The Real Threat Lurking Behind the Comcast-Time Warner Deal
Business + Economy

The Real Threat Lurking Behind the Comcast-Time Warner Deal

Robert Galbraith / Reuters

A "national octopus" that would stifle competition. That's what the CEO of Public Knowledge, a non-profit dedicated to preserving the openness of the Internet, says Comcast would become if its proposed takeover of Time Warner Cable were allowed to go through.

The two cable giants announced their intention to merge in February, in an all-share transaction that was originally valued at $45 billion. Due to a decline in Comcast's share price, the deal is now valued at less than $40 billion.

Public Knowledge chief executive Gene Kimmelman, a former Justice Department anti-trust attorney, and other critics (and supporters) of the proposed tie-up testified at a three-hour Senate hearing yesterday. A statement on the deal from Public Knowledge website went even further, saying a bigger Comcast would be a "cable behemoth" and a "bully in the schoolyard."

Related: What the Landmark Netflix-Comcast Deal Could Cost You

Why the strong words? Comcast is already the nation's biggest provider of high speed internet services. Combine Comcast's customer base with Time Warner's and the new entity would control access to 30 million subscribers, or about 40 percent of all U.S. households served by high-speed internet.

The general fear is that an über-Comcast could all too easily dominate the content creators, networks and Internet companies that must use Comcast to connect to end users, which could ultimately mean less competition and higher prices.

“I’m very concerned that consumers are going to get stuck with higher cable and Internet prices, fewer choices and even worse service,” Senator Al Franken, a member of the Judiciary Committee, said in a pre-hearing statement. “Comcast has an army of lobbyists pushing this deal, but during this hearing we need to make sure that consumers’ voices are being heard, too."

It wasn't just Democrats voicing their concerns. Utah Republican Senator Mike Lee: “I’ve heard concerns for some time that the effects of robust competition, particularly pricing and quality of service, are not currently enjoyed in these markets."

The Not-So-Free Market System
Naturally, Comcast touts only benefits as a result of the proposed merger. "Comcast and TWC are better together for millions of customers and businesses," the cable giant's executive vice-president David Cohen said in a recent statement. "Significant benefits [will be] achieved without diminishing competition in video, broadband, phone, programming, advertising and other markets." In the hearing itself, he added: “There is nothing in this transaction that will cause anyone’s cable bills to go up.”

Related: Comcast Takeover of Time Warner Cable to Reshape U.S. Pay TV

Comcast will have to do more to convince regulators, as yesterday's Senate hearing was just the beginning of the cable giant’s fight to push this deal through. The Justice Department will look at whether a combination of Comcast and Time Warner will violate antitrust laws, and the Federal Communications Commission will determine whether or not the new entity would serve the public interest.

Maybe the most interesting tidbits to emerge from the intense coverage of this big business-big government matchup is the money circulating behind the scenes. Comcast spent $18.8 million lobbying Congress last year, ranking 7th highest among more than 4,000 organizations tracked by the Center for Responsive Politics. The company and its employees contributed another $1.8 million to politicians on both sides of the aisle. The biggest recipient of Comcast donations? President Obama. Comcast's Executive Vice President David Cohen has also hosted at least one fundraiser for the president.

Time Warner Cable spent nearly $8.3 million on lobbying last year, and contributed more than $480,000. The non-profit transparency-in-government organization Sunlight Foundation reports that, since 1989, Comcast and Time Warner employees have donated $42.4 million to politicians.

A merged Comcast-Time Warner probably would be a “national octopus” in the telecom arena: a 40 percent market share may be too big a slice of any sector of the economy. Despite Comcast's protestations to the contrary, less competition almost inevitably means less innovation and less freedom in the free market for consumers, as well as for the smaller businesses that orbit that larger, dominating ones—which is what a merged Comcast-Time Warner would be.

Still, the real national octopus wrapped around the political and regulatory system — what stifles the competition of ideas and voices in those "markets" — is likely the same tentacled creature that's always lurking in the depths: money.

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