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The Comcast-Time Warner Cable Deal Will Reshape US Broadband

The FCC faces a "crossroads" over the merger's facts as verbal tensions flare.

by Sam Gustin
Aug 27 2014, 12:30pm

Image: Thomas Belknap/Flickr

Comcast's proposed $45 billion purchase of Time Warner Cable drew a frenzied round of last-minute filings this week—both pro and con—ahead of the Federal Communications Commission deadline for public comments on a merger that, if approved, will reshape the US media landscape.

It's no surprise that the two sides are telling radically different stories about the deal, which would combine the two largest cable companies in the United States into an unprecedented entertainment and communications juggernaut with immense market power.

Related: If Comcast's Merger Happens, It'll Be Thanks to a Mountain of Lobbyist Cash

Philadelphia-based Comcast and its allies, including more than 50 city mayors from across the country, argue that the merger would deliver significant consumer benefits, including faster Internet service, increased innovation, and a much-needed injection of capital spending to boost urban and rural communications infrastructure.

"The increased investment, improved services, and community commitments that Comcast and Time Warner Cable have made all weigh heavily in favor of the proposed transaction," the mayors wrote in a letter spearheaded by Philadelphia Mayor Michael Nutter.

The deal's critics, which include influential lawmakers and dozens of public interest groups, argue that the deal would harm the public interest by threatening industry competition, stifling innovation, and creating a corporate colossus with unprecedented "gatekeeper" power over broadband access in huge swaths of the country.

Senator Al Franken, the Minnesota Democrat, declared that because the deal "does not advance the public interest—but, rather, is inimical to it—it must be rejected."

On issue after issue, supporters and critics of the merger have expressed diametrically opposing views about the consequences of the buyout. In this respect, the debate over the deal has become a metaphor for the intensely polarized battle about the future of US tech policy, and even more broadly, the bitter political struggle for advantage that has paralyzed Washington, DC.

"We're at a critical crossroads," Michael Copps, who served as a FCC commissioner from 2001 to 2009 and is now a special advisor to DC-based public interest group Common Cause, told me in a recent interview. "We have dumbed down our civic dialogue dramatically because of the effects of media consolidation on news and information."

The FCC's role in evaluating the merger is crucial, because the agency has a statutory responsibility to ensure that the merger advances the public interest, even as it addresses other issues such as net neutrality and municipal broadband.

Copps, a longtime champion of net neutrality, journalism and media diversity, has been an outspoken critic of Comcast's multi-year march toward consolidation. As a FCC commissioner, he voted against Comcast $30 billion purchase of NBCUniversal from industrial conglomerate GE.

Comcast argues that the deal isn't anticompetitive because it doesn't compete with Time Warner Cable in the same markets

Comcast's Time Warner Cable buyout is even worse, according to Copps. As the debate over the deal has escalated, the rhetorical sniping between Comcast and its critics has grown increasingly vitriolic.

In a blog post on Monday, Comcast executive vice president David L. Cohen wrote that Common Cause and other critics "continue to make the same discredited arguments that we've demonstrated consistently don't have any merit." (Earlier this year, Cohen said he was "struck by the absence of rational, knowledgeable voices in this space coming out in opposition or even raising serious questions about the transaction.")

Comcast argues that the deal isn't anticompetitive because it doesn't compete with Time Warner Cable in the same markets. (That's because the nation's largest cable companies have divided up the country by region so that a few major players now control their respective areas.) Rather, Cohen argues, the pact will allow Comcast to better compete with the likes of DirectTV, Verizon, and even Google and Facebook.

"This transaction is pro-consumer, pro-competitive, and strongly in the public interest," wrote Cohen, who argues that the deal will allow the combined company to leverage its new scale and resources to improve and expand service. But he's not promising a reduction in prices for consumers.

John Bergmayer, senior staff attorney at DC-based digital rights group Public Knowledge, accused Comcast of waging its own disinformation campaign. "The diverse voices that have raised an alarm at the FCC about this merger show that Comcast's spin is not working," Bergmayer said in a statement. "Buying Time Warner Cable would allow Comcast to put its interests above those of creators, TV viewers, Internet users, and competition."

Combining the two largest cable companies in the country would create a corporate giant with 33 million customers—about one-third of the US cable TV and wireline broadband market. To critics, that's simply too big.

"Consumers are harmed when a single company can use its power as a distributor to control what content and programming people can access nationwide," Bergmayer wrote. "Such 'gatekeeper' power would allow Comcast to raise costs for rivals, keep programming from being available on new online platforms, interfere with the open Internet, control the market for streaming video devices, and charge Internet companies for access to its massive customer base."

Comcast clearly understands that net neutrality, which is the principle that broadband companies should treat all data equally, has become a potent issue with federal regulators.

"We won't block access to any lawful website you want to visit, and won't slow down your download speeds," the company declared in a series of recent ads placed in Mike Allen's influential POLITICO Playbook daily newsletter, which is widely read in Washington, DC.

Comcast has sponsored Allen's daily newsletter a dozen times since the deal was announced earlier this year.

What Comcast didn't say in those ads is that it agreed to be bound until 2018 by the FCC's now-defunct 2010 Open Internet order, which enshrined net neutrality but was struck down by a federal court in January, in order to win approval of its acquisition of NBCUniversal. Now, Comcast has offered to extend that commitment to the Time Warner Cable purchase. It's also unclear what happens after 2018.

Comcast has also gone to great lengths to demonstrate broad and deep backing from around the country for the Time Warner Cable deal. Cohen cited the support of dozens of state and local officials, business groups, chambers of commerce, diversity groups, and non-profit organizations. In particular, the company has highlighted plans to expand what it calls its "acclaimed" Comcast Essentials low-income internet service program to Time Warner Cable's footprint.

Consumers Union isn't buying that argument. "Comcast is currently trying to impress Washington by claiming to provide low-cost broadband access to low income communities and by nominally embracing Net Neutrality," the group said in a statement. "Yet due to barriers that limit eligibility, customer difficulty with signing up, and lack of outreach even to eligible participants, the company's Internet Essentials program has not delivered on its promises."

PUBLIC OFFICIALS HAVE WALKED AWAY FROM THEIR RESPONSIBILITY TO PRESERVE COMPETITION, LOCALISM AND DIVERSITY IN THE MEDIA BUSINESS

It's tough to have a productive debate about public policy when the opposing sides can barely agree on the facts at the core of the dispute. In the coming months, the FCC will bear the responsibility for establishing those facts, so that it can decide whether Comcast's proposed purchase of Time Warner Cable will advance the public interest. The FCC is expected to finish its work by early next year.

In the meantime, it's worth taking a step back to look at the rapidly evolving, big-picture balance between America's news, media and entertainment businesses, the dwindling number of corporate giants that control them, and their relationship to the lawmakers and regulators that oversee them.

At a time of profound disruption and upheaval in the economics of these news and entertainment businesses, and virtually unprecedented corporate influence over the political process, it's worth asking the question: Are these relationships—is this balance—healthy and in the best interests of the country?

Former FCC Commissioner Michael Copps says no.

"Public officials have walked away from their responsibility to preserve competition, localism and diversity in the media business," Copps said. "If we don't have media diversity, all we're going to hear is the corporate, homogenized, special interest point of view, instead of a vibrant marketplace of ideas."

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