Senators skeptical of cable mega-merger

 

 

Senators on Wednesday expressed skepticism that a proposed mega-merger between the country’s two largest cable companies would be a good deal for subscribers.

Comcast and Time Warner Cable executives tried to convince members of the Senate Judiciary Committee that the $45 billion deal would lead to better service and faster Internet for their constituents, but lawmakers on both sides of the aisle seemed unconvinced.

Sen. Richard Blumenthal (D-Conn.) described his fellow lawmakers’ attitudes as “a general sense of skepticism, which is reflected in the general public.”

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“The case has yet to be made that consumers will really benefit in a tangible, real, substantial way,” he said.

Cable executives did their best to convince the lawmakers that combining the two industry titans would allow the resulting company to compete with upstarts and major firms like Google and Verizon. The new resources would make Comcast better able to invest in new technologies and deliver faster Internet speeds for its subscribers, they said.

“We’ve concluded that this deal is far and away the best outcome for our consumers,” Arthur Minson, Time Warner Cable’s chief financial officer, told senators in the packed hearing.

Comcast Executive Vice President David Cohen added that the deal, if approved, would “give us the scale and reach to innovate and compete against our national and global competitors.”

That would lead to “more investment, faster speeds, better technology, more Americans connected.”

“I think consumers are the big winners in this transaction,” he added.

The deal would put Comcast in most large markets, including 19 of the top 20 in the country. The company would control about 30 percent of the cable market and an estimated 40 percent of the broadband Internet market.

The two firms don’t currently compete in any of the same markets, however, which executives said should allay any fears that the acquisition would violate antitrust laws.

“We don’t compete for customers anywhere,” Cohen said.

Lawmakers aren't the ultimate judges of the proposed deal. That task falls to regulators at the Federal Communications Commission (FCC) and the Justice Department, who will be charged with poring over company claims in the coming months.

Still, Congress can play a large role in swaying regulators as well as the public’s perception of whether or not the merger would be a good deal for consumers.

Many senators refrained from launching outright attacks on the proposal, but were far from willing to give executives a pass.

Sen. Mike Lee (R-Utah), the ranking member of Judiciary’s Antitrust subcommittee, said the deal “raised some potentially very serious concerns.”

The cable industry, he said, does not enjoy the “effects of robust competition” that other markets do, a factor that “may make it more likely for a large transaction to pose some kind of a competitive threat.”

Lee also worried that the deal could have political ramifications, given some Comcast executives’ cozy relationships with the Obama administration.

“I’ve heard some concerns expressed that the emerging Comcast, the post-merger Comcast, might have the incentive or even the predilection but certainly an enhanced capacity, due to its larger size, to discriminate against certain types of content, including political content,” Lee said.

Sen. Al Franken (D-Minn.) has been the most vocal critic of the deal, and said on Wednesday that it would “result in fewer choices, higher prices and even worse service for my constituents.”

He dismissed Cohen’s argument that the two companies don’t currently compete in the same markets.

“What he’s really saying is that these two companies, each of which control many of their own local markets, want to be one larger company that controls the national market,” Franken said. “That kind of expansion has a serious impact on competition.”

Consumer advocates have said that one troubling facet of the deal is Comcast’s ownership of NBC Universal, which regulators approved in early 2011. If the new deal goes through, that could give the company a license to jack up content fees everywhere, said Gene Kimmelman, the CEO of consumer interest group Public Knowledge.

“The ramifications will cascade through the economy and could lead to significant price increases for others,” he said.

Cohen has previously said that the deal would not necessarily lead to lower costs for consumers. On Wednesday, he clarified that even though subscribers’ bills might go up in the future, that would not be because of the proposed merger.

“I can make you and the members of this committee one absolute commitment, which is that there’s nothing in this transaction that will make cable bills go up,” he told Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.).

Leahy pressed Cohen on the company’s commitment to “net neutrality,” which mandates that companies grant equal Internet access to all different kinds of online content. A top court recently threw out the FCC’s rules on the issue, but Comcast is nonetheless bound to them through 2018, under conditions of its acquisition of NBC.

“The conditions that currently apply to Comcast should not be seen as the end point, but rather the minimum level of protection that should apply to promote competition online,” Leahy said. “Regardless of the outcome of this latest merger, I hope that Comcast will accept an extension of these rules beyond 2018.”

Cohen said that he expected the company would follow through on upholding the rules.

FCC Chairman Tom Wheeler has announced that commission will start to work on writing a new set of regulations, which should be up and running by the time Comcast’s commitment runs out, he said.

“I can’t imagine that the commission is not going to have those rules in place before 2018,” Cohen said.