Comcast to buy rival Time Warner Cable, will the FCC allow it?
What: Comcast has confirmed a deal to acquire Time Warner Cable for about US $44 billion. The proposed deal will be intensely scrutinized by the U.S. government, including the Justice Department, which will address antitrust concerns, and the FCC (Federal Communications Commission), which is charged with ensuring that the deal serves the public interest. As part of the deal, Comcast is expected to extend its commitment to follow the FCC's open-Internet rules.
Why it matters: The deal creates a company that controls three-quarters of the US cable industry, challenging regulators. From an advertising and media buying perspective, Comcast belongs to the U.S. largest advertisers with US$ 1.7 billion in 2012 advertising (measured media) spending according to WPP's Kantar Media. Time Warner Cable spent $224.3 million in 2012 year to advertise in major media.
Comcast Corp. has acquired Time Warner Cable Inc. for about US $44 billion. The company has agreed to pay about US $159 per share of Time Warner Cable stock. The deal will combine the largest two US cable companies.
Time Warner Cable had asked for US $160 in mid-January, when Comcast rival Charter offered to buy it at about US $130 per share. The sum Time Warner had suggested is very close to what Comcast ultimately offered, beating Charter Communications Inc. to what is the second-largest cable-television acquisition by equity value according to data compiled by Bloomberg.
Comcast owns NBC Universal which in turn owns Spanish-broadcast network Telemundo and English-language cable network Mun2. Time Warner Cable does own several local news and sports channels in addition to its powerful distribution network. It also owns Time Warner Cable Media, which sells video and digital ads on cable systems, channels like NY1 and web sites like Road Runner. Comcast belongs to the U.S. largest advertisers with US$ 1.7 billion in 2012 advertising (measured media) spending according to WPP's Kantar Media. Time Warner Cable spent $224.3 million in 2012 year to advertise in major media, according to the Kantar Media division of WPP.
The merged company would account for almost three-quarters of the cable industry, according to the National Cable Television Association.
Through this consolidation, Comcast would become the main television channels, phone services and Internet connections provider in one in three American homes, a total unmatched by any other distributor. Comcast already has about 23 million television subscribers in markets like Philadelphia, where it is headquartered. With the addition of Time Warner Cable subscribers, Comcast will strengthen to face negotiations with cable channel owners like The Walt Disney Company.Time Warner lost 217,000 residential video subscribers in the fourth quarter of 2013, against strong competitosr such AT&T Inc., Verizon Communications Inc. and Netflix Inc. Comcast has added 43,000 subscribers in the same period.
Is it too dangerous for the nation's telecommunication system to be in the hands of just one provider?
Will Comcast really be able to expand its footprint?
There are doubts about whether Comcast will be able to expand its cable footprint or not. In the US, a rule that banned a single cable company from controlling more than 30% of the market has been enforced by regulators. As part of the deal, Comcast is expected to extend its commitment to follow the FCC's open-Internet rules.
John Bergmayer (photo), a Senior Staff Attorney at Public Knowledge, advocates for the public interest before courts and policymakers. Bergmayer is convinced that Comcast cannot be allowed to purchase Time Warner Cable and that it should be stopped by Antitrust authorities and the FCC (Federal Communications Commission). The attorney is against this deal as he is convinced that an enlarged Comcast would be able to keep others from innovating, while facing pressure to improve its own service. New equipment, new services, and new content would have to meet with the new conglomerate's approval to stand any chance of succeeding. According to Bergmayer, this will all lead to raising costs for consumers, who ultimately pay the bills. From his point of view, it is dangerous for a large proportion of the nation's communications infrastructure to be in the hands of just one provider.
"If Comcast takes over Time Warner Cable, it would yield unprecedented gatekeeper power in several important markets. An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content,” Bergmayer said. "Fortunately, the regulators and law enforcement agencies who must approve a deal between Comcast and Time Warner Cable are empowered to promote the public interest, not Comcast's interest in empire-building. We call on them to protect the public and stop this deal," He added.
However, The two companies are likely to point out that they don't directly compete. The Justice Department and other federal agencies will certainly line up to scrutinize the proposed combination.