By Julian Hattem - 04/09/14 06:00 AM EDT
Comcast and Time Warner Cable executives are headed to Capitol Hill on Wednesday to try to sway skeptical lawmakers to support their proposal for a $45.2 billion merger.
The leaders of the nation’s two largest cable companies argue their combination would be good for consumers by creating faster Internet speeds and making the marketplace more competitive. Opponents say the deal will lead to higher costs, and they are vowing to push back aggressively.
“This transaction means a host of exciting benefits for consumers,” Comcast Executive Vice President David Cohen told reporters on Tuesday, after filing the FCC document asserting that the merger would lead to “unique benefits” for consumers.
Cohen will testify before the Senate Judiciary Committee alongside Arthur Minson, Time Warner Cable’s executive vice president and chief financial officer.
Lawmakers do not have a formal role in approving the merger. That job falls to consumer interest and antitrust lawyers at the FCC and Justice Department who will be reviewing the proposal.
But opposition from lawmakers can influence the views of regulators and sway public opinion, so companies seeking mergers often go out of their way to ease their concerns.
So far, most lawmakers have been reluctant to weigh in much on the deal before hearing what the companies have to say.
Sen. Al Franken (D-Minn.), however, has been a vocal critic and is likely to reiterate his worries about the merger Wednesday
“I’m very concerned that with this deal, consumers are going to get stuck with higher cable and Internet prices, fewer choices, and even worse service,” he said in a statement to The Hill. “Comcast has an army of lobbyists pushing this deal through, but during this hearing we need to make sure that consumers’ voices are being heard too.”
The hearing will also be a prime opportunity for Comcast to sell the deal to a skeptical public.
A Reuters/Ipsos poll released last month found that 52 percent of people believed that deals like the cable giants’ merger are bad for consumers and lead to less competition. In Consumer Reports, Comcast and Time Warner Cable are respectively ranked 15th and 16th out of 17 television cable service providers in terms of customer satisfaction.
Comcast has launched a publicity blitz to try to change that impression and reassure consumers. That includes commercials promising “a whole new day” for Comcast as well as ads targeted to the local Washington market.
“The PR effort is full and up and running,” said Derek Turner, the research director at the consumer advocacy group Free Press, which is opposed to the merger.
So far this year, Comcast has brought on two former Senate staffers to lobby on its behalf, including the former general counsel of the Senate’s antitrust subcommittee, Seth Bloom. The company is already a giant in terms of influence spending, doling out more than $18 million on lobbying last year, according to the Center for Responsive Politics.
On Wednesday, executives from Comcast and Time Warner will argue that their top competitors aren’t cable companies. Instead, services such as Netflix, DirecTV and Apple are finding new ways of delivering shows and movies to televisions and other devices.
“The difference between all of those competitors and us is that they all have national or global market scale,” Cohen said, which lets the other companies invest in the future through infrastructure and development.
“We realize, looking three years ahead, five years ahead, 10 years ahead, in order for us to continue to be competitive we need to have the additional scale that comes from this transaction,” he added.
Comcast and Time Warner Cable don’t operate in the same markets, so the deal would not reduce the number of options for any single consumer, the companies said. Still, after shedding about 3 million subscribers, the combined company would have service in 19 of the top 20 cable markets and control nearly 30 percent of the overall market.
Opponents have warned that the company’s size could turn it into a monopsony, which is an over-consolidation of buying power. That’s different than a monopoly, where one company overwhelmingly controls the ability to sell or produce a certain product.
Babette Boliek, a law professor at Pepperdine University and visiting fellow at the American Enterprise Institute’s technology policy center, said that companies like Netflix and Amazon that offer online videos might make the argument about cable TV consolidation “a bit of a sideline.”
Instead, “the interesting market is going to be the Internet market,” she said.
Critics aren’t swayed by those arguments. They note that after the merger, Comcast would control about 40 percent of the broadband Internet market.
“What we’re talking about here is Comcast is going to be the only option for next-generation broadband for 4 out of every 10 U.S. homes,” said Turner with Free Press. “That level of control in an almost completely unregulated market is just a recipe for disaster.”