House Republican and Democratic lawmakers raised concerns about Comcast’s proposed combination with Time Warner Cable, including the possibility that the company would gain too much market power over the lineup of channels and programming over its systems.
The hearing before a House Judiciary antitrust subcommittee did not yield any major stumbling blocks that would put the merger in doubt. In fact, none of the lawmakers expressed outright opposition to the merger.
But even Republicans who described themselves as free-market purists expressed concerns over what the $45 billion transaction would mean for their cable bills and the availability of a diversity of programming options.
Rep. Blake Farenthold (R-Texas) said that he did “not want to sound hostile to this merger,” but nevertheless expressed concern that new networks, like Univision Sports, would be able to get carriage, or that Comcast would have incentives to offer up one of its Houston sports channels, featuring Astros games, to competitors.
“How are we going to address the issue of fair access to your programming?” he asked.
Univision announced its opposition to the transaction late last month.
Comcast’s David L. Cohen said that they already carry eight Univision networks, and, when it comes to adding additional channels, said that they will “resolve our issues with Univision in due course.”
He also said that the fears access to a bevy of regional sports networks were “overstated,” as program access rules are in place to prevent discriminatory practices and Comcast is bound by conditions of its combination with NBCUniversal in 2011 that allow for small cable networks to enter into arbitration in disputes over sports programming.
The four-hour hearing was lengthened by the presence of eight witnesses and, at least at the beginning, made all the more uncomfortable by the fact that the heating system in the House venue was left on, with temperatures in the 80s.
The proposed merger, which would give Comcast a leading cable presence in 19 of the 20 largest markets, has stoked some fears that the larger company would have more leverage over programming costs when negotiating carriage contracts.
Matthew Polka, the CEO of the American Cable Assn., which represents small- and medium-sized cable operators, said that the transaction would result in higher prices and fewer choices for consumers, as Comcast gains greater bargaining power in negotiations. For example, he said that the company would have the “incentive” to charge higher prices for it channels, or, when it comes to carrying non-Comcast channels, that it will demand “even larger volume discounts from its rivals.”
Cohen, however, defended the merger as falling well within the size acceptable to antitrust regulators. He noted that the FCC has twice concluded that a cap of 30% of the cable households was the cap “justified to prevent undue control” over programming negotiations. Although courts have struck down that cap, the Comcast-TWC combination would still fall below it, he said.
The Department of Justice and the FCC are reviewing the merger, and while congressional committees will not have a yes or no vote on the deal, they do have oversight.
So far, the most strident opponent on Capitol Hill is Sen. Al Franken (D-Minn.), who has warned that the market power of the combined company also would have too great of control over the broadband market. By Comcast’s estimate, it will have about 40% of broadband subscribers.
Even if they have not come out against it, of concern to some lawmakers was the ability of independent channels, particularly startups, to find and retain carriage. Patrick Gottsch, founder and chairman of Rural Media Group, told the panel that Comcast dropped carriage of its RFD TV in Colorado and New Mexico markets last year even though it had “strong ratings” and the decision to remove it was “made over the objections of customers.”
That drew a number of questions over why Comcast made the decision to drop the channel. In fact, Rep. Louie Gohmert (R-Texas) told Cohen, flippantly, “I get that. Why would Comcast want people who cling to God and their guns?” He even read an e-mail he said inferred that Comcast was part of a politically motivated effort to keep Glenn Beck’s “The Blaze” from gaining a cable footprint. Cohen vowed that the company would not engage in partisan-motivated programming decisions.
RFD TV, he said, was dropped in those markets as the company looked for “bandwith” to add high definition versions of the Smithsonian Channel and a cooking channel. Comcast still carries RFD TV on other systems, and Cohen noted that Dish and DirecTV still offer it in those markets.”We are primarily an urban clustered cable company,” he said. “It is our goal to provide programming to customers that they want to see.” In response, Rep. Doug Collins (R-Ga.), said, “A lot of people move from the farm to the urban area, but still like to be connected to the farm.”
Lawmakers also queried Comcast about rising prices. Cohen has said that they were “not promising that customer bills are going to go down or even increase less rapidly.” On Thursday, he said that the merger “has the potential to slow the increase in prices,” as it would give it more economies of scale. He said that the major factor in price increases has been the cost of programming, which has risen 120% in the past decade. Cable bills, on average, have risen by half that amount.
Rep. Darrell Issa (R-Calif.) suggested that there needed to be legislative reform of antitrust laws. While Comcast may be able to “check the box” and see the merger approved, he wondered whether the laws are sufficient to keep pace with “what is going on today.”
Existing laws have to do with a company that “has the market power to distort” the landscape. The laws “don’t talk about market access that promotes” competition.