Comcast-Time Warner Cable Merger Hits Setback After FCC Staff Recommend Hearing (Report)

Brian Roberts Comcast CEO - H 2014
AP Photo/Susan Walsh

The Wall Street Journal reports that staff concluded that a "hearing designation order" overseen by an administrative law judge was the best option, suggesting the FCC doesn't feel the deal is in the public interest.

In its review of Comcast's bid to purchase Time Warner Cable, the Federal Communications Commission is recommending a "hearing designation order," according to the The Wall Street Journal, a process so onerous that, if it proceeds, it could put an end to the proposed $45.2 billion merger.

The FCC will refer the transaction to an administrative law judge, says the Journal. "This on top of Department of Justice staff recommending a lawsuit to stop the deal ... would appear to be a death sentence for the transaction," said BTIG analyst Richard Greenfield.

Citing sources familiar with the matter, the Journal reported that putting the merger in the hands of an administrative law judge is a sign that the FCC does not believe the transaction is in the public's best interest, an opinion also expressed by various consumer-advocate groups over the past several months.

While such a hearing could prove to be a deal-killer, Comcast and Time Warner Cable would likely have the opportunity to add their input before the process begins. 

Executives from Comcast met with FCC and Justice Department officials on Wednesday as part of a review of the proposed merger, although the executives did not comment on the substance of those meetings. 

Comcast, though, has been using its corporate blog to try to build support for the merger. On Wednesday, for example, executive vp David Cohen defended the company's initiative called Internet Essentials in a post titled: "Setting the record straight on criticisms of the Comcast-TWC transaction."

Critics say Internet Essentials, which offers low-cost computers and Internet to qualifying households, is too complicated and restrictive, with some critics using the program's shortcomings to bash Comcast and its effort to purchase Time Warner Cable.

"The unconnected population is difficult to reach, and closing the digital divide is a long-term process," Cohen wrote. "What's remarkable is that even though Comcast is only one of multiple providers and does not have broadband systems in two-thirds of the country, the program has accounted for approximately one-quarter of all the national broadband adoption growth for low-income families with children from the program's inception through June, 2014."

Meanwhile, Greenfield speculated on what Comcast might acquire if it it isn't allowed to purchase Time Warner Cable, or if it chooses to drop its bid because of too many demands from regulators seeking concessions and promises from the conglomerate.

Among Comcast's targets, predicts Greenfield, would be Netflix, Time Warner, Cablevision or a combination "of the highest quality online content creators," such as Vice Media and Glenn Beck's The Blaze.