Executives from Comcast and Time Warner Cable will visit Capitol Hill on Wednesday in an effort to make the case for their merger, aiming to convince lawmakers that the $45 billion deal is good for consumers and that the firms are not as dominant as opponents claim.
The companies outlined their arguments in regulatory filings this week, saying that together they will be able to bring ultra-fast Internet connections to more U.S. homes. The companies also say they face increasing competition from Web video firms, wireless carriers and other Internet service providers.
The comments have drawn a backlash from consumer advocacy groups that oppose the merger of two companies that have long track records of poor customer service and increasing prices. The firms also will face skeptical lawmakers who fear that the union will quash new online competition.
“If this merger takes place, Comcast would accumulate unprecedented market power,” Gene Kimmelman, president of the group Public Knowledge, said in testimony submitted to the Senate Judiciary Committee. The group was among 50 public interest organizations that wrote letters Tuesday to Justice Department and Federal Communications Commission officials, seeking to block the deal.
Central to the debate over the merger is whether a bulked-up Comcast will have outsized power over a slew of technology, media and telecom firms that will depend on it to reach millions of customers.
The firm would dominate television and Internet service in 19 of the top 20 markets, including New York and Los Angeles. (Comcast serves parts of the D.C. area; Time Warner Cable does not.) It would have nearly 50 percent of the market for the best broadband Internet speeds, Kimmelman said.
And as consumers increasingly turn to the Internet for entertainment, communications and information, Comcast would have too much influence as the first nationwide provider of cable television and cable modem Internet, critics say.
“This increased size would magnify its status of gatekeeper for both new and emerging Internet services and conventional distribution of content to consumers,” Kimmelman said.
Comcast argued in regulatory filings Tuesday and last week that the merger isn’t anticompetitive because the firms don’t compete in the same territories. It promised a string of conditions to assure that it won’t squeeze out competition as the first nationwide cable service provider.
With its purchase of NBC Universal three years ago, Comcast took a powerful seat in the middle of the media and Internet universe. It has influence over practices across the industry, from consumer bills, to deals for licensing programs, to advertising rates, to the backroom charges paid by Web giants such as Netflix to ensure fast downloads.
Netflix relented in a fight over fees for smooth streams of its videos to Comcast customers because the Web giant thought it couldn’t win against such a powerful gatekeeper, said Netflix officials speaking on the condition of anonymity.
Mark Cooper, a researcher for the Consumer Federation of America, said he wondered whether regulators would have allowed Comcast to buy NBC Universal if it had bought Time Warner Cable first. “The overwhelmingly dominant firm that would result from this merger would be uniquely capable of coordinating . . . industrywide efforts to undermine competition,” Cooper said.
In its defense, Comcast pointed to a wide array of competition. Netflix and Google compete with its cable television service. Apple TV is considering a set-top box, too, the firm said.
“The difference between all those competitors and us is they have global and national scale,” Comcast executive vice president David Cohen said in a conference call with reporters Tuesday. That scale allows companies such as Netflix and Apple to sell their products globally and invest in research, development and new technology. Comcast needs the merger with Time Warner Cable to reach that level, he argued.
Analysts say lawmakers will probably grill the companies in a string of hearings, but they forecast that the merger will be approved with strong conditions.
“We still think the lack of core competition concern and service quality upgrades for Time Warner Cable are likely to lead regulators to approve the merger,” said Paul Gallant, an analyst at Guggenheim Securities.
Excerpted from The Switch at washingtonpost.com/blogs/
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