Comcast gives up bid for Time Warner Cable as FCC pushes back
Comcast is expected to announce Friday their intention to walk away from their proposed acquisition of Time Warner Cable. Did regulatory pressure kill the deal?
A proposed deal by the US's largest cable company, Comcast, to buy out number two, Time Warner Cable, would have been among the largest corporate merger deals ever.
But for federal regulators, the takeover may have been just too big, and as a result the cable giant will reportedly abandon its pursuit of the $45 billion takeover, according to the New York Times.
On Wednesday, Comcast representatives met with staffers at the Federal Communications Commission and the Justice Department, where officials scrutinized the state of the deal. Their responses may have been the motivation behind Comcast's expected announcement they will drop the endeavor, according to the Times.
The Wall Street Journal reported that FCC staffers recommended that the agency issue a "hearing designation order," which puts the merger on the desk of an administrative law judge on Wednesday. According to the Journal, this move was a strong sign that the regulatory agency was not in support of the takeover to as it was constituted.
If Comcast's acquisition of Time Warner had been completed, the company would have ended up with about one third of the American pay-TV market and 57 percent of the broadband market, according to the Journal.
The proposed takeover had also begun to raise eyebrows among progressive Democrats. On Tuesday six Senators including Bernie Sanders (I) of Vt., Elizabeth Warren (D) of Mass., and Al Franken (D) of Minn. penned a letter to both the Justice Department and the FCC asking both agencies to shoot down the proposed merger. The senators claimed the merger would result in higher prices, decreased options, and poor customer service.
"That is just anti-competitive and in my mind we need more competition in these spheres not less, and this would lead to higher prices, and fewer choices and if possible, if it is possible at all, even worse service from these companies," Sen. Franken told NPR.
Comcast continually ranks near the bottom of customer satisfaction rates, according to the American Customer Satisfaction Index. The only company that faired worse in 2014 was Time Warner Cable. Comcast was voted as the worst company in America for 2014 by the Consumerist.
Reports indicated that these issues were addressed when Comcast officials met with Justice Department officials to hammer out lingering concerns as the merger was set to move into its final phase, according to the Wall Street Journal. The Journal, citing unnamed sources close to the negotiations reported, that the Justice Department had serious reservations about the merger, but originally agreed to keep an open dialogue. According to the report, Justice Department officials wanted more than "behavioral remedies" or verbal assurances Comcast will live up to a certain standard in their business practices.
However, after the meeting with the Justice Department, Comcast representatives walked away from the table with serious doubts that a deal that would be palatable for regulators would to be possible, according to Bloomberg citing an unnamed source who was close to the talks.
The merger would have put Comcast in control of millions more Americans' access to the Internet. Critics of the deal worried that expansion into more households would give Comcast immense bargaining power with content providers and set-top box makers at a time when increasing numbers of Americans are shifting away from cable television subscriptions to streaming TV, according to the Washington Post.