Report: FCC Staff to Seek Hearing on Comcast-TW Cable Merger

The Wall Street Journal reported on Wednesday that FCC staff were preparing to recommend that Comcast’s bid to acquire Time Warner Cable be sent to a hearing, a move that could raise more doubts that the transaction will get the government’s greenlight.

The report, which cited unnamed sources, came on the same day Comcast’s effort to win government approval for the merger entered a new phase as company representatives met with officials of the Department of Justice and the FCC with both agencies reviewing the $45 billion deal.

A hearing on the merger would be before an administrative law judge, a far different review than the typical process where staff scrutinize transactions and it is circulated between commissioners for approval. Former FCC commissioner Robert McDowell told the Journal last week, “Mergers are never put to hearing in order to approve them. They are designated for a hearing in order to kill them.”

Comcast spokeswoman Sena Fitzmaurice declined to comment on the Wall Street Journal report, but said in a statement, “We had one in a series of meetings with the Department of Justice today, as well as another meeting with the FCC. As with all of our DOJ discussions in the past and going forward, we do not believe it is appropriate to share the content of those meetings publicly, and we, therefore, have no comment.”

An FCC spokeswoman did not immediately return a request for comment.

The DOJ and the FCC are each reviewing the transaction.

Some Wall Street analysts have lowered their chances of the deal gaining approval. S&P Capital IQ’s Tuna Amobi said last week that the regulatory environment has shifted in Washington, particularly at the FCC, which recently passed a robust set of net neutrality rules.

He suggested that the FCC could be sensitive to opponents’ arguments that “no amount of safeguards” will be enough to address their concerns.

The focus of the concerns of opponents has been on Comcast’s share of the broadband market — estimated at 35% to 40%, but at 57% at higher Internet speeds of 25 Mbps and higher. The FCC recently set 25 Mbps as the standard benchmark for broadband service.

Other groups, like the Writers Guild of America, have warned of the increased market leverage that the company would have, including over the fast-growing market for Internet video.

Still, last week, Macquarie Securities’ Amy Yong published the results of a survey of 50 investors, with 83% believing that the deal would close. Some 60% said that it was unlikely that Comcast would walk away.

That survey was conducted before a Bloomberg report that Department of Justice attorneys were preparing to recommend against the transaction. A Time Warner Cable spokesman said the company had “no indication” that is the case.

The story, albeit citing unnamed sources, triggered intense speculation about the deal’s prospects.

Some cable industry executives have speculated that the story may have been leaked by the DOJ as part of an effort to better negotiate with Comcast-TW Cable over potential conditions, or to at the very least send a signal that the transaction is unlikely to gain approval as is.

The DOJ could block the merger, or engage in negotiations with Comcast over potential conditions.

Earlier on Wednesday, Comcast published a blog post from executive VP David Cohen, defending the merger and the company’s deployment of its Internet Essentials program for low-income households with children.

He also tried to refute claims that Comcast would favor its own content as it engages in trials over broadband pricing tied to a subscriber’s data usage.

“Comcast treats all Internet traffic the same, whether it involves affiliated or unaffiliated programming and whether the traffic comes from an affiliated or unaffiliated website,” he wrote.

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