Cable Bosses Criticize Net Neutrality Rules, Downplay Further Mergers

Cable consolidation
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CHICAGO — The chiefs of major cable companies were outspoken when it came to criticizing FCC chairman Tom Wheeler and the agency’s recent regulatory moves, but cagey when it came to potential mergers in their own future.

At the Internet and Television Expo, the sole exception was Cablevision CEO James Dolan, who said, “I like to see us move on to consolidation of markets,” noting that consolidation in the New York marketplace, where Cablevision is based, “would provide a great deal of ingenuity and access to resources… and lower prices.”

“If New York was operated as one market, you would see Wi-Fi distributed throughout the entire marketplace,” he said.

When moderator Julia Boorstin asked if he would like to make a deal with Verizon FiOS, he said no. Asked if he would like to make a deal with Time Warner Cable, he said yes.

Time Warner Cable CEO Rob Marcus, however, said that he was not going to comment “on further M&A.”

Patrick Esser, CEO of Cox Communications, quipped, “I feel like I am in Match.com and we are all trying to update our relationship status.”

Marcus did comment on disagreement with Wheeler about the lack of competition in the broadband marketplace: “I feel like we operate in a different environment than he seems to live in. In my world, broadband is incredibly competitive, and I think the competition has in fact fueled an incredible amount of investment on our part, and it is an investment we continue to make.”

Michael Fries, president and CEO of Liberty Global, which does not have operations in the continental U.S., said that he was “baffled” by Wheeler’s remarks. “There is a presumption of guilt and a punishment of success that this industry has achieved that I have never experienced before,” he said.

He added that the FCC’s move to Title II regulation would remain under challenge by the cable industry: “It is terrible regulation, I am sorry. I will say what these guys are thinking.”

He said it is a contrast to his company’s experience in Europe, where regulators have focused on “a level playing field. They have focused on a light touch. They have focused on infrastructure competition. They have not arbitrarily defined broadband as 25 Mbps, for example. What incentive is there for a telco to invest, with that as the definition?”

The FCC voted in January to raise the standard for broadband service from 4 Mbps to 25 Mbps, meaning that the industry landscape is less competitive at the higher speed level.

“We suffer from the Stockholm syndrome in the U.S., but we have to be careful of our captors,” said Thomas Rutledge, president and CEO of Charter Communications. He added that even though broadband has become a bigger part of their business, their biggest spending is still for the cable side via programming costs.

Esser said that they have already seen rising legal costs and rising pole attachment fees in the wake of the FCC’s moves. “At the end of the day my customer pays for that,” he said.

Dolan, however, said that he didn’t see the net neutrality regulations as “affecting us much at all,” although he did say that he was concerned about FCC moves to allow government-owned broadband services as competitors.