Comcast and Time Warner Make Their Case

Carl Weinschenk
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The second, less dramatic but ultimately decisive phase of Comcast’s $45.2 billion acquisition of Time Warner Cable is under way: the legislative and regulatory reviews that will determine if it can be consummated and, if so, what conditions the government will demand.

In a blog post, Comcast Executive Vice President and Chief Diversity Officer David Cohen wrote that Comcast today is filing a joint Applications and Public Interest statement with the Federal Communications Commission (FCC). Last week, a Hart-Scott-Rodino notification was filed with the U.S. Department of Justice. Cohen wrote that tomorrow he will testify before the Senate Judiciary Committee.

The initial thinking is that the deal will be approved. The strongest indicator is that there is relatively little overlap in footprint, despite the size of the two operators. In the post, Cohen laid out the potential benefits of the combined entity to current subscribers of each operator.


This is a particularly intriguing process, and one that has implications even beyond the scope of the creation of a telecommunications and content behemoth because it will provide the first glimpse of the post-net neutrality landscape. In January, the United States Court of Appeals for the District of Columbia essentially gutted the rules that existed since broadband emerged. The decision, if not mitigated by subsequent decisions or new laws, opens the floodgates to far greater carrier influence over the third-party content it carries.

Cohen suggests that the combined Comcast/TWC will protect the rights of the third parties for the foreseeable future. Last year, Comcast agreed to abide by the rules as they stood at that point, before they were gutted, until 2020 as part of the approval of its acquisition of NBCUniversal. Comcast has pledged to do the same if it is allowed to purchase TWC.

It is a very interesting situation. Neither Comcast, Time Warner Cable nor, for that matter, the DOJ or the FCC have control over what the court decides. However, the governing bodies are free to make decisions based on what the new ground rules may be (Comcast’s promise to use the old standard for six years notwithstanding). CNET’s Marguerite Reardon suggests that the basic complexities of a carrier both creating and selling content and owning the communal pipe are still issues:

And even though Comcast points to Internet companies such as Netflix, Amazon, Google, and others as content competitors, the reality is that these providers still have to ride over Comcast's infrastructure to reach customers. And as a content company itself through its control of NBC Universal, Comcast also controls some of the content that these companies also want to provide to their customers.

In a parallel development, Bloomberg reports that Charter is advising TWC investors to nix the deal. Charter, the fourth biggest operator, was shunned in an initiative to buy TWC for $37 billion in cash and stock. The company now says that Comcast, according to Bloomberg, “is too susceptible to regulatory hurdles” due to its size. The story says that Charter may purchase systems serving some of the 3 million subscribers Comcast says it will sell if the deal closes.

It is likely that Comcast’s acquisition of Time Warner Cable will close. The pledge to stick to the old rules until 2020 is a good start that should be commended. The fact that it was made to sway the public and please regulators and legislators is irrelevant: Comcast could have dug in its heels. Hopefully, the government will be able to extract further concessions that protect consumers and maintain the entrepreneurial spirit that has characterized the Internet until today.



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