Less than an hour after CNBC’s David Faber broke the news late Wednesday night that Comcast had reached a $45 billion deal to acquire Time Warner Cable, consumer advocates had already drawn up a list of concerns.
Comcast’s deal to acquire Time Warner Cable will undergo a lengthy regulatory review by both the Federal Communications Commission and the Justice Department, which okayed the cable giant’s plan to acquire NBCUniversal three years ago but hasn’t reacted as favorably to horizontal agreements like this between two similar companies.
Comcast has a good track record of getting deals passed by regulators, and the company spends a significant amount of time and money making friends in Washington. Even if this deal is approved, it may come with significant conditions that could cause Comcast some heartburn.
Earlier this month both the Justice Department’s antitrust chief and FCC Chairman Tom Wheeler went out of their way to stomp on SoftBank Corp’s idea of buying T-Mobile USA over worries about decreased competition. AT&T executives are still sore over regulators’ denial of their $39 billion plan to buy T-Mobile in 2011.
This deal is different since cable companies like Comcast and Time Warner don’t compete in the same markets, like AT&T, T-Mobile and other wireless carriers. Comcast has already offered to divest three million customers as part of the deal to keep its overall national market share at under 30 percent to appease regulatory concerns. (There is no national cable market cap anymore because a federal appeals court rejected the FCC’s 30 percent limit in 2009 and the agency never tried to set a new limit.)
Even though Comcast is the nation’s largest cable provider and Time Warner is the second largest, Comcast officials are arguing that antitrust regulators should look more broadly at the video market and include satellite television, Verizon’s FiOS and AT&T’s U-verse pay-TV service.
Antitrust officials are likely to examine how a combined Comcast-Time Warner could exert more market power in fee negotiations with broadcasters for the rights to carry their programming. They’ll also likely look at the combined company’s control over video content, especially regional sports networks, and look at issues like peering agreements with Internet backbone operators that have agreements to deliver traffic from Netflix and other web companies.
Four years ago Comcast got into a dispute with Internet network operator Level 3 over how much it would charge to deliver Netflix traffic to Comcast customers. That argument was eventually settled, but disputes like it have continued to be an issue for some consumers who complain that Netflix and other video downloads are slower than other Internet traffic.
At the FCC, regulators can look at basically anything involving the deal since the agency is tasked with ensuring that a merger is in the public interest.
One issue that may not come up that much is net neutrality, even though the FCC is currently focused on writing new rules to ensure Internet providers don’t deliberately block or slow legal Web traffic. Comcast agreed to abide by the agency’s “Open Internet” rules until 2018 when it bought NBCUniversal. The company is volunteering to extend that agreement to cover Time Warner’s Internet customers as well. That means that the FCC’s Open Internet rules — which were rejected by a federal appeals court in January — could still be enforced by the FCC over the nation’s largest Internet provider.
The agency may try to extend Comcast’s net neutrality agreement further as well as other conditions it agreed to in 2011 when the agency approved its NBCUniversal purchase. Most of the NBCUniversal conditions expire in 2018, although the agency could now try to extend them while adding some more.
“I’d look to the Comcast/NBCU conditions to be extended, especially the content sharing and net neutrality conditions and also some price controls, especially for low-end users,” said Robert McDowell, a former FCC Republican commissioner who helped approve the NBCU deal. “From a 50,000 foot level, Chairman Wheeler can accomplish a lot of public policy goals through ‘voluntary’ merger conditions more quickly than he could through the commission’s rule-making process.”
Not surprisingly, Twitter has been abuzz with consumers complaining about the deal; public interest groups are already panning it. “No one woke up this morning wishing their cable company was bigger or had more control over what they could watch or download,” said Free Press president Craig Aaron, in a statement. “This deal would be a disaster for consumers and must be stopped.”
Comcast owns NBCUniversal, which is an investor in Re/code.
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