Comcast, Time Warner Cable Said to be Throwing in Towel on Merger

Josh Long**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in Q1 2015.**

Comcast Corp. is reportedly giving up on its plan to acquire Time Warner Cable in the face of regulatory opposition in Washington, D.C.  

Sources told The New York Times and Bloomberg that Comcast was throwing in the towel after learning that U.S. regulators intended to oppose the $45.2 billion merger.

Officials with the U.S. Justice Department and Federal Communications Commission are leaning against the merger, Bloomberg reported. People briefed on the issue told the Times that the deal was facing scrutiny over whether it was anticompetitive and against the public interest.

“The record in this transaction supports only one outcome: ending the proposed merger of Comcast and Time Warner Cable,” said Don’t Comcast the Internet, a campaign that is driven by COMPTEL, ITTA (The Independent Telephone & Telecommunications Alliance) and NTCA-The Rural Broadband Association, in a statement commenting on the recent media reports. “Consumers and competition will be the big winners if this merger is indeed blocked or withdrawn.”

The Justice Department’s antitrust division is responsible for vetting the agreement for competitive concerns, while the FCC is examining the agreement under broader criteria to determine if it is in the public interest. FCC staff members informally recommended referring Comcast’s acquisition to an administrative law judge, sources told the Times.

The cable companies declined to comment on the reports, but Bloomberg said an announcement on the fate of the transaction could come as early as Friday.

Regulatory opposition to such a large telecommunications merger is not unprecedented. In 2011, the Justice Department moved in federal court to block AT&T’s $39 billion acquisition of T-Mobile USA. AT&T ultimately walked away from the deal.

Comcast also has faced opposition to the merger on Capitol Hill. In a letter Tuesday to FCC Chairman Tom Wheeler and Attorney General Eric Holder, six senators called on the government to block the deal. The senators, comprised mostly of Democrats, predicted the merger would result in “higher prices, fewer choices, and poorer quality services for Americans — inhibiting U.S. consumers’ ability to fully benefit from modern technologies and American businesses’ capacity to innovate and compete on a global scale.”

The Wall Street Journal, reporting Sunday on a planned in-person meeting between the cable giants and Justice Department, said DOJ and FCC staff members remained concerned that the combined company would …

… hold too much power in the broadband Internet market. People with knowledge of the review also told the newspaper that staff members are worried that the merged company would have an unfair competitive advantage against TV channel owners and new entrants that offer online video programming.

A number of states also have been reviewing the merger, including California and New York. Earlier this month, a California regulatory official concluded the acquisition is not in the public interest and he recommended denying the merger. Earlier this year, however, an administrative law judge in California recommended approval of the agreement, subject to Comcast meeting a number of conditions.

In a proposed order, California Public Utility Commissioner Mike Florio cited a number of concerns with the deal including its effect on competitive phone providers that currently purchase wholesale access from Time Warner Cable.

“In the event that post-merger Comcast either ceases to provide such access in the former Time Warner territory, or provides it at higher prices or with more onerous terms … this would affect the ability of CLECs to provide their services to consumers,” Florio’s proposed order stated. “As a result, and contrary to Comcast’s claim that the merger would have no effect on competition, the merger could have a significant negative effect on competition for voice services, by reducing the availability or increase the cost of alternate customer options.”

Comcast and Time Warner have claimed that their proposal has little impact on customer choice because they don’t operate in the same markets.

We can only assume this means status quo for the channel going forward. Master agents we talked with earlier this month about the proposed Charter-Bright House Networks merger said they are generally in favor of these types of tie-ups because they extend the reach of the cable networks and bigger, more complex deals with customers would result.

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