Deal Conditions Can’t Fix Comcast/TWC, Merger’s Opponents Say

Critics of Comcast’s deal to buy Time Warner Cable are making “discredited arguments” that “don’t have any merit” said Comcast Executive Vice President David Cohen in a blog post responding (http://bit.ly/1p9Ffk7) to comments filed in docket 14-57 Monday (http://bit.ly/1wthpno). The deadline was 11:59 p.m. for comments on the transaction.

"Our getting bigger is better for consumers,” said Cohen, disputing a joint petition to deny (http://bit.ly/1vGXhtX) from Consumers Union and Common Cause. The American Antitrust Institute (AAI), the Independent Telephone and Telecommunications Alliance and others, including a group of 65 content producer and public interest organizations, opposed the deal. The Democratic Governors Association (http://bit.ly/XMUp3y), Free State Foundation (http://bit.ly/1rvBd7q), numerous state legislators and Boys & Girls Clubs of America and diversity groups supported the deal as good for the public interest. Commenters critical of the deal are using the review “to advance agendas that have nothing to do with this transaction,” said Cohen. “We're pleased to have the support of a broad range of individuals, businesses, and organizations."

Comcast/TWC’s competitive harms can’t be mitigated by conditions, said AAI (http://bit.ly/1pZ3ErL), Common Cause, Consumers Union and others. Conditions have proven unsuccessful at limiting anticompetitive behavior, they said. Because Comcast knows its business better than regulators do, it’s very difficult to craft conditions that stop specific conduct, they said. Consumers Union pointed to Comcast’s conflict with Netflix over Internet speeds and with Bloomberg over neighborhooding as examples of conditions from Comcast/NBCUniversal proving ineffective. “Any application of behavioral remedies in Comcast-TWC would be usefully informed by actual experience with such remedies in Comcast-NBCU” said AAI. The only effective response to the application is to deny it,” said Common Cause and Consumers Union.

Some conditions could address “serious potential anticompetitive impact” on video, broadband and low-income telecom customers, said a joint filing from the National Association of State Utility Consumer Advocates and the New Jersey Division of Rate Counsel. Such conditions would include a la carte video options, a freeze on rates now charged within certain tiers of programming, and rules promoting voice competition and requiring Comcast to continue to provide federal and state Lifeline service in states where TWC has applied for eligible telecom carrier (ETC) status, they said. If it doesn’t deny the deal outright, the FCC should require TWC to make SportsNet LA, and its exclusive Los Angeles Dodgers baseball content available to all competing pay-TV companies at “fair market value” and require the divestiture of all of Comcast’s regional sports networks properties, said the Sports Fan Coalition.

The FCC can’t impose conditions without providing evidence of the harm they would address, said the Free State Foundation. “The commission must refrain from imposing any conditions on the merger unrelated to demonstrable concerns over market power and anticompetitive conduct.” If conditions are handed down, they would need to be extended well beyond the 2018 sunset of the Comcast/NBCUniversal conditions, AAI said. “If the [Department of Justice] and FCC ultimately consider behavioral conditions in Comcast-TWC, a consent order would have to be in effect for a significant time period in order to constrain potential anticompetitive post-merger conduct."

Comcast/TWC will “bring substantial benefits to the communities we serve,” said the Cuban National Council (http://bit.ly/1vGXhtX), which also praised Comcast for “keeping its promises to the Latino community.” Other diversity groups supporting the deal included the National Congress of Black Women and several regional Urban League organizations. “I appreciate the business practices, values and integrity that Comcast has shown here and across its footprint,” said Georgia State Rep. Mark Hamilton, a Republican, one of many state legislators who filed in support of Comcast/TWC. Comments from the Democratic Governors Association and others lauded Comcast’s Internet Essentials program and infrastructure improvement.

The deal would cement Comcast’s “dominance” in the programming market, said Writers Guild of America, West and the Future of Music Coalition. “Post-merger, Comcast will have enhanced market power to negotiate affiliate and retransmission fees below competitive market rates.” After the deal, “70 percent of the multichannel video market for programmers -- be they international conglomerates or independent startups -- will not belong to Comcast,” said Cohen. “Broader marketplace and industry issues are more appropriately handled in general FCC proceedings and not in the context of the Commission’s review of this transaction.”

Comcast/TWC is already spurring increased industry consolidation, several commenters said, pointing to the proposed AT&T/DirecTV. The FCC should look at the Comcast deal in the context of the “sea-change” it would create for cable and broadband, AAI said. “Given how the marketplace continues to evolve, the Commission cannot view the Comcast/TWC/Charter transaction within a vacuum,” said ITTA. Under the deal, Charter Communications would get some divested subscribers. AAI and ITTA attacked the proposed cable system swaps with Charter as furthering industry consolidation rather than alleviating it.

Seventy-four percent of U.S. consumers polled say the deal will lead to higher broadband and cable prices, Consumers Union said. Many commenters pointed to Comcast’s dealings with Netflix as the basis for concerns about the combined company’s control of a large part of the broadband market and the effect of the deal on net neutrality rules. “If a company like Netflix, which has more subscribers than Comcast does, can be forced to pay Comcast a toll, no one would stand a chance against a combined Comcast/TWC,” said Consumers Union. Cohen said “Comcast remains committed to a free and open Internet and supports the FCC putting in place strong, legally enforceable open Internet rules, but these rules should apply to all companies, not as unduly burdensome conditions that will prevent us from competing effectively in a highly competitive marketplace.”

Reject the proposed deal, Sen. Al Franken, D-Minn., told the FCC in 40 pages of comments. “That amount of power is unprecedented,” he wrote (http://1.usa.gov/YVSES3). “It is dangerous, too. It will leave consumers with higher prices, fewer choices, and even worse service.” Franken is a member of the Senate Judiciary Antitrust Subcommittee and has been a vocal critic of the deal in hearings and in his Senate reelection campaign. Franken argued that none of Comcast’s arguments for the deal are persuasive, saying the company already has meaningful scale and questioning whether it would improve service for TWC customers. He denied Comcast faces competitive pressure that would warrant such a deal.

"Comcast is able to maintain its market position because it operates in areas that lack sufficient competition and consumer choice,” Franken said. “The issue is not just that Comcast has a presence in so many markets, it is that Comcast’s presence in many of those markets is dominant.” It has “power and incentive” to be a gatekeeper when it comes to television content, Franken said. He devoted several pages to warning of the deal’s dangers to net neutrality, saying it’s perhaps nowhere “more incompatible with the public interest” and “would make matters unacceptably worse.” That “substantial threat” alone warrants rejection, Franken said, emphasizing this question comes “at a time of great uncertainty for net neutrality on the Internet’s last mile, transit on its backbone, and interconnection between the two."

The FCC Media Bureau denied a request from the Office of the Mayor of Los Angeles to extend the commenting deadline by two weeks, in a Friday order included in Monday’s Daily Digest (http://bit.ly/1t7cpCG). Comcast and TWC objected to the extension, and the bureau rejected the mayor’s argument that it needed more time to prepare comments and that a two-week delay would cause no harm. “The Commission has an obligation to review proposed transactions as expeditiously as possible, regardless of whether or not delays in the process would result in harm to a party,” said the order.