The collapse of the proposed merger between Comcast and Time Warner should have been a surprise to no one. This merger, if it had happened, would have put more than half the U.S. broadband industry into the hands of a single company. The deal’s demise is not surprising, considering that the Federal Communications Commission and the Department of Justice had already killed several mergers, such as AT&T’s attempt to merge with T-Mobile, that the agency felt would be bad for consumers.
Nominally, the Comcast-Time Warner merger was a marriage of cable television companies, and if that were all that was at stake, it might have flown. But times change and this merger became more about broadband than about television. Broadband, as you, no doubt, know by now, is one of the FCC’s hot buttons. Anything that the FCC sees as interfering with the free access to broadband is basically doomed.
Looking at the FCC’s history on broadband issues, ranging from net neutrality to local limits on broadband providers, this should have been clear to Comcast’s lawyers. But for whatever reason, the parties involved went ahead with their merger plans and, in the process, spent millions of their stockholders’ dollars in an effort that was pretty clearly in trouble from the start. Worse, it’s pretty clear Comcast knew the merger was in trouble.
How did Comcast know, you ask? Just look at the vast “better together” advertising campaign that’s been going on for over a year. In fact, Comcast has been using its mandated net neutrality agreement that was a result of its merger with NBC as a selling point. Considering that this limitation was the only way that the FCC would agree to let Comcast buy NBC, the company should have realized that it was already pushing the limits.
This doesn’t mean that the FCC has called a halt to cable mergers. What it really means is that the FCC, and to some extent the DOJ, are putting a stop on mergers that would result in a near-monopoly that could result in damage to the government’s clear goal of a totally neutral Internet. There’s every likelihood that Time Warner Cable will find another merger partner to help it recover from its financial problems.
The reason the merger collapsed isn’t that the FCC voted to deny permission, however. What actually happened is that the FCC decided to request a hearing on the proposed merger following a meeting with Comcast earlier in the week. We don’t know what actually transpired in that closed meeting, but it clearly caused enough concern at the FCC that the agency decided to slow things down. The best way to slow things down is to request a hearing because that can require months to take place, more months of planning, and the outcome of any hearing was probably not going to be favorable to Comcast.
To get an idea just how unfavorable the hearings would have been, just take a look at the range and depth of the opposition. There you’ll find some very strange bedfellows from Common Cause to a variety of industry associations, such as COMPTEL. When opposition arises among such a diverse group, the FCC notices.
This is not to suggest that opposition is rare—because it’s not. Nearly anything the FCC does has someone, somewhere opposing it. But when you see so many different groups in opposition, this indicates that something serious is going on. That was the case with the Comcast merger.
Collapse of Comcast-Time Warner Merger Will Benefit Internet Users
What’s also telling is the common theme of the opposition. Everyone, it seems, is pretty certain that Comcast would become the 1,000-pound gorilla of the Internet. “Comcast and Time Warner Cable’s decision to end Comcast’s proposed acquisition of Time Warner Cable is in the best interests of consumers,” said FCC Chairman Tom Wheeler in a prepared statement released to the press after the end of the merger was announced. “The proposed transaction would have created a company with the most broadband and the video subscribers in the nation alongside the ownership of significant programming interests.”
“Today, an online video market is emerging that offers new business models and greater consumer choice,” Wheeler said. “The proposed merger would have posed an unacceptable risk to competition and innovation, including to the ability of online video providers to reach and serve consumers.”
Just how much of a problem this might have been was demonstrated in 2013, when Comcast, then a silent partner in the Hulu steaming service, blocked the sale of the service to AT&T and DirecTV, despite a billion dollar offer that was seen by many observers as being a premium price. According to reports in The Washington Post, this was viewed by the Justice Department as a demonstration of how Comcast would use its size and influence to control the Internet.
Of course, public pressure also played a role, as noted in a prepared statement by Common Cause President Miles Rapoport, “As we saw in February when the FCC adopted strong rules to protect the free flow of information online, citizen voices can still make a difference in our government’s decision-making. More than 800,000 Americans told the FCC that the Comcast/Time Warner Cable merger would be bad for competition and innovation; their arguments were well-founded and have now carried the day. This is their victory.”
So what’s next for Comcast? Perhaps now that Comcast isn’t spending all that money on a doomed merger attempt it can do something that actually benefits consumers, like lowering prices.