Tags: Comcast | Time Warner Cable | Merger | Opposition

Fierce Opposition Doomed Comcast-Time Warner Cable Merger

Friday, 24 Apr 2015 07:29 AM


The month after Comcast announced its merger agreement with Time Warner Cable, the cable giant's politically connected executive vice president David L. Cohen appeared on C-SPAN to explain the rationale for the deal. In a word, he described it as "scale."

In the cable and broadband industries, "You need a lot of investment in R&D and innovation to keep pace," he said, adding that the transaction would allow Comcast to make bigger investments in new technology.

But to many content creators, "scale" doesn't mean bigger investment but bigger negotiating leverage on the other side of the bargaining table. It was just the kind of term that made them cringe — and spur them to mount what appears to be a successful campaign to torpedo the massive merger, valued at $45 billion.

With reports that Comcast is poised to abandon the deal, opposition groups were ready to do a victory lap. Sen. Al Franken (D-Minn.), perhaps the biggest critic of the merger in Congress, said that if the reports are true, it would be a "huge victory for American consumers."

A transaction that a year ago was seen as all but inevitable has seen its chances diminish considerably in recent months, and certainly in the last week as reports surfaced that the Department of Justice and then the FCC were ready to recommend that it be blocked.

Their reasoning may lie in the confidential documents that Comcast and its competitors submitted as part of the review, so for the time being it is difficult to determine the impact of a public lobbying effort to scuttle the deal.

Comcast faced a coalition of opposing public interest groups, the Writers Guild of America and companies such as Netflix and Dish Network. Discovery Communications weighed in with criticism, and Comcast responded by accusing it and other companies of "extortion," seeking better program carriage terms in exchange for their support.

Merger opponents were organized and savvy in their marketing messages. The "Stop Mega Comcast" coalition, a collection of media watchdog orgs and businesses including Dish Network and Glenn Beck's the Blaze, were aided by a PR push spearheaded by the D.C. marketing firm Glover Park.

The prospect that Comcast would dramatically increase its reach in the broadband market at a time when Internet-delivered content is growing by leaps and bounds was unnerving to many.

No matter how strongly Comcast made the case that the deal would not affect competition because of the lack of overlap between Comcast and TW Cable markets, the size of its post-merger broadband footprint and the concept of the No. 1 and No. 2 cable operators joining forces was concerning enough to give detractors plenty of ammunition.

In Hollywood, the fear among writers was that Comcast-TW Cable wouldn't just lead to a more formidable NBCUniversal, but a cascade of other mergers as well. They point to Rupert Murdoch's attempt last summer to buy Time Warner, which he eventually abandoned.

The Writers Guild of America East and West opposed the transaction, a reflection of their concern that the new opportunities blooming for Internet video could be stalled by consolidation.

"What we like is more competition, not bigger companies sitting on the other side of the table," said Lowell Peterson, executive director of the Writers Guild of America East. "If one of the major sectors gets bulked up, everyone else gets bulked up too."

Todd O'Boyle, a spokesman for the group Common Cause, which was part of a coalition opposing the merger, said that they have focused on Comcast's compliance with conditions placed on its 2011 acquisition of NBC Universal. Although the company has insisted that it has met or exceeded the conditions, save for an $800,000 FCC sanction for not better disclosing an offering of standalone broadband, critics have zeroed in on other compliance issues.

That weighs heavily on regulators, O'Boyle said.

"Plenty of people have said that behavioral conditions are tough to enforce, but here is clear evidence it is not working," O'Boyle said.

He also said that the mobilization efforts that went into pushing for the FCC's move to reclassify the Internet as a Title II broadband service, allowing it to impose robust net neutrality rules, helped in that public interest groups then set their sights on the Comcast-TW Cable transaction.

Amanda Wait, partner at Hunton & Williams and a former Federal Trade Commission lawyer, noted that "you have got an Obama administration that has publicly stated on multiple occasions that they are not shying away from the hard cases."

She added, "The competitive harm story here is actually pretty complicated. It is not your traditional overlap."

Comcast argued that they don't compete with TW Cable in any market. But "the story is really about changes in bargaining power pre- and post- merger. ...The DOJ and FCC had concerns about bargaining power pre- and post- merger, and it is not really an easy fix" with conditions, she said.

She suggested that there was a strategy behind the timing. The DOJ reviewed the merger in conjunction with the FCC, but it was the FCC that was reportedly ready to send the merger to an administrative law judge — a prospect that immediately had Wall Street analysts wondering if the parties would just call it off.

With companies walking away, the DOJ avoids a much more complicated process of taking Comcast to court. "The DOJ never had to show their hand," Wait said.

Comcast certainly pulled out all the stops to try to get a merger approved. Its connections in Washington are, to say the least, extensive. Comcast chairman-CEO Brian Roberts has played golf with Obama, and Cohen has been a campaign bundler. The company's lobbying spending in 2014 — almost $17 million — is larger than that of any other single corporation. In the first quarter of this year, it spent $4.6 million on lobbying, up 50% from a year earlier.

At a hearing last week before the California Public Utilities Commission, an array of speakers from different organizations that have received Comcast support, like Equality California and environmental organizations pressing for restoration of the Los Angeles River, spoke out in favor of the deal.

And the company has even run full-page ads in the Washington Post, making its case that "together is better for more people."

Some lobbyists, however, have wondered whether the hard sell on the merger has had the opposite effect of making regulators more sensitive to the idea of corporate influence. FCC chairman Tom Wheeler is said to be especially concerned of the notion that he is beholden to the cable industry, as he led its trade association in the 1970s and '80s.

What also gave critics some fodder were embarrassing customer service incidents, including the posting online of a subscriber's attempt to cancel service as an agent refused to let him do it, to the point of abuse. And in Los Angeles, Time Warner Cable has been blamed by multichannel competitors like DirecTV for demanding too great a price for carriage rights of a Dodgers Channel. The standoff has left about 70% of the L.A. market unable to access the baseball games.

© 2017 Thomson/Reuters. All rights reserved.

   
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The month after Comcast announced its merger agreement with Time Warner Cable, the cable giant's politically connected executive vice president David L. Cohen appeared on C-SPAN to explain the rationale for the deal. In a word, he described it as scale. In the cable and...
Comcast, Time Warner Cable, Merger, Opposition
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2015-29-24
Friday, 24 Apr 2015 07:29 AM
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