Why conservative senator is questioning Comcast-Time Warner merger (+video)
Comcast wants to merge with Time Warner, combining the country's two largest cable companies. In a congressional hearing, Comcast touted the deal, but the doubts of Sen. Mike Lee pointed to broader concerns.
Comcast, the nation’s largest cable and Internet service provider, is entering the homestretch this week in its attempts to convince Congress, federal regulators, and a skeptical public that its proposed mega-merger with Time Warner Cable, the nation’s second largest provider, will be a boon for consumers.
If approved, the $45 billion deal, announced in February, would create a cable and Internet colossus that will provide cable service for nearly one out of three American consumers, while at the same time wiring in high-speed Internet service for almost 40 percent of the broadband market.
On Wednesday, Comcast executive vice president David Cohen testified before the Senate Judiciary Committee, arguing that the proposed merger would provide “more investment, faster speeds, better technology, more Americans connected.” On Tuesday, Comcast defended the mega-merger with a 180-page “Public Interest Statement,” filed with the Federal Communications Commission, which must approve the blockbuster deal.
“There’s been a lot of discussion as to whether big is bad, and sometimes when companies join together big can be dangerous,” Mr. Cohen also said in a conference call with reporters Tuesday. “But in this particular space with this particular transaction, we think big is very good.”
A host of consumer groups, however, think big is very bad when it comes to control of the nation’s communication’s pipes.
“The Comcast-Time Warner Cable merger would give Comcast unthinkable gatekeeper power over out commercial, social and civic lives,” wrote a coalition of more than 50 media companies in a letter to the Justice Department and FCC Tuesday. “Everyone from the biggest business to the smallest startup, from elected officials to everyday people, would have to cross through Comcast’s gates.
And both Comcast and Time Warner Cable have long been the butt of consumer service punch lines. Both companies rank at the very bottom of nearly all customer satisfaction polls, including the American Consumer Satisfaction Index released last December. The top two cable and Internet service companies ranked just higher than the Long Island Power Authority, the New York utility caught unprepared after Sandy in 2012.
Cohen acknowledged this Wednesday, saying the company has received a “kick in the butt” from customer service critics. “We are laser focused on trying to improve the customer experience,” Cohen told Judiciary Committee members.
But cable service satisfaction aside, consumer groups and members of Congress are worried that the new cable giant, which will control their own significant entertainment and news offerings as well as the pipes that will distribute those of their competitors, will stifle their competition and continue to try to squash the concept known as “net neutrality,” which requires service providers to treat all content the same.
Federal courts have tossed out the FCC’s net neutrality rules after Comcast sued the FCC and won in 2010. Another court ruling against the FCC’s net neutrality rules this year has forced the federal regulatory agency to try to rework its rules. Comcast continues to oppose the rules, though it agreed to abide by them until 2018, a condition of its merger with NBC Universal.
Even conservatives on the committee expressed some skepticism at the proposed merger. In general, Republicans usually support the telecommunications industry’s complaints against the restrictions of net neutrality and oppose government regulation of the industry.
"Considering the significant share of the video and Internet market Comcast has, and considering the well-known political leanings of NBC, I’ve heard concern that Comcast might have the incentive and the ability to discriminate against certain political content,” said Sen. Mike Lee (R) of Utah, a tea party favorite and one of the Senate’s most conservative members.
A coalition of 13 conservative organizations, including TheTeaPary.net and Let Freedom Ring, also joined the chorus of concern, saying market forces are needed to develop innovation and push down prices.
Comcast rejects such concerns, saying that it does not compete directly with Time Warner Cable in any market, so consumers will see no effect. And Comcast aruges that Verizon and especially Google are rising as potential competitors, forcing the telecommunications giant “to up our game,” according to Cohen.
Still, the efficiencies gained by the merger may not end up saving consumers money, he told the Senate Judiciary Committee members. Noting that he was “being honest,” he said he could not guarantee any price drops after the merger, though whatever “economic benefits are generated will ultimately inure to the benefit of consumers,” who are “in the driver’s seat” with the options available.
Critics say a dangerous semi-monopoly is taking shape.
“The merger will only exacerbate conflicts between cable services and content providers, such as the television networks and cable channels such as HBO and Showtime, which means that we can expect to see more blackouts when these companies are unable to arrive at agreements,” says Lance Strate, professor of communications and media studies at Fordham University in New York. “The merger will provide Comcast/TWC with enormous power over content creators and distributors, and that will certainly add constraints on the kinds of content that will appear on cable.”
“Consolidation rarely benefits consumers,” he continues, “and the government should act in the public interest either by promoting competition or regulating telecommunications industries where competition is absent or limited.”