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The merger of Comcast and Time Warner Cable will create a stronger company but will not be an increased competitive threat because there is a growing number of ways consumers and businesses can get video, broadband and phone services, according to a filing Tuesday by Comcast with the Federal Communications Commission.
The combination will actually serve the public, says the extensive filing, because Comcast agrees to voluntarily extend many of the protections it agreed to when it acquired NBCUniversal in 2009 beyond the original three-year commitment, and to extend those protections to Time Warner Cable customers as well.
“Comcast is now the only company legally bound by the no-blocking and non-discrimination rules in the FCC’s Open Internet Order, in the wake of the recent D.C. Circuit decision vacating these rules,” states the filing. “It is subject as well to unique restrictions. Accordingly, not only will this aspect of the transaction address and prevent any of the putative competitive harms certain parties may allege regarding edge providers, but application of these Open Internet rules to all of TWC’s cable systems is an immediate and substantial public interest benefit that approval of this transaction will extend to millions of additional consumers.”
“This transaction, therefore, will spread the reach of those protections to all of TWC’s customers,” adds Comcast. “The Open Internet rules were designed to establish baseline requirements to foster the virtuous cycle of innovation involving edge providers and to provide consumers and edge providers some important certainty.”
The concept of a “virtuous cycle” is central to Comcast arguments in favor of the TWC merger. The idea is that innovative technologies will mean consumers get more services at less cost, which will spur innovation, after which even more consumers will benefit from even more new services.
“Each company has had some success, but its limited geographic scope has constrained its ability to offer truly meaningful competition to the established providers,” says Comcast in the filing. “The combined company’s greater geographic reach and its combined expertise and services will allow it to become a stronger competitor, offering businesses of all sizes better options, lower prices, higher quality and enhanced services.”
The filing says that the two companies’ current service areas do not overlap, so there is no issue of having too big a market share after the merger is completed. “Because Comcast and TWC serve almost entirely distinct geographic areas,” explains Comcast, “they do not compete for any of these services and the transaction will not result in any reduction in competition or consumer choice for broadband, video or voice providers – nor will it increase Comcast’s market share in any geographic product market.
“The lack of competition between Comcast and TWC fundamentally distinguishes this transaction from proposed mergers recently challenged by antitrust regulators, such as the AT&T/T-Mobile transaction,” claims Comcast. “Indeed, the absence of any reduction in competition should end the inquiry into any potentially anti-competitive effects in these consumer markets resulting from the horizontal aspects of the transaction.”
Comcast says there is now so much competition, and so many choices for consumers, that the local share of market cannot be deemed too high after this transaction.
“No relevant local market share changes as a result of this deal,” adds the filing, “and the transaction should not be used as an opportunity to air generalized concerns or views of what a different hypothetical market might look like.”
Comcast argues that in reality the combination of their advanced technology, high speed broadband, more extensive channel lineup and commitment to diversity will be extended to TWC markets and that will make it even better for consumers, business and advertisers, thus serving the public interest.
Comcast says that, in the past decade, the marketplace has seen a fundamental shift.
“Today’s MVPD [multiple video providers] marketplace is even more competitive than it was in 2009 – let alone in 2001 – with cable providers’ share of U.S. MVPD subscribers having declined significantly in recent years in light of robust competition from DBS [direct broadcast satellite] and telco providers,” asserts the filing. “Along with new wireline MVPD entrants, like Google Fiber, a number of online businesses like Netflix, Apple, Google, Amazon, Hulu, Sony, and a host of smaller companies are entering the online video space and positioning themselves as full or partial competitors to MVPDs. At the same time, MVPDs like Dish, DirecTV, and Verizon FiOS are reportedly exploring online video offerings.”
Comcast also says that content providers will not be impacted by having to deal with a much larger cable distributor.
“Concerns about a merger leading to an increase in bargaining power usually arise when the merging parties compete with each other for customers because the combined company would face less competitive pressure post-transaction,” says Comcast. “In the current transaction, this concern does not arise, because Comcast and TWC do not compete for customers. So the transaction does not change Comcast’s incentives or next best alternatives to carrying a content provider’s programming – Comcast will face the same risk post-transaction of losing subscribers to competitors if it does not carry the programming as it does today.”
“With 22 million customers, Comcast is a significant MVPD in programming negotiations, and it seems unlikely – as a real-world matter – that the addition of 8 million (or even 11 million) more customers creates any truly new bargaining power that will somehow tip the scales in a dramatic fashion against either large or small programmers,” writes Comcast. “To the contrary, programmers with valuable content have significant bargaining power of their own, as reflected in the fact that programming costs have outstripped inflation.”
Comcast, which has battled Tennis Channel and others that believe they do not get fair treatment, says smaller programmers support this merger. “The company carries over 160 independent networks, including many small, diverse, and international networks,” says the filing. “And it is well into the process of fulfilling the commitment it made in connection with the NBCUniversal transaction to launch 10 new independent networks, including at least eight owned or managed by minority groups.”
What the merger will mean, says Comcast, is that consumers and businesses will get better service, high broadband speeds, greater selection of programming, more rapid rollout of next-generation services including TV Everywhere and a company that has a commitment to charity, the handicapped and the highest business standards.
“As set forth in the Declaration of Michael J. Angelakis, Comcast vice chairman and chief financial officer, these economic drivers will provide the combined company with a greater ability to invest and innovate, not only to serve its existing customers better, but also to respond effectively to new competitive dynamics,” says the filing.
Comcast estimates the merged companies will save about $1.5 billion. A lot of that money will go to innovation which will mean even faster broadband speeds for customers.
“By virtue of the better broadband speeds and services and increased competition this transaction will produce across the combined company’s footprint,” Comcast claims in the filing, “the Internet ecosystem as a whole will benefit.”
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