Strong arguments for and against Comcast deal before Senate panel today

U.S. Sen. Al Franken (D., Minn.) says a Comcast acquisition of Time Warner Cable would be anticompetitive. Franken is a member of the Senate Judiciary Committee.
U.S. Sen. Al Franken (D., Minn.) says a Comcast acquisition of Time Warner Cable would be anticompetitive. Franken is a member of the Senate Judiciary Committee. (Getty Images)
Posted: April 10, 2014

On the eve of a Senate Judiciary Committee hearing that will bring Comcast Corp. face-to-face with one of its sharpest critics, Minnesota Sen. Al Franken, the cable-TV company released on Tuesday a 650-page public interest filing on the potential benefits of the $45.2 billion deal for Time Warner Cable Inc.

Comcast steadfastly maintained that creating a huge company that provides cable television and Internet and phone service will not eliminate any consumer choice for those services. The reason: Comcast and Time Warner Cable Inc. do not compete with each other for subscribers.

There is sharp dissent, and it goes beyond Franken's assertion that the merger would make Comcast a marketplace monster. Exchanges between Franken, a Democrat, and Comcast executive vice president David L. Cohen could enliven the session.

Mark Cooper, of the Consumer Federation of America, warned Tuesday that a merger of Comcast and Time Warner Cable would be an "abomination with respect" to economic market power. He says it would violate the Justice Department's anti-competitive thresholds "by a mile."

The battle lines are sharply defined as the first of what could be several hearings opens at the Dirksen Senate Office Building.

A merger of Comcast and Time Warner Cable would control close to 50 percent of the "true broadband" residential market, Cooper said.

Comcast disagreed, claiming that because of competition from phone company DSL services and wireless companies, a combined Comcast/Time Warner Cable would control only 20 percent of the national broadband market.

"[Consumers] will have the exact same choices after this transaction as they did before the transaction," Comcast's Cohen said in a conference call with reporters. He argued there was a difference between Comcast/Time Warner Cable and the recent combination of American Airlines and U.S. Airways, because that deal eliminated an airline.

The Senate Judiciary Committee cannot block the merger; only the Federal Communications Commission and the Justice Department's Antitrust Division can do that. Yet the Senate hearing likely will air grievances about cable-TV bills, poor cable-TV service, online video competitors, and what seems to be unsettling concerns about Comcast's size and reach.

Among those to testify will be a University of Pennsylvania law professor, the chief executive of an independent golf channel, and the top executive at a company that offers WiFi wireless services.

Critics fear that Comcast/TWC could use its strong position in the broadband market to leverage the cable-TV model onto the Internet - with broadband-related subscriber fees.

Gene Kimmelman, president and chief executive of the nonprofit Public Knowledge, who will testify, said on Tuesday: "This merger would give Comcast the incentive and ability to stifle competition, thwart innovation from online services, and impose higher costs on rival video and online video services, which will eventually be paid for by consumers."

The standard for the FCC to approve the merger is whether the potential benefits of a Comcast/Time Warner Cable combination outweigh the potential harms to consumers. The FCC approved in 2011 Comcast's purchase of NBCUniversal - but with some 150 conditions.

The regulatory review of Comcast's deal for NBCUniversal came as the nation's economy was still recovering from the 2008 financial crisis. The industrial conglomerate General Electric, wounded by the crisis, wanted to quickly sell NBCUniversal, and Comcast said owning it would rescue the NBC broadcast-TV network.

Comcast says this new merger would bring huge benefits to millions of Time Warner Cable subscribers through higher Internet speeds and heightened investment in TWC's aged technology network.

Comcast also claims the merger could sharpen competition for telecom services for businesses and would expand Comcast's discounted $10-a-month Internet service for poor families with school-age children to Time Warner Cable's service areas.

The deal, Comcast has acknowledged, would not bring down cable-TV rates or even slow cable-TV rate increases for Comcast or Time Warner Cable subscribers.

A merger with Time Warner Cable would create a national TV company with positions in 19 of the nation's 20 largest TV markets, so the new company can compete in the rapidly shifting telecom and technology industries. The Philadelphia company views Google, which provides super-fast Internet services in several cities, and Apple Inc. as future competitors.

Apple's iTunes store sells more than one million TV episodes or movies a day. Google's websites, mostly YouTube, draw 157 million unique viewers a month who view billions of videos.

The combined Comcast/Time Warner Cable would control about 30 percent of the pay-TV market. Over the last five years, Comcast said on Tuesday, cable-TV companies have shed 7.3 million TV subscribers while Verizon Communications Inc., AT&T Inc., and other telephone companies entering the TV business have added 6.2 million TV customers and satellite-TV operators 1.7 million.

"This is no longer the media and communications industry of the 1992 Cable Act or the 1996 Telecommunications Act or even the industry that the FCC and the antitrust agencies analyzed in the Comcast-AT&T Broadband and Adelphia merger proceeding or in the Comcast-NBCUniversal transaction four years ago," Comcast wrote in the filing.

"Rather, it is a larger, more complex, and multi-faceted ecosystem, in which an array of sophisticated companies with national or even global footprints offer stiff competition."

Comcast quoted a Verizon executive as recently saying that its FiOS TV service was the fifth-largest cable TV company. He added: "I also have something that cable doesn't have, which is 100 million eyeballs on wireless devices."

The Senate hearing begins at 10 a.m.


bfernandez@phillynews.com

267-443-3517

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