Comcast TWC Merger

New York Mayor Bill de Blasio is not calling for the FCC to reject Comcast’s proposed merger with Time Warner Cable, but he is asking that they impose a series of conditions on the transaction, including an expansion of lower-cost Internet service and better customer service.

Monday is the deadline for an initial round of comments to be submitted to the FCC on the merger as it reviews whether it is in the public interest. The Department of Justice also is reviewing the merger, but it is examining antitrust concerns.

“A series of similar mergers has already reduced competition in the cable and broadband sectors, leaving Americans vulnerable to increasing rates and declining customer service,” De Blasio wrote to FCC chairman Tom Wheeler. “Comcast and TWC operate cable networks in distinct non-overlapping geographic markets. Nonetheless, the vertical integration resulting from this transaction may reduce competition between distributors and programmers, with Comcast potentially favoring its own programming and requiring bundling agreements.”

De Blasio said that the city has engaged in a “constructive dialogue with Comcast” but they still have concerns.

If the merger is approved, Comcast will gain Time Warner Cable’s large footprint in New York and Los Angeles, what analysts have said was one of the key drivers of the decision to merge.

De Blasio is calling for a series of commitments including:

—An expansion of Comcast’s Internet Essentials program, designed to extend broadband access to low-income residents. De Blasio wrote that the barriers to entry — based on whether a household has a child in a school lunch program — are too narrow. He also is calling on Comcast to increase upload and download speeds, and to expand its range of lower cost offerings for households that do not qualify for the program.

—Greater transparency on rates. De Blasio cited an FCC report that cable rates have expanded at more than twice the rate of inflation over the past 17 years. He wrote that “one analysis suggests that Time Warner Cable customers have been confronted with bills containing charges that are over 20 percent higher than advertised prices,” and called for accurate information that explain discrepancies between advertised rates and actual charges.

—Improved customer service. De Blasio noted that TW Cable has the highest ratio of complaints to cable subscribers among all New York franchises. He called for Comcast to make “concrete, measurable improvements in customer service,” with quarterly reports on progress.

—Net neutrality. Comcast is bound by net neutrality rules as a condition of the NBC Universal merger in 2011, and says that it will extend the provisions to TW Cable customers. The net neutrality condition remains in place even though a federal appellate court struck down the FCC’s industry-wide rules earlier this year. But De Blasio is calling for Comcast to pledge its “full support for FCC adoption of the strongest possible rules to prospect and promote the open Internet across the industry.” He’s even urging Comcast to drop its opposition to the reclassification of broadband as a telecommunications service, something that would give the FCC greater oversight.

While Comcast has already said a benefit of the merger will be its ability to improve ┬áthe TW Cable network, De Blasio is calling for “time-bound” commitments that 100% of its network will be upgraded to fiber-optic cable by July 2020. He’s also calling for Comcast to “illustrate its dedication to the public interest” by expanding free Wi Fi hotspots within a quarter mile of 20% of residences in TW Cable’s service area by 2020.

Los Angeles Mayor Eric Garcetti has not filed comments yet, but the FCC on Friday rejected a request that it extend a filing deadline for two weeks.

Comcast has drawn the support of more than 50 mayors, including Michael Nutter from the company’s hometown of Philadelphia as well as the city leaders of Denver, Austin, Miami and Albuquerque. It also has garnered support from the Democratic Governors Assn. , Pennsylvania Gov. Tom Corbett and Maryland Gov. Martin O’Malley.

In a blog post, its executive vice president, David L. Cohen, reiterated that “our getting bigger is better for consumers,” noting that it would allow it to boost technology, Internet speeds and have a “more reliable and secure network.” He said that while programming costs have increased by 130% over the past 10 years, Comcast’s consumer pricing has increased at about half that rate.

With more comments expected right up until the deadline, Cohen wrote that “as in many prior transactions, various parties have attempted to use this review to advance agendas that have nothing to do with this transaction and to seek government support for parochial business interests that in many cases are seeking more money and distribution for themselves.”

Nevertheless, even as Comcast argues that they do not compete in any market with TW Cable, an array of opponents contend that the transaction will give it too great a dominance over the TV and Internet landscape. Companies such as Netflix and Dish Network have come out in opposition to the merger, as has the American Cable Assn., which represents smaller cable operators, and the Writers Guild of America, West.

Dozens of public interest groups, including Common Cause and Consumers Union, also have urged FCC rejection of the merger. During a congressional hearing, Sen. Amy Klobuchar said that they had heard from independent programmers concerned about Comcast’s bargaining power after a merger, but that their executives were reluctant to speak out publicly because of fear of retribution in future negotiations.

Comcast’s responses to the comments are due by Sept. 23.

Update: Among the supporters of the Comcast-TW Cable transaction is Crown Media, parent company of the Hallmark Channel. CEO William Abbott wrote that Comcast has a “long history of being one of the most supportive distributors of unaffiliated and independent programmers.”

Weighing in against was the Parents Television Council, which called for Comcast to unbundle channels it owns and distributes. It cited TW Cable’s purchase of Dodgers rights to launch a new sports channel that is bundled to its Los Angeles subscribers.

The New York Public Service Commission, which also is reviewing the transaction, also filed comments in which it recommended conditions such as a $50-per-month, 10 Mps Internet service, and review of Comcast’s diversity and local programming commitments from its purchase of NBC Universal. It also is calling for improved enforcement of conditions, including more explicit language to allow arbitrators to award attorneys fees for successful complaints.

Acknowledging Comcast’s argument that it doesn’t compete with TW Cable’s service areas, the Public Service Commission said that such a “horizontal view of competition appears too narrow.” Although they don’t have overlapping service territories, Comcast and Time Warner Cable “do compete with other providers of telephone, video and broadband services, whose competitive position could be undermined as a result of the proposed merger given the combined company’s enhanced market power over programming and other uopstream wholesale services.”

 

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