Earlier this week, Comcast CEO Brian Roberts reached out to Federal Communications Commission Chairman Tom Wheeler in a last-ditch effort to lobby for the cable giant's $45 billion merger with Time Warner Cable. Roberts argued that the deal would benefit consumers and advance the public interest, adding that the company was "eager" to complete the transaction.
Comcast's argument failed. The cable giant has announced that it's abandoning the merger with Time Warner Cable, now that regulators have made clear that the deal would face nearly insurmountable obstacles.
"Today, we move on," Comcast's Roberts said in a statement.
The deal's death blow came when the FCC decided to send the merger to an administrative law judge, which could have resulted in a year-long, trial-like public spectacle. Such hearings are so burdensome for companies that over the last 30 years, no big telecom merger has ever been completed once it was designated for this process, according to policy experts.
"This is the FCC's nuclear option," said a person close to the Comcast merger review. "It's the way to kill a deal."
By the time Comcast met with federal regulators on Wednesday in a final effort to salvage the merger, FCC officials had become convinced that the deal would not benefit consumers and needed to be blocked. At that point, there was little Comcast could do other than walk away.
"This is the FCC's nuclear option. It's the way to kill a deal."
"Today, an online video market is emerging that offers new business models and greater consumer choice," Wheeler said in a statement. "The proposed merger would have posed an unacceptable risk to competition and innovation especially given the growing importance of high-speed broadband to online video and innovative new services."
The FCC's strong opposition to the merger is just the latest surprising example of how the agency has sided with public interest advocates against corporate giants under Wheeler's leadership. From the FCC's tough new net neutrality rules to the agency's support for community broadband networks and now its resistance to the Comcast deal, Wheeler has emerged as an unlikely public interest champion.
"I've been working in the public interest community for 40 years and I can't recall a similar period where the FCC moved so aggressively to promote broad public interest objectives and stand up to large corporate interests," said Andrew Jay Schwartzman, senior counselor at the Georgetown University Law Center's Institute for Public Representation in Washington.
Wheeler came more into the public spotlight last year as the net neutrality debate received more attention from the general public—and spots on John Oliver's show.
When Wheeler was tapped to lead the FCC two years ago, many public interest advocates were skeptical because of his background as a top lobbyist for the National Cable Television Association (NCTA) from 1979 to 1984, and the Cellular Telecommunications & Internet Association (CTIA) from 1992 to 2004. More than two dozen public interest groups wrote a letter to President Obama expressing alarm about a candidate "who was the head of not one but two major industry lobbying groups."
Since then, Wheeler has gone to great lengths to prove that the FCC's "client" is the public, as he frequently says in public statements and speeches, and not the corporate interests he once represented. "I have the American people as my client, and the actions we take at the FCC are built around the interests of that client," Wheeler declared at a broadcast industry conference last year.
Schwartzman, who has known Wheeler for decades, says that much of the initial skepticism about the FCC chairman was unwarranted, and reflected a knee-jerk reaction to his lobbying background. "It's important to remember that when Wheeler represented the cable and wireless industries in the past, those companies were upstarts," said Schwartzman. "They were the little guys. Wheeler's mindset has always been very pro-competition."
Schwartzman also points out that when Wheeler became FCC chairman, he was 67 years old and had already made a substantial amount of money working as a venture capitalist during the previous decade. Unlike some of his predecessors, "Wheeler wasn't looking for his next job," Schwartzman said. Past FCC officials have been criticized for racing through the "revolving door" for huge paydays at the companies they once regulated.
Wheeler, a longtime Democrat who was a top fundraiser for President Obama, also had decades of experience working in Washington, so he knew how to navigate the corridors of power. "Wheeler has a very acute sense of what the political costs are going to be for a decision," said Schwartzman. "When he makes a tough decision, he's ready to take the heat."
Over the last few months, Wheeler has weathered a blistering series of attacks from cable industry lobbyists and their allies in Congress over the FCC's net neutrality rules and support for community broadband networks. In March, Republican lawmakers subjected Wheeler to a marathon series of hearings on Capitol Hill during which he was criticized as an "unelected bureaucrat" who had overstepped his authority. At one point, Louie Gohmert, a Texas Republican, accused Wheeler of "playing God with the internet."
As for Comcast, the collapse of the merger represents a stunning defeat for CEO Roberts, who has methodically expanded the company his father founded in 1963 with a small cable outfit in Tupelo, Mississippi. Comcast is now the nation's largest cable and broadband company, with $70 billion in annual revenue. Combined with Time Warner Cable, Comcast would have controlled 57 percent of the national broadband market.
The deal's implosion is also a strong wake-up call for a corporate giant that has exercised enormous influence in Washington by employing 130 lobbyists and pouring campaign cash on lawmakers from both parties. "Big cable is accustomed to calling the shots in Washington, so Comcast is probably feeling a bit of shell shock right now," said Todd O'Boyle, program director for Common Cause's Media and Democracy Reform Initiative, which opposed the deal.
Public interest advocates were elated by the merger's downfall. Former FCC Commissioner Michael Copps, a longtime opponent of media consolidation, called it "spectacularly good news for consumers concerned about the spiraling costs of cable and broadband and for millions of citizens who want nothing more to do with gatekeeping and consolidation in the communications ecosystem on which our democracy depends."
In the wake of the deal's collapse, Wheeler is likely to face new attacks from cable industry groups and their political allies, but the FCC chairman has shown that he's willing to stand up to the industry he once represented. Last month, Wheeler strongly defended the FCC's strong net neutrality policy—which is loathed by big cable and telecom companies—and predicted that the new rules would withstand the industry's fierce legal onslaught.
"I think Wheeler's doubters were wrong," said O'Boyle. "He's clearly heard the public outcry about the open internet, community broadband, and now the Comcast merger. It's really amazing to see the so-called 'unelected bureaucrats' doing a better job of responding to the public than their elected representatives."