae & Park, 1987, p.4). While their findings indicate the need for companies to examine internal communication, they do not
address the implications on external communication as indicated by job title.
Bae and Park apply the contingency theory of conflict management to public opinion and how consumers respond when corporations
engage conflict management. Bae and Park’s research focuses on customer responses to Samsung’s use of philanthropy as a means of
conflict resolution. According to Bae and Park, “Contradictions may be due to varying communication skill importance because of one’s
position in the organization” (Bae & Park, 2011, p.146). The scope of their research is aligned with socio-contextual influences that affect
public opinion. Bae and Park provide adequate evidence that strategies must be utilized that do not change the company’s stance in order to
avoid providing conflicting messages to customers. The contingencies addressed by Di Salvo and Larsen (1987) and Bae and Park (2011)
revolve around communication, which is vital for a successful vertical integration by any company. However, Comcast’s need for involvement
in the global market issues a gap in research since the research did not offer suggestions for the socio-contextual influences of the global
audience. Furthermore, there is a need for research regarding the possible contingencies that arise during the process of globalization.
Literature Review
Other scholars have used contingency theory to examine behavior. Holm, Kumar, and Rohde (2011) applied the contingency theory to examine customer profitability
against the complications that arise in the work place. With marketing as the founding element, Holm, Kumar, and Rhode’s goal was to further analyze the Customer
Lifetime Value (CLV) and Customer Profitability Analysis (CPA) to answer the question as to when these models should be implemented to generate the most success.
Their research was centered on providing employment strategies for these current models in order to generate customer profitability. Contingency theory proved helpful
in their research by aiding in the categorizing of customer behavior and complexities. These categorizations revealed the contingencies that occur in the workplace that
require action from employees, thus proving the need for this research. Holm, Kumar, and Rhode were able to find a gap in research by noting that, “Although both CPA
and CLV models can be useful for resource allocation purposes, the respective models will not be equally useful to deploy in different customer settings” (Holm, Kumar &
Rohde, 2011, p. 393). Their findings concluded that employers should work for a balance between CLV and CPA in order to measure customer profitability since the
complexities of any company’s clientele base is complex. Ramaswami’s (1996) research proposes traditional and contingency theory as a means to further explore
negative employee responses under the scope of marketing corporations. Unlike Holm, Kumar, and Rohde (2012), Ramaswami (1996) focuses on employee behavior
under the assumptions of contingency theory and allocates their behavior by the context of their job description. Both studies present a need for further research on the
behavior of external stakeholders and the effect it has on profitability.
Cadeaux and Ng (2012) acknowledge technological changes and globalization as generating much of the uncertainties involved in vertical alignment, which supports
structural contingency theory as a means to analyze Comcast’s future in the market. Cadeaux and Ng provide accessible research toward the effect of structural
contingency theory on vertical alignment. Their research does regard the global market; in fact, their findings support the uncertainties involved when a company is
integrating into the global market and provide a meta-analysis of the literature available regarding strategies currently used in vertical integration. Cadeaux and Ng
recognize the negative effects of environmental uncertainties on vertical integration and argue “that environmental uncertainty should favour less integrated vertical
structures; that is, structures that lack strong hierarchies, central authority or formalization of rules and procedures” (Cadeaux & Ng, 2012, p.7). Additionally, strategies for
predicting the uncertainties will be based on the individual company. Due to its broad range of focus and the complexity of different organizations, Cadeaux and Ng were
unable to address exactly how to predict the level of uncertainty per organization. However, their research did favor structural contingency theory as the more adequate
indicator.
The literature presents the need for more research on corporations who are contemplating or in the process of vertical integration through the lens of structural
contingency theory. Structural contingency theory was originally intended for the examination of international relationship. Scholars such as Cadeaux and Ng (2012); offer
findings that incorporate the effects of technology and globalization on vertical alignment. The literature presented supports structural contingency theory as an
appropriate fit for analyzing Comcast while allowing for gaps in research to be answered.
Net Neutrality
“Net neutrality posits that individuals who pay similar rates to an ISP for
access to the internet should have similar access to all legal content and
that content should travel over the network at the same rate.”
(Holofcener, 2012, p. 404) much the same way as the internet built itself
by communication between users and the sharing of ideas, Comcast must
follow the same principal if they wish to become an elite level TNC and be
known as a force to be reckoned with at the international level. Since
“The internet was founded and developed on the principles of net
neutrality.” (Holofcener, 2012, p. 405) Comcast must follow the principles
of net neutrality that “it must remain neutral in the allotment of the
internet access because the internet’s future creators will need that
access to keep the internet growing.”(Holofcener, 2012, p. 404) Although
Comcast is a for profit corporation it would do itself a tremendous
disservice to restrict any type of content due to pricing. The open ideas
that flow through the internet should reflect in the open service that
Comcast offer to its customers. Profit should never interfere with freedom
of information and if Comcast wishes to achieve the elitist level of a
Global international corporation, it must remember this.
Comcast Background
Comcast Corporation began in 1963, when Ralph Roberts bought American Cable Systems.
In 1969, he then renamed Comcast from the combination of words Communication and
Broadcast. Throughout the 1970’s and 1980’s, Comcast slowly acquired many other
communications companies and several high profile cable channels, and in 1996 when
Microsoft invested one billion dollars within the company, this allowed them to acquire
other cable channels such as E! and the Golf Channel. In 2002, Comcast purchased AT&T
broadband and became, at the time, the nation’s largest cable TV owner.
Throughout the early 2000’s Comcast made many other large acquisitions along with a
failed bid for Disney Corp in 2004. However in the late 2000’s, Comcast began taking on
much larger acquisitions such as purchasing NBCUniversal in 2011, completing the
purchase of the entire company in 2013. After announcing their intent to purchase Time
Warner Cable, “the company, one of the largest cable and entertainment conglomerates, is
waiting for regulatory and shareholder approval for the merger with Time Warner Cable.
The deal would unite the two largest cable operators in the United States and give Comcast
control of about 30 percent of the cable markets in the nation, and 35.5 percent of the
fixed high-speed Internet markets.” (Steel, 2014) When Comcast acquired NBC Universal,
but with the FCC condition they offer a ten-dollar internet option for low-income people.
They then launched their Internet Essentials service in 2011, with much fanfare. It soon
became obvious only a small amount of those people were actually able to access it, and
the FCC wasn’t going to do much to enforce their mandate that Comcast get people signed
up for it.
Comcast Background
The ULU Local 100, with the help of some post
ACORN organizations, has led efforts to ask the FCC
to force Comcast to live up to their agreement.
Unfortunately, this has been a mostly uphill fight,
but it’s given community organizers worldwide a
clear goal. “Internet needs to be treated as a utility
that can be accessed by all citizens in order for a
civic society to function properly, and denying the
right of internet access to low-income people
based on lack of regulatory control is something
that we can fight against, and quite possibly win.”
(Anderson, 2014, pp 56-57).
Across the border in Canada, 43% of the poor don’t
have the internet, and research finds the main
reason for this is extravagantly priced services from
the main three Internet Service Providers. ACORN
Canada’s second convention started to address this
gap by writing letters to the three main Canadian
ISP’s, to meet with Acorn. Only the Rogers ISP
responded, and by the end of the summer, they
launched their Connected for Success service for
public housing tenants in Toronto.
This wasn’t successful at connecting the poor to
the internet, but it did get Rogers to see that the
time for government to see the internet as a utility
may be coming soon. In Vancouver, ACORN has
finally had meetings with a second ISP, TELUS, to
provide a more robust service, but they claim they
need a partner in this to verify the incomes of the
poor. Also the Canadian version of the FCC, the
CRTC, responded to ACORN only by letter with
their desire for open market free of any type of
price controls, but did state they’d plan a formal
review of internet pricing in 2014. They can count
on ACORN being present at that review.
Comcast Between Mergers and Acquisitions
Chavez (2013) focuses on the redefining of the U.S. Latino audience. He refers to the development of the Spanish-language network Telemundo, and in particular, the
bilingual network, mundo2, a name pronounced like the word mundos (worlds) that has multiple meanings. By integrating the number two into its title, the name can
be seen as a nod to its sister company, Telemundo, or a second world. But the alphanumeric treatment of the brand name can also be interpreted as two worlds, which
is consistent with Telemundo’s original corporate mandate of providing the “best of both worlds” (Chavez, 2013, p. 7).
Telemundo began in 1986, when the Reliance Capital Corporation, headed by financiers Henry Silverman and Saul Steinberg, formed the competing Spanish-language
network. By focusing more specifically on the experiences of U.S. Latinos, the new network attempted to differentiate itself from their competitor Univision, which
imported most of its programming from Mexico. Telemundo on the other hand, made a concerted effort to produce much of its programming domestically with
production centers in Hialeah (Florida), Los Angeles, and Puerto Rico along, with foreign production centers located in Mexico City and Bogotá. NBC Universal acquired
Telemundo in 2001 (Chavez, 2013).
By utilizing the structural contingency theory as a lens, it can be assessed that the advancement and transformation associated with media mergers (in this case NBC
Universal’s acquisition of Telemundo), produce progressive and multifaceted media consolidations. However, the acquisition of Telemundo by NBC Universal is a prime
example of a network looking to branch out through targeting niche markets that their current station programming will not allow. While constructing an imagined
audience of viewers based on “linguistic and cultural unity”, mun2 targeted audience of 18-34, primarily female, and by infusing the network with material resources
NBC Universal ensured its long-term viability in ways not available to competing networks (Chavez, 2013, p. 3). However, as a subsidiary of a much larger organization,
the mission of mun2 is “ultimately beholden to the economic imperatives of its parent company,” NBC Universal (Chavez, 2013, p. 2).
In 2012, Comcast Corporation gained a controlling share in NBC Universal, giving mun2 greater access to an array of programming and production and distribution
assets (Chavez, 2013, p.7). This acquisition of Telemundo and mund2 through its controlling share of NBC Universal, now allowed Comcast to position itself as a more
comprehensive media destination for U.S. Latinos, which is something it did not have the power to do prior. The reasoning behind Comcast’s efforts to attract a new
Latino audience was in part due to the fact that they have been defined in terms of their proficient use of emerging technologies. This ultimately puts Comcast in a key
position to be able to build an audience who will be ripe for the new properties they are developing, with the utilization of new technologies. All of this supports
Comcast’s goal to become a global leader.
Conclusion
The demand for higher revenue essentially decreases the quality of the content being produced. This research has reported a connection between
organizational values and content, but the factors that influence this effect vary and would likely differ for other media outlets. Primarily, research
has been devoted to the effect of media content on organizational fixtures relating to newspaper content; therefore, structural contingency theory
would provide a modernized frame and perspective to transnational media corporation, Comcast. Comcast has been criticized for a number of
reasons, for example its customer satisfaction often ranks among the lowest in the cable industry, and in addition, it has violated net neutrality
practices in the past. Comcast’s critics are many and they advocate for a distinction between its private network services and the rest of the
Internet. Critics also point out a lack of competition in the vast majority of its service areas. Yet, even with this imposed necessity requisite to
concentrate on improving service, Comcast instead focuses its energies on extending the reach and audience of their corporation in order to
compete in the global market.
It can be seen that structural contingency theory is an ideal framework to utilize, when examining the activities of a global media corporation such as
Comcast. Comcast competes on a global and national scale, a forum that allows corporations to invest in research, development and new technology.
The leaders of Comcast propose that the only method they can continue to expand and compete is through merging and/or acquiring their opposition.
They see their competitors as being the likes of Netflix, Google, and even Apple. And the reasoning behind this is that their goals are to succeed in the
national and global broadband industry.
The future of entertainment is online, and companies that supply the fastest connections have the most power over the bulk of industries that want
to get their Web content and services to consumers. Comcast will have 40 percent of the broadband Internet market if the merger with Time Warner
is approved. Hence the impetus to pursue the lofty goal that Comcast ensues through the merger with Time Warner. On the other hand, the possible
merger between two of the nation’s biggest cable companies, Comcast and Time Warner Cable, would result in a combined group that would be the
dominant provider of television channels and Internet connections. A deal such as this invokes images of powerful media conglomerates controlling
everything we see on TV and access on the Internet.
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Comcast: The Quest for Global Dominance
Morgan Lloyd
Peggy McGill
Dawn Parra
Queens University