D.C. Critics Blast Comcast’s Plans to Merge With Time Warner Cable

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It was only a few years ago that Comcast went through the rigorous, year-long process to secure regulatory approval of its acquisition of NBCUniversal. Now, with its plans for the country’s largest cable system to acquire the second largest, it is ready to do it again.

Comcast will face what is likely to be a 6- to 12- month process for securing regulatory approval, with the FCC and either the Department of Justice or the Federal Trade Commission charged with giving the transaction the greenlight. It will have to make the case to the FCC that its acquisition is in the public interest, and to the DOJ or the FTC (depending on which entity scrutizes the transaction) that it is not anti-competitive.

Their case for regulators approving the $45.2 billion transaction is that they do not compete with Time Warner Cable in local markets, and that its rivals from satellite, telecom and, lately, Google Fiber are ripe for maintaining vigorous consumer choice. Comcast is arguing that the acquisition ultimately will be good for consumers in enhancing technology in the newly combined company and extending some of the public interest commitment that it made for the NBCU transaction to Time Warner Cable customers.

FCC chairman Tom Wheeler had no comment. But since he took the post in November, he has indicated that he would judge such consolidation based on competition in the marketplace. “When competition is high, regulation can be low. When competition is low, we are willing to act in the public interest.”

That is the question: Comcast argues it faces robust competition from other technologies. Many public interest groups, however, immediately condemned it.

“This is so over the top that it ought to be dead on arrival at the FCC,” said Michael Copps, a former FCC commissioner who is now adviser to Common Cause. “The proposed deal runs roughshod over competition and consumer choice and is an affront to the public interest.”

Some critics seized on Comcast’s contention that it will not be reducing competition in any market, noting that is because cable operators have monopolies in their individual jurisdictions.

In a conference call with reporters, David L. Cohen, exec VP of Comcast, even noted “some of the hysteria” already surrounding the transaction.

“The proposed transaction will not reduce competition in any relevant market,” Cohen argued.

While the decision of whether to approve the merger will lie in the hands of government regulators, a transaction of this size is likely to stir intense debate on Capitol Hill and elsewhere about the nature of the cable business today.

Sen. Amy Klobuchar (D-Minn.), the chairwoman of the Senate Judiciary antitrust subcommittee, said that she plans to hold a hearing to “carefully scrutinize the details of this merger and its potential consequences for both consumers and competition.”

Sen. Patrick Leahy (D-Vt.), chairman of the Senate Judiciary Committee, said in a statement, “Millions of Americans rely on cable connectivity to receive the programs they love and to access the Internet at the fast speed needed as we conduct more of our lives online. I will closely monitor the response of the FCC and the antitrust authorities to this transaction.”

Sen. Al Franken (D-Minn.), a critic of the Comcast-NBCUniversal merger, shot off a letter to the FCC, the FTC and the Department of Justice with “serious reservations” about the transaction.

“Many consumers would switch cable providers if only they had a viable option to do so,” he wrote. “Unfortunately, a handful of cable providers dominate the market, leaving consumers with little choice but to pay high bills for often unsatisfactory service. I am concerned that Comcast’s proposed acquisition of Time Warner would only make things worse for consumers.”

Franken, who sits on the Senate Judiciary Committee, also raised the prospect of revisiting how Comcast and NBCU has complied with the conditions that helped secure government approval of their transaction. He said in the letter that there were “ongoing questions as to Comcast’s compliance with the terms and conditions set forth as part of the NBC Universal deal.”

Comcast also faces industry opposition.

The American Cable Assn., which represents small- and medium-sized cable companies, urged the FCC to update its rules governing competition among cable operators for programming.

“Comcast-NBCU’s takeover of Time Warner Cable would vastly increase the number of cable homes served by an operator affiliated with NBCU’s popular programming, creating new incentives for NBCU to demand unfair terms and conditions from TWC’s pay-TV distribution rivals, including ACA members,” the organization’s president, Matthew M. Polka, said in a statement.

Even TheBlaze, the network owned by Glenn Beck, expressed misgivings.

“As monopolies in the markets that they serve, cable companies often ignore their subscribers’ wishes,” said Chris Balfe, the company’s CEO. “Major MVPDs do not have a good history of supporting independent programmers whose content is in demand like TheBlaze and we are skeptical that giving Comcast even more market power will benefit consumers, promote competition or lead to more diversity of voices or consumer choice on their channel line ups.”

In a research report on Thursday, analyst Craig Moffett of Moffett Nathanson wrote that Comcast should expect a “cacophony of protest,” predicting that the “far more critical” question facing regulators will be that the transaction will reduce the “diversity of voices.”

“Independent programmers, in particular, will complain that Comcast will now be simply too powerful; a threat from the new Comcast to drop carriage would amount to threat of a death sentence (or so they will claim),” Moffett wrote in a research report.

Comcast is a lobbying force in Washington. According to the Center for Responsive Politics, the company spent $18.8 million in lobbying in 2013, placing it in the top ten spenders of all entities.

It secured regulatory approval of its acquisition of NBCU after a protracted period of debate, including congressional hearings and warnings from public interest groups of its impact. Comcast sweetened some of its public interest commitments, including ones related to independent programming and expanding diversity. Among its initial opponents was Bloomberg LP, which eventually gave its support to the merger but is in the midst of challenging Comcast’s compliance with one of its conditions that it place news channels within the same neighborhood on the channel lineup. The Tennis Channel also is seeking Supreme Court review after the D.C. Circuit struck down an FCC ruling that found that Comcast was discriminating against the channel by not placing it in the same tier as some of the sports channels it owns, like the Golf Channel.

But Comcast argues that the impact of its proposed Time Warner Cable acquisition will be to create a “pro-consumer cable competitor.” In a listing of its public interest benefits, it made a point of noting that the net neutrality rules that it must follow as a condition of its acquisition of NBCU will apply to Time Warner Cable customers, even though the D.C. Circuit has struck down the FCC’s rules to prevent Internet providers from discriminating against certain types of traffic.

“Because Comcast and Time Warner Cable do not currently compete to serve customers, there will be no change in market share in local markets for video, high-speed data, and voice,” Comcast said. “And, there will be no impact on the competitiveness of other MVPDs, including DirecTV, DISH, Verizon, AT&T, and other cable companies, because they will still be competing with the same number of competitors in each market in which they operate. This absence of horizontal overlap means that the transaction will not harm competition or reduce consumers’ choice in any way.”