Many assume that the government opposed Comcast’s bid because combining the country’s two largest cable companies would have reduced cable competition. But this is false. Because of industry economics and bad government policy, cable companies’ service areas rarely overlap. Comcast and Time Warner do not compete head-to-head in any market, and neither do the three companies in the Charter deal. So mergers will not reduce the cable options available to any customer.

Similarly, some suggest regulators will approve the Charter deal because the resulting company could better compete against Comcast.  This is also false, as post-merger Charter will not compete with Comcast for customers. Understanding these deals, and the regulatory response to them, requires a more nuanced understanding of cable markets.

As in 2014, the economics of the cable industry are ripe for consolidation. Cable companies lost roughly one million customers in 2014. Most blame high prices, although cable companies have little control over price increases. Bloomberg reports that over half of your cable bill goes to content providers such as Viacom and Disney. While cable bills have risen 5% each year, these programming costs have risen 10% each year, creating an increasingly difficult margin squeeze for cable providers. Mergers create scale, giving cable companies more leverage against studios in the battle to divide profits in a shrinking cable market. The quest for scale is driving merger mania throughout the industry, including the aborted Comcast-Time Warner deal and Charter’s proposed mega-merger.

But mergers give these companies greater scale in another industry as well: broadband Internet service. America’s cable companies are also its largest Internet providers. Many assume this drove the government’s concern about the Comcast deal. Cable is under increasing pressure from Internet-based video providers such as Netflix and Hulu. But those companies rely upon broadband networks to reach consumers. The combined Comcast-Time Warner empire would have controlled roughly half of all American broadband customers—and regulators were afraid the company might use its power over broadband networks to protect its cable business from Internet-based competition.

This concern was probably overstated. Antitrust law generally forbids such abuses. Moreover, most cable companies understand that the Internet is their vehicle for future growth. A rob-Peter-to-pay-Paul strategy cannibalizing the future to prop up a dying cable business would be bad business in the long run.

Nonetheless, this concern explains why Charter will likely face less regulatory scrutiny. Charter, Time Warner, and Bright House together comprise only one-third of American broadband customers, so they will have less opportunity for anticompetitive behavior. Moreover, the Federal Communications Commission’s new net neutrality rules give regulators more oversight of broadband networks and greater ability to halt anticompetitive practices.

Ultimately, cable’s merger mania reveals its identity as a mature industry in transition. The Internet has a history of disrupting seemingly stable old businesses, as companies such as Borders, Blockbuster, and countless music labels can attest. Now the Internet has cable in its sights. Greater scale will help this suddenly old media compete more effectively in an increasingly rich, dynamic, and competitive market for video. And in the process it will free up capital to improve Internet speeds and build out the broadband networks that will power the industry’s future."