Lights, Camera … Reaction to Comcast-TWC Deal19 Feb, 2014 By: Doug McPherson
NEW YORK – Analysts and insiders who’ve been digesting last week’s blockbuster deal between Comcast and Time Warner Cable are speaking. Their gist? It’s as varied as a bag of trail mix – sweet, salty and – yes – nutty.
If regulators approve the deal, Comcast will be a hugely dominant player in media, with more than 30 million subscribers. But many say that approval is a big “if.”
The Federal Communications Commission (FCC) and either the Department of Justice or the Federal Trade Commission (FTC) will have to approve the merger. The agencies have not yet decided which will take up the case. The FTC typically examines cable mergers but the DOJ usually handles media deals, including Comcast's 2010 purchase of NBCUniversal from GE.
To avoid regulatory issues, Comcast has said it’s willing to divest 3 million subscribers. Comcast currently has about 22 million video subscribers; Time Warner Cable has 12.5 million video customers in major markets such as New York, Los Angeles and Dallas.
Comcast also issued this statement: “There will be no impact on the competitiveness of other multi-channel video program distributors, including DirecTV, DISH, Verizon, AT&T, and other cable companies, because they will still be competing with the same number of competitors in each market in which they operate. This absence of horizontal overlap means that the transaction will not harm competition or reduce consumers’ choice in any way.”
Still, lawmakers have chimed in saying they’ll offer scrutiny. Sen. Amy Klobuchar (D-MN), the chairwoman of the Senate Judiciary antitrust subcommittee, plans to hold a hearing to “carefully scrutinize the details of this merger and its potential consequences for both consumers and competition.”
And Sen. Patrick Leahy (D-VT), chairman of the Senate Judiciary Committee, said, “Millions of Americans rely on cable connectivity to receive the programs they love and to access the Internet at the fast speed needed as we conduct more of our lives online. I will closely monitor the response of the FCC and the antitrust authorities to this transaction.”
CNN has reported it’s unclear what regulators will do. The Obama administration has a somewhat mixed record on antitrust issues, recently allowing giants American Airlines and US Airways to merge with few issues, but thwarting the proposed AT&T/T-Mobile merger in 2011.
Herbert Hovenkamp, an antitrust law professor at the University of Iowa, told CNN he thinks the deal will go through if Comcast agrees to more concessions, but added, "Anyone who tells you they know the answer, I suspect they're bluffing,"
Maurice Stucke, antitrust law professor at the University of Tennessee, told CNN, "The FCC is going to be the wild card. This is the opportunity for the new chief to take a stance and become a vocal regulator."
Time Warner Cable’s stock rose 7 percent just after the deal was announced to $144.76 per share. Comcast closed down 4 percent to $52.97 a share.
Here’s a sampling of other reactions:
Michael Copps, a former FCC commissioner who is now adviser to Common Cause: “This is so over the top that it ought to be dead on arrival at the FCC. The proposed deal runs roughshod over competition and consumer choice and is an affront to the public interest.”
Former Starcom Media executive Tim Hanlon, now founder/chief executive officer of The Vertere Group: “The deal hastens tech innovation on the advertising front, as it eventually harmonizes the 30 million-plus households on a common ad tech platform – addressable advertising, dynamic ad insertion in VOD (video-on-demand) – something the Canoe Ventures consortium could never do.”
Matthew M. Polka, president of the American Cable Association (ACA): “Comcast-NBCU’s takeover of Time Warner Cable would vastly increase the number of cable homes served by an operator affiliated with NBCU’s popular programming, creating new incentives for NBCU to demand unfair terms and conditions from TWC’s pay-TV distribution rivals, including ACA members.”
Craig Moffett, analyst with Moffett Nathanson: “Independent programmers, in particular, will complain that Comcast will now be simply too powerful; a threat from the new Comcast to drop carriage would amount to threat of a death sentence, or so they will claim.”
Paul Krugman, economics columnist for the New York Times: “I haven’t seen anyone arguing that the deal would promote innovation. Maybe that’s because anyone trying to make that argument would be met with snorts of derision. It’s time to go back to worrying about monopoly power, which we should have been doing all along. And the first step on the road back from our grand detour on this issue is obvious: Say no to Comcast.”
Media critic Wayne Friedman: “The cable industry is essentially looking for its next act. Its consumer video business is still solid, but overall subscriber numbers are down. That said, existing subscribers continue to pay rising monthly fees. Cable’s broadband and phone businesses continue to grow, but many of the industry’s executives are looking farther down the road – to where the likes of Google will continue to find ways of siphoning off more pieces of the media/advertising business.”
FCC Chairman Tom Wheeler: No specific comment yet, but he has indicated that he would judge such consolidation based on competition in the marketplace, and has been quoted as saying, “When competition is high, regulation can be low. When competition is low, we are willing to act in the public interest.”
Media critic Bob Garfield: “The real issue here is broadband market share. Even if network neutrality is restored by legislation or regulatory reclassification of broadband pipes as common carriers, the fact is that, in our lifetimes, virtually all programming will be entering our devices over the Internet. Giving Comcast more market share would give one company a third of the entire online infrastructure – i.e., the core of our economy, our communications network, and increasingly, our very way of life.”
Jill Kennedy, a blogger on media news: “It seems media company CEOs are hell bent on proving to Wall Street that their companies can be growth companies. Unless they fire every employee and start a new company by themselves in a garage, they cannot be growth companies the way Wall Street would like. By the end of 2014, giant media companies with their film studios, broadcast networks and massive real estate leases will be much leaner and the quality of the product will be much worse.”
Public Knowledge senior staff attorney John Bergmayer: “An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content. It would be able to keep others from innovating, while facing little pressure to improve its own service.”
Consumer Watchdog's John Simpson: “The implications for broadband access to the Internet – where we in the United States pay more for slower speeds than most of the rest of the industrialized world – are dire. Comcast would have no incentive to improve broadband service and would have the power to do what it wants.”