After a morning media blitz by Comcast to announce its plans to buy Time Warner Cable, the companies now face the arduous task of selling it to D.C. regulators over the howls of protest from media watchdog orgs.
While Comcast’s policy chief David L. Cohen (pictured), on a conference call with reporters Thursday, characterized the merger as “pro-consumer” and said it would do nothing to stifle competition, the cable industry is not exactly beloved in the eyes of the public, members of which frequently complain of rising cable bills and are wary of any moves than will limit access to the Internet.
Cohen said that “once you take a breath and get past some of the hysteria,” the result is a transaction that is “approvable by the FCC, the FTC or the Justice Department and relevant state or local regulators.” He said that the merger will not result in “reduced customer choice at all,” and that the company would command lower than 30% of market share, the threshold for previous FCC attempts (overturned in the courts) to limit consolidation.
Perhaps no question is greater in consumers’ minds than whether the combination will raise their monthly bills, amid rising programming costs and more features added to cable packages. Asked if the merger would lead to lower prices, Cohen said, “It is always hard to quantify.” He said that Comcast is “not promising that they will go down or even that they will increase less rapidly,” but he suggested that the cost savings from the merger could result in “consumer benefit.”
The industry, however, has become a target on Capitol Hill. Such politicos as Sen. John McCain (R-Ariz.) and Sen. Richard Blumenthal (D-Conn.) have jumped on consumer dissatisfaction in proposing legislation to give consumers more choices, unbundling the tiers that force subscribers to take a myriad of channels whether they want them or not.
Such legislation is a political longshot, but the proposed merger is likely to highlight-long simmering tensions between distributors and content companies, particularly when it comes to negotiating retransmission agreements for broadcasters.
Comcast lobbyists will be working overtime in D.C.’s corridors of power to secure approvals in the face of criticism that the deal is “an affront to the public interest,” in the words of former FCC commissioner Michael Copps, now an adviser to Common Cause.
Comcast argues that the broadcast stations in the markets it is acquiring will have greater protections in retransmission negotiations, with Comcast bound by conditions to which it agreed as part of its acquisition of NBCUniversal.
Cohen also said that when it comes to negotiating for carriage of channels, there are an increasing number of competitors for distribution, from satellite operators and telcos to emerging online video markets like Google Fiber. He even said that the competition has become so great that “the balance of power really has tilted decisively on the programmers’ side.”
“I am going to make the argument to (programmers), ‘You guys can be calm. This is not going to impact our ability to dramatically negotiate with you.’”
Comcast also faces opposition in Hollywood’s content community. The Writers Guild of America West, which warned of the company’s acquisition of NBCU, with then-president John Wells testifying at a congressional hearing, said that the combination with Time Warner Cable is “bad for everyone: content creators, programmers, suppliers and consumers.
“As writers know all too well, media consolidation leads to already too powerful companies limiting competition. The WGAW will fight to stop this ill-conceived merger.”
The combined company would have about 32% of all broadband subscribers after it divests about 3 million subscribers, according to a report from MoffettNathanson Research. As part of its conditions for acquiring NBCUniversal, Comcast agreed to abide by Net neutrality rules until 2018, and it says that it will apply those non-discrimination provisions to Time Warner Cable customers as well. That is significant given that D.C. Circuit’s ruling last month that overturned some of those rules.
With this merger, the company could face additional conditions on usage-based pricing, among other things, according to MoffettNathanson, or it could be asked to extend the period by which it is bound by Net neutrality. Asked whether Comcast would agreed to such an extension, Cohen said: “It is hard enough to negotiate with the government. I would rather not negotiate with the press.” But he said he “fully expects” FCC chairman Tom Wheeler to come up with a new Net neutrality regime “that he is comfortable with.”
Comcast also indicated that Time Warner Cable broadband consumers will notice the difference once they become Comcast customers, with faster speeds and greater reliability. Cable customers also will see more video-on-demand choices and an advanced DVR that allows them to download recorded content to use on mobile devices.
Comcast will face at least one congressional hearing in the coming months. Sen. Amy Klobuchar (D-Minn.) announced plans to hold a hearing of the Senate Judiciary’s antitrust subcommittee. It also will face a lengthy review before the FCC, with a file open for the public to offer its comments. And it is likely to also bring new scrutiny to its political strength in Washington, where it is among the top lobbyists and has longtime connections to the administration. Cohen, for instance, is an Obama campaign bundler and was a guest at this week’s state dinner at the White House for French President Francois Hollande.
And even as some lawmakers, like Al Franken of Minnesota, issued statements critical of the merger, Comcast had secured an endorsement from a prominent Senate leader, Sen. Chuck Schumer (D-N.Y.). He said that he got a commitment from Cohen on Thursday to expand its workforce in upstate New York.
“I urged Mr. Cohen to maintain the entire TWC workforce in New York and consider adding to their presence – and while there was no guarantee – my expectation is that Comcast will invest in New York – as they did after the merger with NBC – and the results of the merger will be positive for New York,” Schumer said in a statement.