A Comcast truck is seen parked at one of their centers on February 13, 2014 in Pompano Beach, Florida. (Photo by Joe Raedle/Getty Images)
Comcast's massive $45 billion merger with Time Warner Cable appears headed into rocky regulatory waters this week in the wake of reports that the Justice Department isn't sold on the idea — and in fact, the agency could have some serious questions about it. Could this lead to the merger's demise? Here's what we know so far.
What's up with Comcast?
The company's proposed merger with Time Warner Cable is coming under intensifying scrutiny from federal officials whose job it is to determine if a merger will be good or bad for consumers. Some of these experts in the Justice Department are reportedly "leaning against" approving the merger, according to Bloomberg. And on Sunday, the Wall Street Journal reported that Comcast will be meeting with DOJ officials Wednesday to discuss what the company would have to do to get the government's blessing.
This is no ordinary merger. It's one of the biggest deals we've ever seen in telecom and media — and how it fares will have huge implications for the way we get online and watch TV. At a time when all our entertainment is converging on the Internet, we're talking about the creation of one enormous player with control over millions of Americans' access to the Web, and to the content they see there.
Remember that Comcast was part of another mega-deal just four years ago when it bought NBC Universal. If that deal was about gaining better access to content, this one is all about gaining better access to more households — and possibly using that combo as a way to put pressure on other companies in various industries that rely on Comcast, or compete with Comcast.
What happens if DOJ rejects the deal?
Well, the Justice Department is only one of two agencies that must sign off on the merger before it can go through. The nation's top telecom regulator, the Federal Communications Commission, also has to give the green light.
The Justice Department, in merger reviews, looks at a deal's effect on competition and antitrust concerns. That's a pretty narrowly defined mission. But the historic nature of the merger, and its potential to radically change the relationship between the cable industry and others, may be encouraging regulators to broaden and deepen their inquiries.
If the government files suit to block the merger, that would amount to a huge headache for Comcast: For more than a year, the company has argued that the merger would lead to faster Internet service and a better TV experience. Even if the deal goes to court, Comcast could fight the lawsuit or try to negotiate with the government in an effort to save the merger.
"We continue to believe that our transaction with Time Warner Cable will bring substantial benefits to consumers without any competitive harms," Comcast said in a statement. "We will continue to engage in our productive discussions with the government and do not see any value in commenting on rumors and speculation."
Why is the deal such a… big deal, anyway?
The Comcast-TWC merger would join the country's two largest cable companies, adding millions of subscribers to Comcast's rolls and making it an even bigger player in video and Internet access.
The deal would give Comcast control of nearly 34 million TV subscribers and 32 million broadband customers. Nationally, Comcast would account for a third of the pay-TV market and 57 percent of the broadband market, according to the Journal.
Critics of the deal say that's far too big. Comcast's expansion into more households would give it vast power in negotiations with content partners and other set-top box makers, they argue. Those third parties would face a choice: Bend to Comcast's terms or risk losing access to the single biggest chunk of viewers and Internet users in America.
Why is the Justice Department concerned?
Between Comcast's potential power over other industry players that are crucial to your Internet and TV experience — Apple, for instance, or Netflix, or Disney which owns ABC and ESPN — and the company's sheer reach in its own industry, regulators seem skeptical of Comcast's argument that the deal won't have any anti-competitive effects.
One way that's played out is in a discussion about how to talk about competition. Comcast has argued that it doesn't have a presence where Time Warner Cable does — so its taking over TWC wouldn't eliminate a competitor from a given market and therefore shouldn't raise competitive concerns.
But other economists say it's not enough to look at what'll happen in a local market; you have to look at the merger from a national perspective. And for the reasons above, they argue, the Justice Department and FCC should study not just how the merger affects Comcast's position within the cable industry, but also Comcast's relationships to other industries, as well.
Is there anything Comcast can do about DOJ's concerns?
Comcast has already offered to make some concessions, such as shedding customers to avoid having too much sway in one market. They're also set to meet with regulators on Wednesday to discuss those potential conditions. But according to the Wall Street Journal story, Comcast hasn't met with the Justice Department since it announced the merger more than a year ago, which suggests DOJ may not be interested in the concessions Comcast is offering. (
Update: A source close to the negotiations says Comcast has been meeting with DOJ officials "all along — pretty much nearly every week.")
Another potentially troubling indicator for the merger? The companies' stock prices. With deals like these, the involved companies' stock prices tend to converge as the deal approval nears. But that hasn't happened in the case of Comcast-TWC, perhaps a sign that stock traders and analysts are worried the deal won't be approved.
In a recent blog post, Comcast said it hopes to receive a decision on the deal by mid-year.
Source :
washingtonpost.com