Shareholder value, the public interest & the Comcast/TWC deal

Over the past several days I’ve seen a number of post-mortems on the decision by Comcast to drop its bid to acquire Time Warner Cable after it became clear regulators weren’t going to approve the deal. Two items in particular caught my attention over the weekend: a piece by Eric Lipton in the New York Times discussing Comcast’s not-so-successful lobbying effort in Congress, and an interview with Comcast Chairman and CEO Brian Roberts on Squawk Box, a program carried on CNBC, a cable network owned by Comcast since it acquired NBCUniversal roughly two years ago.

One of the things that struck me about the CNBC interview is that it clearly illustrates one perspective on the deal and Comcast’s impressive growth, and on the net value of regulation. I’d call this the “investor” perspective. From this perspective, the key metrics for evaluating Comcast, its actions and external factors impacting the company (e.g., regulation) are tied directly to the company’s ability to “maximize shareholder value,” something Brian Roberts and his team have been very good at over the years.

In contrast, the focus of the Times piece was concerns about the merger’s likely impact on the public interest rather than on shareholder value.

Market power skews shareholder value away from public interest

While some (perhaps some libertarian-leaning economists and CNBC commentators) might equate these two values, I suspect most people (experts and non-experts alike) would agree they are not the same, nor always positively correlated.

In fact, I’d argue that shareholder value and the public interest are likely to be inversely correlated when the company in question wields extensive market (and political) power and has a history of using it aggressively to gain competitive advantage and additional market power. All the more so when First Amendment issues are part of the equation, as is very much the case with regard to Comcast.

In a market with healthy competition and low barriers to entry, companies can only succeed if they satisfy their customers. In such markets I wouldn’t be surprised to find a meaningful correlation between shareholder value and the provision of high-quality service.

But, as FCC data (see graph on pg. 12) makes clear, many customers seeking high-speed Internet connections lack an attractive (or any) competitive option to cable-delivered broadband service. And the cost of market entry into this very capital-intensive sector remains very high.

And, as someone who has been both a Comcast and AT&T Internet customer, and has visited many an online user forum, my view is that, even when there is a choice between these two industry giants (or their peers), switching from one to the other is akin to jumping from the frying pan into the fire. And even if you’re eager to make that jump, the transition may involve a series of frustrating interactions with the CSRs, IVRs, techs, wait-times, billing mistakes and equipment returns/pickups of not one, but two companies. For an extreme—and hopefully rare—example of this type of experience, spend a few minutes listening to this recording of a Comcast customer attempting to drop his service.

This lack of attractive options and reluctance to jump through the hoops needed to switch between them may help explain why providers of Internet and bundled services often offer big rebates and steep short-term discounts to get customers to switch. Perhaps they’re hoping that, this time, a customer will stick around after the discount expires, since they’ll know that their only option at that point would be to jump back into the same frying pan they left a short while ago. Switching back and forth may be a game some consumers are willing to continue playing, but I suspect it’s too time-consuming and frustrating for most (at least it would be for me). Most, I suspect, simply want fast and reliable speeds, and responsive customer service and tech support. Unfortunately, providing that may cost a bit more than offering switching rebates and discounts (or so it seems based on companies’ actions).

An admirable focus on the public interest

To their credit, the FCC and Justice Department took seriously their responsibilities related to determining the competitive and public interest impacts of the proposed deal. And though Congress had no direct say in these decisions, it seems that many of its members also remained unconvinced that “what’s good for Comcast is good for the country,” even after months of heavy lobbying. As Lipton reports in the Times.

Despite the distribution of $5.9 million in campaign contributions by the two companies during the 2014 election cycle, and the expenditure of an extraordinary $25 million on lobbying last year, no more than a handful of lawmakers signed letters endorsing the deal…Congress has no direct power to approve or disapprove any merger, but endorsements, particularly if they come from black and Hispanic leaders, can send a subtle but important message to regulators that the deal is in the public interest and should be cleared…

Lawmakers cited a variety of reasons as to why Comcast’s elaborate pitch failed to gain traction this time: The miserable customer service ratings the company earns, for instance, made politicians leery of helping it out. In addition, there were much more substantial antitrust concerns associated with this deal, and some members of Congress said they thought Comcast had failed to live up to its promises in the NBCUniversal deal, and so could not be trusted this time.

Other lawmakers and staff members on Capitol Hill, in interviews Friday, cited Comcast’s swagger in trying to promote this deal. They said they felt that Comcast was so convinced in the early stages that the deal would be approved that it was dismissing concerns about the transaction, or simply taking the conversation in a different direction when asked about them…

“They talked a lot about the benefits, and how much they were going to invest in Time Warner Cable and improve the service it provided,” said one senior Senate staff aide…“But every time you talked about industry consolidation and the incentive they would have to leverage their market power to hurt competition, they gave us unsatisfactory answers.”

Together, the CNBC interview and NYT article highlight the difference between a thoughtful and holistic perspective on communication policy and public policy in general, and what I’d call the CNBC/libertarian/Wall Street perspective (for an extreme example of the latter, see Rick Santelli’s infamous trading floor rant attacking “losers” seeking mortgage modifications while ignoring trillion dollar bank bailouts and Wall Street criminality)

Having observed Brian Roberts’ career since its early days, my sense is that he is an extremely capable strategist, manager and dealmaker, and also a person of integrity. And he has plenty of reason to be proud of the company his father and he have built. It’s been impressive to watch.

But I also believe that he sees his primary role as maximizing shareholder value, and his primary constituency as being Wall Street analysts and investors, not Comcast’s customers. This perspective might not trigger regulatory problems if his company didn’t enjoy high levels of market power in key bottlenecks sectors of the communications industry. But, as the FCC and DOJ rightly concluded, Comcast does wield such market power and was seeking to augment it significantly with the TWC deal.

Customer satisfaction as a key indicator

As one longstanding piece of evidence to support my view of Comcast’s priorities, I’d point to its history of being consistently among the lowest-ranked companies in its industry (and among all U.S. companies) in terms of customer satisfaction.

Though I can understand Squawkbox hosts choosing not to confront their “boss” with tough questions, I would have liked to see one of them ask him about why this prolonged history of poor customer service has not yet been remedied, and how much Comcast planned to spend to address this issue in the future. Instead, we see the discussion about what’s next for the company leading to Roberts’ comment that:

The deal was going to slightly increase our leverage. That is now not happening. So that opens up room for further stock buybacks. And I think that’s an area that certainly we’re open to thinking about and talking about with the board.

I would have liked to see Roberts instead (or at least also) say that investing heavily to improve customer service was something he was going to discuss with the board, and that he was seriously committed to turning his company into a leader rather than a laggard in satisfying its customers, as measured by independent surveys.

But, just as the hiker only had to outrun his fellow hiker, not the bear, Comcast, to augment its shareholder value, need only leverage the fact that its local access pipe is much faster than most of its telco competitors, and invest just enough to ensure that the poor quality of its customer service doesn’t outweigh its speed advantage for too many customers.

And even if Roberts actually did announce a seriously-funded customer service initiative (or a large scale commitment to all-fiber networks), Wall Street analysts would most likely respond with downgrades of its stock, and pressure to direct cash flow to buybacks and dividends rather than to improved customer service and investments that could yield positive externalities with great social value but uncertain prospects for monetization by the company.

This speaks to the difference between what Marjorie Kelly calls “generative” and “extractive” business and ownership models, which I wrote about in relation to Internet access here and here (and may write about on the Quello Center blog in the future).

Primary takeaways

Digital inequality shows larger impacts on youth academic performance as compared to time spent on screens.
Digital skills play a significant role in mediating unstructured online engagement (social media use, playing video games, browsing the web) and youth academic, social, and psychosocial development.
Unstructured online engagement and face-to-face social interaction are complementary and continuously interact to create and enhance youth capital outcomes.

A familiar story: concerns of screen time

Today’s discussions of adolescent well-being have coalesced around a clear narrative: teenagers spend too much time online, and their academic performance, mental health, and social lives are deteriorating as a result. A steady stream of academic papers, books, and op-eds, alongside a growing number of policy proposals––school phone bans, age-gated social media use, restrictive screen-time limits––rest on the same underlying claim, aligning with a contemporary, digitized version of the displacement hypothesis:

Screen time, particularly the unstructured, free-time spent on social media, gaming, watching video content, or browsing the web, is said to displace the productive face-to-face activities that build adolescents into capable adults.

The implied and often practiced solution is restriction. In response, this dissertation tested this claim directly, and placed it within the broader context of adolescence.

Across three years, I followed 653 Michigan adolescents from early through late adolescence: in grades 8 or 9 (survey one, 2019) to grades 11 or 12 (survey two, 2022). Notably, these students, studied over time, were part of a broader pooled sample of 5,825 students across the same eighteen highschools. The study window captured the year before and the year after the peak of the COVID-19 pandemic and related lockdown orders, functioning as an unprecedented stress test for theories of adolescent social, academic, and digital life and, importantly, as a benchmark to compare the effects of pandemic-related change and inequality to those effects from screen time alone.

Across four studies of adolescents, consisting of six cross-sectional and longitudinal analyses, findings are not consistent with the displacement narrative, nor the broader concerns about the time youth spend on screens.

Findings are, however, consistent with something the current public and (most) academic discussions have largely overlooked or ignored: the gaps and inequalities that determine whether adolescents can access and use the internet meaningfully in the first place.

What the displacement hypothesis overlooks

Displacement and related research and policy concerning the time young people spend online assumes a “zero-sum” model of adolescent day-to-day time. An hour online is an hour not spent studying, reading, sleeping, or interacting face-to-face (i.e., time spent on more productive or developmentally “better” activity).

Indeed, this makes sense logically. However, as an empirical claim, this model requires time spent online to behave differently from all other ways adolescents allocate time; it must produce uniquely negative outcomes and be inherently harmful across digital contexts, rather than the typical mix of trade-offs corresponding to, and often overlooked among any other social or developmental context.

Yet, online time does not differ from other youth activity. Instead, I find it has a mix of pros, cons, and even some “uniquely digital” benefits which youth utilize for social and academic gains. When I compared unstructured digital media use against traditional face-to-face interaction and activities, both produced similar patterns: some negative associations with academic outcomes, some null, and some positive.

Trade-offs within traditional face-to-face activity (for example, social time with friends and family, or time spent in after-school extracurriculars) are treated as ordinary developmental experiences that must be experienced for the betterment of development. The identical trade-offs involving digital time tend to be overlooked or ignored, and online engagement is perceived as altogether harmful.

A growing body of evidence, including this dissertation, do not support that distinction. Indeed, the developmental context is routinely misread, leaving out the context of the experiences and time spent on digital, as well as face-to-face activities, interactions, existing inequalities, and changes inherent to development. As such, I proposed a novel framework to understand these contexts:

Digital capital exchange

Rather than treating screen time as a unified harm, this dissertation advances an “exchange”-based framework, grounded in James Coleman’s theories of youth capital and digital inequality scholarship, particularly following Eszter Hargittai, Jan van Dijk, and Alexander van Deursen (see this list of all dissertation references for full works).

The core proposition is that adolescents’ online engagement is not an alternative to developmental activity but another, albiet modern domain through which young people accumulate and mobilize online resources––particularly digital skills––that work alongside existing social networks and experiences to be exchanged for human capital (measured as: academic achievement, aspirations, STEM interest) and social capital (peer networks, community participation, extracurricular involvement).

Online time is not the mechanism; instead, it is digital skills that I find to be the most vital component in youth capital exchange and enhancement. Unstructured online engagement contributes to online skills; those skills, accumulated and mobilized alongside existing peer, family, and community networks, translate into the outcomes researchers and parents care about, i.e., academic achievement, aspirations, and face-to-face interaction and social networks.

This digital capital framework treats online and in-person contexts as complementary rather than antagonistic, and it situates adolescents’ digital lives within the structural conditions––connectivity quality, device reliability, autonomy of use––that determine whether exchange can occur at all.

Methods (in brief)

Paper-and-pencil surveys were administered to students in classrooms at two time-points: spring 2019 (N=2,876) and spring 2022 (N=2,949), across the same eighteen predominantly rural Michigan schools, grades 8–12. Official, nationally-ranked standardized reading, writing, and math test scores (PSAT 8/9, PSAT 10, SAT; College Board) were then anonymously linked to students’ survey responses with the help of participating districts.

Cross-sectional path analyses modeled pooled and wave-specific samples (pooled N=5,825); two-wave cross-lagged panel models tested reciprocal, longitudinal relationships on the 653 students who completed both surveys. Multi-group analyses of the cross-lagged panel models compared relationships between girls (N=345) and boys (N=308). All longitudinal models included time-invariant socioeconomic covariates as well as time-varying covariates to reduce omitted-variable bias.

Key findings: an overview

To summarize, to the best of my ability, eight chapters across 376 pages, I present two primary findings:

First: digital inequality predicted larger and more consistent declines in human capital than screen time did.

Unreliable home internet and technology maintenance problems––experiencing and/or dealing with broken or outdated devices and software, restrictive school-issued hardware, issues with connecting to or maintaining internet access––decreased youth GPA and standardized test achievement. And, these effect sizes were substantially larger than any negative direct effect from unstructured digital media use.

Across all four empirical studies, digital inequality emerged as the most substantial predictor of academic and developmental decline.

Second: digital skills mediated the relationship between online time and adolescent academic and social outcomes.

Unstructured digital media use, particularly online gaming and web browsing, predicted higher internet and social media skills for adolescents, which in turn predicted stronger academic achievement and self-efficacy (human capital), and social interaction and extracurricular participation (social capital). The positive indirect effect of screen time through skills offset or exceeded any small negative direct effects across several outcomes (supporting our existing peer-reviewed work: Hales & Hampton, 2025, and which you can read more about here).

These exchange processes were amplified when peer and family networks were modeled alongside digital skills, consistent with the premise that online and offline contexts operate together rather than in competition. The effect was not universal: social media skills amplified rather than offset a negative association with consistency of interest, one of the two subscales of grit. The exchange framework describes a contextual and conditional, domain-specific mechanism, not a blanket defense of time spent online.

Implications

If digital inequality, and not screen time, is the primary predictor of adolescent academic and developmental decline, and still warrants concern regarding access quality and experience even with the broader adoption of digital devices across the United States, the current policy emphasis on restriction is pointed at the wrong target. The evidence supports a different set of priorities.

Stable, reliable home (fast) broadband should be treated as an educational prerequisite rather than a consumer amenity. Unreliable connectivity exerted larger downward pressure on human capital than any measure of screen time, and that pressure intensified during the pandemic-era reliance on digital infrastructure. Technology maintenance, device repair, replacement, technical support, and the flexibility to install software and explore the web autonomously, matters as much as initial access, and school-issued devices that restrict autonomous use appear to hinder skill accumulation rather than support it.

Restrictive parental mediation of internet use was negatively associated with grit and self-efficacy at magnitudes comparable to the positive contributions of face-to-face activity. This challenges the assumption that digital restriction functions protectively. Instructive mediation, teaching adolescents to verify information, navigate platforms critically, and mobilize online resources toward meaningful ends, is the posture the data supports.

Finally, the technical skill-building that occurs through gaming, self-directed exploration, and deep web use is skill-building, not wasted time. Closing the persistent gender gap in these domains likely requires legitimizing technical play for girls, rather than restricting it for everyone.

None of the above is an argument that screen time is benign. It is an argument that screen time is the wrong focus, particularly when studied mostly in isolation. Context matters substantially, whether that is time spent on other activities during adolescence, the period of adolescence itself, digital inequality, resources gained from such online use, and how all such factors interact. The factor that predicts whether a given adolescent can convert online engagement into capital outcomes is structural: access, infrastructure, skills, and the autonomy to use them. These factors are distributed unevenly, and its uneven distribution, not hours logged, is what separates adolescents who thrive from those who fall behind.

The full dissertation is available through Michigan State University’s ProQuest archive, or see the embedded full-text PDF below. I’m happy to share papers, preprints, or the underlying framework with anyone interested and working in this area––don’t hesitate to reach out via my contact form. Thanks for reading.

Tags: Comcast FCC public interest regulation shareholder value

Shareholder value, the public interest & the Comcast/TWC deal