Weighing In on a Mega-Merger

Comcast-TWC Deal Critics, Fans Pile On At FCC
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WASHINGTON — Comcast can now size up its opposition.

A range of opponents have signalled their displeasure with the largest U.S. MSO’s proposed $45.2 billion transaction to purchase No. 2 Time Warner Cable since it was announced in February. Should the two companies consummate the deal — which Comcast said last week could happen by early next year — it would result in a mega-MSO with about 30 million subscribers and some 30% of the U.S. pay TV market.

Now, though, opponents of the deal are on the books at the Federal Communications Commission — chapter, verse and conditions — and Philadelphia-based Comcast can plan its counterpunches.

Dish Network, Free Press, the Consumer Federation of America, the Writers Guild of America West, the Future of Music Coalition, and WeatherNation TV were among those officially petitioning the FCC to block the deal.

If the agency doesn’t stop the transaction outright, the petitioners want plenty of conditions. Among the asks were protecting spot cable; making it easier to hook up third-party modems in Charter Communications systems (Stamford, Conn.-based Charter will own or manage an additional 5 million subscribers through transactions related to the Comcast-TWC deal); a la carte; retransmisson-consent conditions; and a veritable host of others. (See “Strings Attached,”.)

The deadline for comments from both sides was Aug. 25. Comcast noted that more than 200 groups and officials have weighed in with their support, but critics citing everything from Comcast’s size to its sports programming to its control of the weather, have argued against it.

Comcast received backing from a host of groups that claimed their partnership with the cable company benefitted minorities, broadband adoption, kids and much more, going beyond financial support to provide tech support and labor. Some critics labeled those efforts as buying support for the deal with corporate contributions.

Many of the merger criticisms centered on the combined companies’ high-speed Internet subscriber count, with some putting it as high as 60% of the U.S. broadband market. Comcast said its share of Internet customers was at most 35.5%, and as low as 15% if wireless LTE providers were included.

Comcast has until Sept. 23 to reply to the comments, but executive vice president David Cohen, who is responsible for shepherding the deal through the FCC and the Justice Department — as he did with the MSO’s 2011 acquisition of NBCUniversal — has already weighed in with a lengthy blog post responding to critics (see “Deal or No Deal,”), saying that some of the programmers critical of the deal are ones that failed to renegotiate better terms in exchange for their support.

Here are some highlights from last week’s FCC data drop.

FOES & CRITICS

• Netflix has complained the paid-peering deal it struck with Comcast was essentially extracted under duress (Comcast disputes this). The over-the-top video provider said the deal must be blocked, citing interconnection issues that, in Netflix’s view, should be part of the network-neutrality conversation. In a voluminous filing, Netflix said the deal is a fundamental threat to the online video distributor (OVD) industry, creating a company with the size and motive to foreclose online competition and slow or degrade traffic for customers who have paid for speed and access.

Free Press, Public Knowledge, Common Cause, Consumers Union and about 60 other groups said the deal would create a gatekeeper with too much control over the future of the Internet. They said the merger would “undermine” ownership and content diversity and that “no amount of promises or conditions would be good enough to assuage concerns about this merger.” (See “Deal or No Deal,”).

Dish Network, the No. 2 U.S. satellite-TV provider, said the rosy picture Comcast and Time Warner Cable have painted of the merger is misleading. The real picture, Dish said, would show a company with the incentive and ability to sabotage OVD and traditional video rivals. No conditions would remedy the “serious competitive harms” of the merger, Dish has said.

• Programmer WeatherNation TV wants the deal blocked because it said the company would have the ability to foreclose competition in the meteorological programming space — Comcast has a 25% interest in The Weather Co., owner of The Weather Channel. It pointed out that The Weather Co. is already both WeatherNation’s chief competition and a key supplier of video graphics and data feeds.

Sinclair Broadcast Group said the FCC must either put conditions on the Comcast-Time Warner Cable merger — including retransmission-consent conditions (see chart) — deregulate broadcasters or deny the merger, a combination it said could drive TV stations out of business. Sinclair has said the deal would create a company with “unprecedented” horizontal and vertical scale, which it could use to raise prices, reduce competition, and diminish localism, diversity and consumer choice.

• No amount of conditions are enough for the Writers Guild of America West, the union representing TV and online writers, including news writers. “We have reached a critical juncture in the history of the media, broadband and telecommunications industries,” WGAW president Chris Keyser said of the filing last week. “The FCC must put a stop to this spate of merger madness that threatens every principle of free market economics we deem important.”

FANS

Urban League of Springfield, Mass., president Henry Thomas praised Comcast’s Internet Essentials low-cost broadband program and urged the FCC to approve the deal. “It is hard to find a more effective program to bring Internet to those young people who depend on access for school work more and more every day,” he said, welcoming expansion to former TWC systems once the deal is approved.

• The Democratic Municipal Officials Association weighed in to support the deal, even though Comcast executive vice president David Cohen has said he does not think municipal broadband is the best way to bridge the digital divide. “This transaction stands to produce new investment in infrastructure that will enhance video and Internet service in our communities,” DMO president Cindy Lerner said.

TiVo cited Comcast’s history of working with it on retail set-top innovation as a reason it supports the deal. “TiVo believes that approval of the above-referenced transaction should benefit consumers that wish to use retail devices to access their pay TV programming,” the digital video recorder manufacturer said.

• The Competitive Enterprise Institute, a libertarian public-policy organization, said the FCC should approve the deal without conditions. The group said it doesn’t know whether the deal will provide all the benefits economic theory suggests, but it said it is confident that “the upside of the deal for consumers is far more promising than its downside is worrisome.”

Crown Media Holdings, parent of Hallmark Channel and Hallmark Movie Channel, is one programmer that is fine with the deal. In a letter to FCC chairman Tom Wheeler that was entered into the docket, Crown Media president Bill Abbott said Comcast has been “one of the most supportive distributors of unaffiliated and independent programmers,” and that he believes Comcast- TWC will be a net positive for Hallmark and other independent programmers.

FENCE-SITTERS

• The National Association of Broadcasters — in a pitched battle with cable operators over retransmission consent, but counting Comcast’s NBCUniversal among its members — steered a middle course. It did not comment on the substance of the deal, but signaled that Comcast was currently in discussions with some broadcast groups over their concerns.

• The New York Public Service Commission is conducting its own review, and said it was not ready to take a side. But it also said it thought Comcast and Time Warner Cable were low-balling the potential for both horizontal and vertical harms.

Discovery Communications in July hired a pair of Capitol Hill veterans to lobby on the deal. “Consolidation raises some real issues here in the U.S. and everywhere in the world,” CEO David Zaslav said at a Sanford Bernstein investor conference in May. A Discovery source said company execs were to meet with FCC officials last week to talk about the transaction, but that it was not filing comments supporting or opposing it at this time. The source said Discovery could join in reply comments, which are due Sept. 23.

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