Comcast’s proposed takeover of Time Warner Cable might be in danger. Because the deal has to pass two different regulatory agencies, it could be harder for the company to win over regulators. And now politicians are weighing in against the merger, making it even more complicated.
The New York Times had this story by Emily Steel laying out the Senators’ arguments against the deal:
A group of six senators on Tuesday urged regulators to reject Comcast’s proposed $45 billion takeover of Time Warner Cable, arguing that the combination of the country’s two largest cable operators would give one company too much power over the future of television and broadband.
The senators’ comments, sent in a letter to the Justice Department and the Federal Communications Commission, came ahead of meetings between the regulators and the companies about the deal, which are scheduled for Wednesday.
Should the merger be approved, Comcast would control about 30 percent of the country’s pay television subscribers. It would also control an estimated 35 to 50 percent of the nation’s broadband Internet service, depending on how regulators define the market.
The Quartz story by John McDuling pointed out that both the Federal Communications Commission and the Justice Department would have to approve the deal:
Big media mergers in the US need the blessing of two government agencies—the Federal Communications Commission (FCC) which regulates the media and telecom industries, and the DoJ, whose purview includes competition (antitrust) laws.
The FCC review, which must take into account the “public interest” has always been considered finely balanced. It has been paused twice, and political pressure is mounting. Today six liberal Democratic senators urged the FCC to block the deal.
The DoJ review was considered less risky, because it largely considers competition issues—and as Comcast and Time Warner Cable like to point out, they don’t actually compete directly against each other, geographically.
Brent Kendall and Shalini Ramachandran wrote for The Wall Street Journal that it isn’t know what concessions Comcast will be willing to make to ensure the deal goes through, but that the Justice Department would likely need to see something:
It isn’t known what promises Comcast might be prepared to offer, but when the cable giant announced the Time Warner Cable deal in February 2014, it said it was prepared to extend certain commitments it made in the NBCUniversal transaction to the current deal.
To ease concerns about the NBCUniversal deal—which involved the accumulation of broadcast and cable TV networks as well as a studio—Comcast agreed to an array of conduct conditions with the department and the Federal Communications Commission.
Those included promises not to discriminate against online video distributors or retaliate against other networks, cable programmers or studios for licensing content to Comcast’s competitors. The company also agreed to follow open-Internet rules.
People familiar with the government’s 14-month review of Comcast’s proposed $45 billion acquisition of Time Warner Cable say similar types of promises would be a tougher sell with enforcers this time around, at least in part because there are questions about whether the earlier set of conditions have worked as intended.
Bloomberg’s Todd Shields pointed out that the deal could offer benefits to consumers:
The deal offers consumers benefits that are “demonstrated and real” including more video-on-demand and faster broadband, said Sena Fitzmaurice, a Washington-based spokeswoman for Comcast.
“These benefits all come with no reduction in competition for consumers,” she said in an e-mail. “We’ll serve less than 30 percent of the video market, and only about 30 million of the 87 million broadband subscriptions in the U.S.”
The senators in their letter said Comcast would have 57 percent of the broadband Internet market and 30 percent of the cable market. The enlarged company would have incentive to prioritize its programming over that of competitors, and “ability to drive out competitors” leading to larger customer bills, they said.
Staff attorneys at the Justice Department are preparing to recommend blocking the merger, people familiar with the agency’s process said last week.
Peter Carr, a Justice Department spokesman, declined to comment as did Kim Hart, an FCC spokeswoman.
The Washington Post story by Brian Fung said that Comcast’s arguments could fall short for what regulators want to hear:
Between Comcast’s potential power over other industry players that are crucial to your Internet and TV experience — Apple, for instance, or Netflix, or Disney which owns ABC and ESPN — and the company’s sheer reach in its own industry, regulators seem skeptical of Comcast’s argument that the deal won’t have any anti-competitive effects.
One way that’s played out is in a discussion about how to talk about competition. Comcast has argued that it doesn’t have a presence where Time Warner Cable does — so its taking over TWC wouldn’t eliminate a competitor from a given market and therefore shouldn’t raise competitive concerns.
But other economists say it’s not enough to look at what’ll happen in a local market; you have to look at the merger from a national perspective. And for the reasons above, they argue, the Justice Department and FCC should study not just how the merger affects Comcast’s position within the cable industry, but also Comcast’s relationships to other industries, as well.
Comcast has already offered to make some concessions, such as shedding customers to avoid having too much sway in one market. They’re also set to meet with regulators on Wednesday to discuss those potential conditions. But according to the Wall Street Journal story, Comcast hasn’t met with the Justice Department since it announced the merger more than a year ago, which suggests DOJ may not be interested in the concessions Comcast is offering. (Update: A source close to the negotiations says Comcast has been meeting with DOJ officials “all along — pretty much nearly every week.”)
The deal has a long way to go before it’s official. With the Congressional opposition, it could be even harder to get through the two regulatory agencies. While Comcast is working to make a case for why the combination is good for consumers, it’s a tough sell when you look at how much of the market they would control.
