Comcast Blasts TWC Deal 'Extortion'

Alleges Competitors Sought Biz Quid Pro Quos to Drop Deal Opposition
Author:
Publish date:
ComcastTWClogo.jpg

Taking off the gloves, Comcast struck back at critics of its proposed Time Warner Cable merger Wednesday, branding many of them extortionists just looking to further their own businesses and dismissing others as feeble efforts being peddled without factual support.

It said Discovery had "demanded unwarranted business concessions from Comcast as a condition of Discovery’s non-opposition to the transaction" -- Discovery called Comcast's charge an effort to divert attention from the deal's real problems (see below) -- and noted Netflix was trumping up its economic theories to get out from under content costs.

The remarks are from an executive summary of Comcast's response to petitions to deny and request for conditions on the deal filed by various competitors, public advocacy groups and others.

The deadline for its response was midnight Tuesday, Sept. 23, and the document, which was made avaiable early Wednesday morning, runs over three hundred pages.

Comcast suggested some of the criticisms of the deal were simply regurgitations of speculative and unsupported claims leveled "for years" at every major cable transaction, the kind of "sky is falling," "doom and gloom" scenarios offered up by Common Cause, Consumers Union, Consumer Federation of America, and others.

But the more specific ones, it said, had everything to do with trying to get billions out of Comcast in exchange for not opposing the deal.

Comcast did not explicitly match up the critic with the those deal asks, which it labeled extortion. But it had a laundry list of them, including "requests for free backbone interconnection; requests for participation in advertising “interconnects”; requests to share advanced advertising technology that Comcast develops; requests for wholesale service arrangements; requests to make all of Comcast’s programming agreements with every single programmer renewable on the same date; requests to renegotiate program carriage arrangements that are not due to expire; requests to expand carriage or increase fees; and many requests to agree to carry networks that do not even exist yet – or that exist, but that are carried by no one."

It said if just the programming quid pro quos were tallied, it would add up to more than $5 billion in additional programming costs, or $4 per month per customer by 2019 and "into perpetuity."

And Comcast said that had it given in to that "extortion," that would have trumped any of its critics supposed concerns about market power and consumers. "The significance of this extortion lies in not just the sheer audacity of some of the demands, but also the fact that each of the entities making the “ask” has all but conceded that if its individual business interests are met, then it has no concern whatsoever about the state of the industry, supposed market power going forward, or harm to consumers, competitors, or new entrants.

Comcast took aim at Discovery, Netflix, Cogent, Dish and Viamedia by name. 

*Discovery: "[L]ike many other programmers, is improperly using this proceeding to promote its own financial interests. In fact, Discovery demanded unwarranted business concessions from Comcast as a condition of Discovery’s non-opposition to the Transaction. Such extortionate demands are patently improper."

*Netflix: "What its comments and trumped-up economic theories here show is that Netflix will use any proceeding, in any context, to try to shift the costs for carrying its content onto the backs of others – a great business result for Netflix, but one that would increase prices to consumers and disserve the public interest.

*Dish. "Dish claims that the transaction will create three potential “chokepoints” in the combined company’s broadband services. Dish is wrong on each count..."

*Cogent: "Cogent peddles many of the same economic arguments about the transaction as Netflix, but for a different self-interested agenda."

*Viamedia: "Viamedia is seeking business advantages here that it cannot obtain in the marketplace.

"As one of the few remaining independent programmers in the country, Discovery has a nearly 30-year history of being one of the most fair, rational and reasonable actors within the industry," said David Leavy, Discovery chief communications officer. "Our long-term commitment to investing in education content that benefits all consumers has been rewarded with nearly 11% of the viewership of ad-supported cable in 2014.  We are always talking to our distribution partners about realizing fair value for our content across all consumer platforms, and it is very unfortunate that Comcast is trying to divert attention away from the real issue. 

"Comcast chooses to not talk about the substantial program discounts they currently get, or what they would do post-merger to demand extreme discounts from cable programmers or block the launch of new networks and brands.  Discovery has 13 networks in the U.S. that strive to serve all ethnic and demographic groups with high quality, family friendly programming.  We stand by our concerns that Comcast could use its enhanced leverage from the proposed merger to impose onerous terms that jeopardize the ability of independent programmers like Discovery to continue investing in a diverse portfolio of content and brands.  Comcast's silence on the details of key issues like program discounts, and instead, its continued strategy of intimidating voices that are not fully supportive of its position, is troubling."

Comcast also used the response to provide a laundry list of its supporters. In fact it led with the positives.

It cited Ovation, Starz!, INSP, Hallmark, and New England Sports Network among programmers who supported the deal without qualification.

Ad agencies supporting the deal include GroupM, Horizon Media, and MediaVest.

On the political front, Comcast pointed to a letter from 50 mayors from cities with either Comcast or TWC cable service.

"Applicants have conclusively demonstrated that the Transaction will serve the public interest, convenience, and necessity," said Comcast. "Accordingly, Applicants respectfully urge the Commission to approve the license transfer applications expeditiously.

Comcast and Time Warner Cable announced in February that their directors had approved an agreement in which Comcast will acquire 100% of Time Warner Cable for stock worth $45.2 billion.

Related