Comcast, Time Warner Deal Signals Changing Times in Cable Industry

By Michelle Maisto  |  Posted 2014-04-12 Print this article Print

In his closing remarks, again playing down popular concerns, Yoo cited AOL's 2000 purchase of Time Warner for $164 billion. "What many predicted would be the end of history" just wound up being "the end of $200 billion in Time Warner shareholder value," he said.

"In addition, just a few short years ago, many argued that fiber-to-the-home would soon consign the cable industry to the dustbin of history," Yoo continued. "These episodes underscore how easy it is to hypothesize problems that never materialize and how easy it is to forget that innovation and willingness to undertake commercial risk have created greater consumer benefits than anyone could have anticipated."

Arguing to the contrary was James Bosworth, CEO of Back9Network, a new golf and lifestyle cable network. Bosworth was looking for distribution for Back9Network and had had five meetings with Time Warner and strong assurances. But since Back9Network's programming competes directly with Comcast's Golf Channel, Bosworth is nervous.

"I hope Comcast will remain true to its commitments and not discriminate based on its ownership of the Golf Channel, and I hope Comcast will judge us on the merits of our business plan. But, so far, that has not been our experience," said Bosworth.

"If the structural problems in the distribution system get worse through mergers, it will not only be bad for those of us trying to launch new networks, but consumers will not have the programming choice—or diversity of viewpoints—they want."

The day's final witness was Richard J. Sherwin, CEO of Spot On Networks (SON), who was also concerned about how TWC's practices might change after the merger, though in a different area of its business.

SON is a WiFi provider to multifamily residences—the "step-child," he said, in a telecommunications industry geared toward serving single-family households.

The young people in these communities rely almost exclusively on wireless technologies, which contribute to an overall "challenging environment" with the "interaction of their dense population of wireless devices so close to each other and the burgeoning demand on the one side and the limitations of the cellular system capacity on the other," said Sherwin.

Further exacerbating the issue are certain "green" materials used in the buildings, which make it hard for cellular signals to reach residents, to the point that 911 calls "are 'sketchy' at best," he said.

But through a combination of communitywide managed WiFi services, swaths of frequency provided in the WiFi bands by the FCC, and specially designed hardware and software approaches created by WiFi providers such as SON, these communities get served, said Sherwin.

Still, SON and others require access to bandwidth that's owned or controlled by companies such as TWC and Comcast, which sell to them "at a reasonable price and with reasonable terms," thanks to conditions put in place by the FCC. These conditions may have since expired, said Sherwin, but until recently they were still honored.

What Sherwin wants is a condition in the merger guaranteeing a continuance of such good behavior.

"The absence of such a condition would reward any entity's anti-competitive sub-industry standard conduct, metastasize such anti-competitive practices and serve to reduce broadband choice and access and decrease innovation and competition," added Sherwin.

Ultimately, the FCC and the Justice Department will decide whether, or under what terms, the merger can happen. The role of Wednesday's hearing, said Sen. Chuck Grassley, R-Iowa, a host of the event, was to conduct some oversight responsibility and "examine the current state of the television and Internet market."

"It's a chance for us to see," he added, "how well our laws are working in an area that has a direct impact on the lives of Americans."

Follow Michelle Maisto on Twitter.



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