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By Diane Bartz
WASHINGTON Feb 13 Consumer advocates and U.S.
lawmakers are worried that Comcast Corp's proposed $45
billion takeover of Time Warner Cable Inc will create a
company with too much power to decide what Americans can watch
on television and do online, and they expect intense regulatory
scrutiny of the deal.
Their concerns are intertwined with a recent court decision
to overturn U.S. open Internet rules, which enforced the
principle that Internet service providers should treat all Web
traffic equally and should not give preferential treatment to
their own movies, websites and content. Comcast, a major
provider of Internet services, is committed to network
neutrality until 2018.
Separately, some media companies are concerned that Comcast
would attempt to pay them less for their television shows,
movies and other content, and have scheduled discussions with
their attorneys with an eye toward lobbying regulators in
Washington, said an antitrust attorney who spoke privately to
protect business relationships.
Comcast's proposed takeover of Time Warner Cable would
combine the country's top two cable providers into a colossus
that could reshape the U.S. pay television and broadband
Internet industry. The deal would put Comcast in 19 of the
nation's 20 largest TV markets.
The deal will be reviewed by the Federal Communications
Commission and either the Department of Justice or the Federal
Trade Commission, the two agencies that share antitrust
oversight in the United States.
Eight antitrust experts interviewed by Reuters were split
on whether the merger would be approved. While Comcast has
agreed to divest 3 million Time Warner Cable subscribers to keep
their combined share of the U.S. pay television market at under
30 percent, it is unclear if that is enough to satisfy antitrust
regulators, the experts said.
A Comcast-Time Warner combination could be especially
troubling in light of the court ruling that struck down FCC
rules aimed at preventing broadband service providers from
favoring one website over another, said Bert Foer, head of the
American Antitrust Institute.
"I hope it (the deal) is going to be fought tooth and nail,"
said Foer. "You're creating this giant and you're doing it in
the absence of a network neutrality rule. That's dangerous to
Foer said that agreements between Comcast and federal
agencies that were put in place at the time of the Comcast and
NBC Universal merger in 2011 to assure network neutrality would
end in 2018 and were nothing more than a "short-term bandage."
NOTHING BUT NET
The advocacy group Consumer Watchdog bluntly called on the
FCC and Department of Justice to block the creation of "an
unjustifiable monopoly" that could raise prices to customers and
would have "no incentive to improve broadband service."
Antitrust authorities often challenge mergers or extract
concessions when head-to-head competition would be diluted,
although there are few areas of the United States where two
cable companies compete directly.
Reed Hundt, FCC chairman during the Clinton administration,
said the current spotlight on the issue of open internet
principles meant the commission would carefully examine the size
and power of the new combined company.
"The FCC will look at that broadband market share and they
will say, 'Chairman Wheeler promised an open internet, what does
this deal mean for that?'" he said. "The FCC will take a hard
look at what is the durable, long-lasting, truly open internet
commitment," Hundt said.
Robert McDowell, a former FCC commissioner who voted to
approve Comcast's acquisition of NBC Universal, said the company
could be asked to extend its net neutrality commitment, and if
they do so, chances of approval are good.
"Comcast understood going into this that they'll have to
agree to at least all of the same merger conditions that were
put into the NBC merger deal plus some other things too. They
will probably see an extension of the term of those conditions,"
Amy Klobuchar, chairwoman of the Senate Judiciary
Committee's antitrust panel, promised a hearing "to carefully
scrutinize the details of this merger and its potential
consequences." No date has been set so far.
The Republican-run House Judiciary Committee is also
expected to hold a hearing "to ensure that the interests of
American consumers and overall competition in the marketplace is
Senator Al Franken was a critic of Comcast's previous deal
with NBC Universal. On Thursday he wrote to both FCC Chairman
Tom Wheeler and top U.S. antitrust officials with "serious
reservations" about Comcast's latest move.
"A handful of cable providers dominate the market, leaving
consumers with little choice but to pay high bills for often
unsatisfactory service. I am concerned that Comcast's proposed
acquisition of Time Warner would only make things worse," wrote
Franken, a Minnesota Democrat.
The Justice Department has stopped a couple of notable deals
recently, particularly a proposed merger of AT&T with T-Mobile
USA. Other deals it sued to stop - like the Anheuser-Busch InBev
deal to buy Grupo Modelo and US Airways merger
with American Airlines - were allowed to go ahead after the
companies pledged big asset sales.
The companies maintain that customers will benefit from the
merger as services and technology improves.
"This transaction is pro-consumer, pro-competitive and
approvable," said Comcast executive vice president David Cohen.
However, "we're certainly not promising that customer bills are
going to go down or even increase less rapidly," he added.
Wall Street analysts said the deal would give Comcast a
stronger hand in negotiations with content providers such as
Walt Disney Co, CBS Corp and Fox. Media
companies collectively receive billions of dollars a year from
pay TV operators for their programming.
"Content providers would face a negotiating behemoth with
close to 30 million subscribers that, oh by the way, is
vertically integrated with a direct competitor (NBC Universal),"
Moffett Nathanson analyst Craig Moffett said in a note to
clients. "Expect them to complain vehemently."
A Disney spokesman did not respond to requests for comment,
and Fox had no comment. CBS' chief executive Les Moonves said in
a CNBC interview that "if you have the right content, you're
always going to have the (pricing) power."
The deal has generated "considerable opposition" among
programmers who fear they will be offered less money for their
content, said the antitrust attorney.
"This is a very problematic deal. ... And I don't know if it
can be corrected," he said.
(Additional reporting by Alina Selyukh in Washington, Lisa
Richwine in Los Angeles, and Jennifer Saba in New York; Editing
by Ros Krasny and Ryan Woo)