Cable giants cite increased competition in video market, including from Netflix, Apple, Google and Amazon
They also dismissed critics’ objections that the deal would reduce competition, pointing to the dynamic evolution in the video marketplace specifically. As satellite and telco TV operators have gained share at MSOs’ expense in recent years, Comcast and TW Cable increasingly face pressure from Internet-video services including those from Netflix, Apple, Google and Amazon.com, they told the FCC.
In the 180-page main filing — a total of 650 pages with appendices — the two biggest U.S. cable operators said there’s “no credible theory of harm” that would result from the deal. The filing “lays out in considerable detail how Comcast and TWC are better together for millions of customers and businesses,” Comcast exec VP David L. Cohen, the company’s head of public affairs, said in a statement. “Importantly, we show that these significant benefits are achieved without diminishing competition in video, broadband, phone, programming, advertising and other markets.”
Critics have claimed the Comcast-TW Cable merger, which would create an entity that controls 30% of the country’s pay-TV market, is decidedly not in the public interest because it would result in fewer choices and higher prices for consumers. Moreover, the combination “could compromise the open nature of the Internet,” Sen. Al Franken (D-Minn.) told Justice Department officials last month.
The cable companies, in the Applications and Public Internet Statement with the FCC, argued that competition has only increased in recent years. Since 2009, when a federal court rejected FCC’s 30% cable ownership cap, DirecTV and Dish Network have added another 1.7 million subscribers and telco video providers have added 6.2 million subscribers, while traditional cable operators have lost 7.3 million video subscribers, the companies said.
In addition, MSOs said they now face a host of Internet-video rivals. Those include Netflix, which has more than 33 million customers in the U.S.; Google’s YouTube, which attract 157 million unique viewers per month who watch nearly 13 billion videos; Apple iTunes, which sells 800,000 TV episodes and over 350,000 movies per day; and Amazon, which currently offers a streaming video service and just announced the Fire TV set-top.
“In the evolving video marketplace in which these companies have thrived, there is no reason why a cable company should be limited in evolving as well, especially one that has time and again demonstrated its willingness to meet and enhance competition through innovation and investment,” Comcast and Time Warner Cable said. “Added scale will make that innovation go faster and that investment go farther.”
The deal is pending approval from the FCC and the Department of Justice. Last week, Comcast filed its Hart-Scott-Rodino antitrust notification with the DOJ. On Wednesday, Cohen is scheduled to testify before the U.S. Senate Judiciary Committee about TW Cable acquisition.
The cable companies reiterated their position that the deal would not eliminate competition in any market.
“Comcast will simply replace TWC as the provider in the latter’s service areas,” they said. “In contrast to certain proposed mergers of direct competitors that were met with skepticism because they would have reduced choice for consumers, there is no horizontal consolidation issue here.”
Programmers have voiced fears that Comcast-TW Cable would have undue buying power in the video market. The MSOs cited the 2009 court ruling rejecting the FCC’s 30% cable ownership cap, in which the court said, “[T]he record is replete with evidence of ever increasing competition among video providers. Cable operators, therefore, no longer have the bottleneck power over programming that concerned the Congress in 1992.”
Comcast and TW Cable also said their merger will not result in harm to the broadband marketplace, because they don’t compete against each other. And the companies also said fears that the resulting company would inhibit access to Internet services was unfounded. Under the conditions it agreed to as part of its acquisition of NBCUniversal in 2011, Comcast has to abide by the FCC’s net neutrality rules until 2018 — even though an appellate court struck down anti-blocking and anti-discrimination provisions earlier this year.
“In this highly competitive marketplace, there is simply no economic incentive for Comcast to use its broadband network to interfere with its customers’ access to edge providers’ content on the backbone or the last mile,” the companies said in their FCC filing. “In any event, Comcast’s Open Internet commitment removes all doubts and provides an additional regulatory safeguard — one that is not present for any other ISP in the market.”
Comcast, disputing the charge that it is as a “gatekeeper” controlling access to broadband users, said Internet content providers have multiple options to deliver traffic to its network. Those include via third-party content delivery networks or directly with Comcast. It referenced the recent agreement with Netflix, which will pay Comcast interconnection fees to deliver video to the MSO’s subscribers. “Comcast has thousands of business transit connections to its network, including dozens of substantial commercial peering and transit arrangements,” the MSOs said in the filing.
Netflix CEO Reed Hastings has complained that such interconnection fees are an “arbitrary tax” that broadband providers like Comcast are charging simply because they have the market clout to do so, and he called for a form of “strong net neutrality” that would do away with such arrangements. “Some big ISPs are extracting a toll because they can — they effectively control access to millions of consumers and are willing to sacrifice the interests of their own customers to press Netflix and others to pay,” he wrote in a blog post last month.
Cohen, on a call with reporters, said Hastings’ portrayal of paid interconnection deals as a net-neutrality issue was “inaccurate,” and Cohen pointed to FCC chairman Tom Wheeler’s comments that peering and interconnection issues would not be part of the agency’s efforts to develop new net neutrality regulations.
Comcast expects to achieve $1.5 billion in synergies by absorbing TW Cable, with 50% of that in the first year. Comcast has agreed to divest TW Cable systems totaling approximately 3 million video subscribers.
“Time and time again, Comcast has delivered — and over-delivered — on its promises to unleash more investment and innovation,” Cohen said. “Together with TWC, we are fully poised to do so again.”