**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in Q1 2014.**
Comcast Corp., the largest U.S. cable company, on Tuesday said its $45.2 billion acquisition of Time Warner Cable Inc. (TWC) will make it a more attractive communications provider for businesses with locations across the country.
The combined company will be able to offer businesses improved services, lower prices and greater options, stated Comcast’s David Cohen, executive vice president and chief diversity officer in public policy, in a blog posting announcing that his employer had filed its public interest statement with the Federal Communications Commission, touting the purported benefits of the megamerger.
“Today, if you had a real estate business with offices in New York, Boston, and Washington, D.C. – Comcast and TWC couldn’t easily offer you a seamless business solution for these multiple locations,” Cohen wrote. “The same if you had BBQ restaurants in Houston, Dallas, and Austin, Texas. Or a tech startup on the West Coast with programmers in Portland, Seattle, the Bay Area and Los Angeles. Competition in the business market has been long in coming, and we can take it to a larger scale that will promote economic development.”
Cohen said the merged company also would provide faster speeds to TWC customers, extend network neutrality protection, and expand a low-income broadband program to TWC markets.
Although Comcast and TWC are the nation’s largest cable companies, Comcast points out the companies don’t compete in each other’s territories. After the deal closes and Comcast divests roughly 3 million customers, the company will still only control 30 percent of the multichannel video market, Cohen said.
“Because Comcast and Time Warner Cable do not currently compete to serve customers, there will be no change in market share in local markets for video, high-speed data, and voice. And, there will be no impact on the competitiveness of other MVPDs, 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,” Comcast states in a summary of its public interest statement.
Critics of the merger fear Comcast will wield too much power in the broadband market. In a letter Tuesday to Attorney General Eric Holder and FCC Chairman Tom Wheeler, 50 public interest groups said the merger would “give Comcast unprecedented control over the Internet” and “pose a grave threat to media diversity.”
“Comcast has repeatedly flexed its corporate and political muscles to get what it wants, even if that has meant harming competition, consumers and communities,” the groups wrote.
In a hearing Wednesday before the Senate Judiciary Committee, Philadelphia-based Comcast and New York-based TWC will seek to persuade lawmakers the merger is beneficial to the public and won’t harm competition.
But witnesses slated to speak also include skeptics of the deal, including Public Knowledge CEO Gene Kimmelman. Public Knowledge was one of the organizations that wrote the letter to Holder and Wheeler.
In prepared remarks before the Senate Judiciary Committee, Kimmelman said Comcast post-merger would have a substantial presence in 19 of the 20 largest designated market areas and control nearly 50 percent of high-speed Internet access, almost 30 percent of multi-channel video programming distributor subscribers and virtually 60 percent of cable subscribers.
He claimed the cable giant would have the “incentive and enormous leverage” to artificially raise the prices of its own programming that competitors pay for, restrain competition from rivals (e.g. Amazon and Netflix) that need high-speed access to deliver high-quality services and pay content suppliers less than market value, leading to higher programming costs for other distributors and increased prices for consumers.
Christopher Yoo, a professor with University of Pennsylvania Law School, said in prepared remarks the merger is unlikely to harm consumers in the markets for cable TV and broadband Internet access.
Citing the 2000 pairing of Time Warner and America Online, which proved to be a fiasco, he also asked lawmakers to keep in mind that the communications sector is unpredictable.
“What many predicted would be the end of history ended up simply being the end of $200 billion in Time Warner shareholder value,” Yoo wrote. “In addition, just a few short years ago, many argued that fiber-to-the-home would soon consign the cable industry to the dustbin of history. These episodes underscore how easy it is to hypothesize problems that never materialize and how easy it is to forget that innovation and willingness to undertake commercial risk have created greater consumer benefits than anyone could have anticipated.”