Comcast pitches Time Warner deal as boost to innovation

Bloomberg NewsApril 8, 2014 

— Comcast Corp., the nation’s largest U.S. cable company, is telling regulators it can offer advanced video services and spread high-speed Internet service without harming competition if it’s allowed to buy No. 2 Time Warner Cable Inc.

Comcast also pledged to treat all Internet content equally for new customers and expand a program offering Web access to poor families, the company told the U.S. Federal Communications Commission in a filing Tuesday. Lawmakers will examine the deal in a hearing Wednesday.

The $45.2 billion acquisition would leave Comcast with 30 million video subscribers, including customers in 19 of the 20 largest U.S. cities. It could face “pushback” from senators critical of media consolidation, Paul Gallant, Washington-based managing director for Guggenheim Securities, said in a note Tuesday. The deal probably will win approval because the companies don’t directly compete, he said.

Regulators may set “tough conditions” such as pricing requirements for Internet access for subscribers and for peering, or access by companies that deliver large amounts of Internet traffic, Gallant said. Consumers face poor service if online video providers don’t pay Web providers such as Comcast and Verizon Communications for priority connections, Netflix Chief Executive Officer Reed Hastings said in a March 20 blog posting.

The acquisition announced Feb. 13 needs clearance from the Justice Department, which considers whether the combination could harm competition, and the FCC, which assesses deals against a broader standard of whether they are in the public interest. Congress, which doesn’t vote on the deal, has influence over the regulatory agencies.

Comcast in its FCC filing said it would extend open-Internet protections, also known as “net neutrality,” to the 8 million Time Warner customers it would add in the deal. Philadelphia-based Comcast has said it will shed 3 million subscribers to stay under the threshhold of serving 30 percent of U.S. pay-TV homes, even though a U.S. court voided such a limit set by the FCC.

As it acquired NBCUniversal in 2011, Comcast agreed to abide by the FCC’s Net-neutrality rules until 2018. A court in January voided the rules, leaving Comcast as the only cable provider bound by the regulations.

Wednesday’s hearing, the first of a possible four congressional hearings, is before the Senate Judiciary Committee. Witnesses are to include a wireless Internet provider and a budding golf network, showing lawmakers may want to ask whether a bigger Comcast could harm small competitors, said Bert Foer, president of the American Antitrust Institute.

Other witnesses at the hearing led by Sen. Patrick Leahy, D-Vt., will be Comcast Executive Vice President David Cohen, Time Warner Cable Chief Financial Officer Arthur Minson Jr.; and Gene Kimmelman, a former Justice Department official who is president of the Washington-based policy group Public Knowledge. The group opposes the merger, saying it would give Comcast too much power over prices and distribution.

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