February 13

Comcast would gain dominance with Time Warner Cable purchase

Industry watchdogs worry that the deal would give the company too much power over American entertainment.

By Ryan Nakashima
The Associated Press

LOS ANGELES – With a single behemoth purchase, Comcast is creating a dominant force in American entertainment and presenting federal regulators with an equally outsized quandary: How should they handle a conglomerate that promises to improve cable TV and Internet service to millions of homes but also consolidates unprecedented control of what viewers watch and download?

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Comcast has agreed to buy Time Warner Cable for $45.2 billion in stock, or $158.82 per share, in a deal that would combine the top two cable TV companies in the nation.

2009 Associated Press File Photo

Comcast, which was already the nation’s No. 1 pay TV and Internet provider, says its $45.2 billion purchase of Time Warner Cable will provide faster, more reliable service to more customers and save money on TV programming costs.

If the acquisition is approved, Comcast will serve some 30 million pay TV customers and 32 million Internet subscribers.

But industry watchdogs say the deal will give the company too much power and ultimately raise the price of high-speed connections.

“How much power over content do we want a single company to have?” said Bert Foer, president of the American Antitrust Institute, a Washington based consumer interest group.

The all-stock deal approved by the boards of both companies trumps a proposal from Charter Communications to buy Time Warner Cable for about $38 billion. It also represents another giant expansion following Comcast’s $30 billion purchase of NBCUniversal, operator of networks like NBC, Bravo and USA, which was completed last March.

Comcast says it will continue to operate under conditions the government imposed when it approved that transaction, including a requirement that it provide standalone Internet service without tying it to a pay TV package and that it make programming available without discrimination to other providers, including online video providers. However, those conditions expire in 2018, and Comcast CEO Brian Roberts was not prepared to voluntarily extend those into the future in a conference call with journalists.

“Those Internet conditions would apply on Day One,” he said. “How long that goes is not something I want to speculate on, but many years at the very minimum.”

Roberts argued that the cable industry has been losing TV subscribers for the last decade because of increased competition from satellite TV providers such as DirecTV and Dish and telecom companies like AT&T and Verizon. Despite gaining subscribers in the final quarter of last year, the forecast is to lose more in 2014.

“It’s a very competitive business,” he said. “That being said, we’ve expanded for consumers their capabilities and access to content in remarkable ways.”

While the provision of video is competitive, it is becoming increasingly less important for cable operators as higher programming costs cut into their profits. On the other hand, providing Internet services is highly profitable and in many markets, cable companies offer the best speeds available.

“In most places outside of a few big metro areas, you’ve only got cable as the only game in town,” said Craig Aaron, president of Free Press, a public-interest group that focuses on the media industry. “I don’t see there on their list of proposed consumer benefits prices going down.”

The deal is expected to close by the end of the year, pending shareholder and regulatory approvals

The two companies already have strongholds in the major markets of New York, Chicago and Los Angeles. Comcast has 22 million pay TV customers but plans to divest 3 million after the deal closes. Time Warner Cable will contribute 11.2 million customers.

The price amounts to $158.82 per share for Time Warner Cable and is about 17 percent above that stock’s Wednesday closing price of $135.31. It tops a Charter Communications Inc. proposal to buy Time Warner Cable for about $132.50 per share.

Charter had pursued Time Warner Cable for months, but Time Warner Cable CEO Rob Marcus consistently rejected what he called a lowball offer, saying he would cut a deal for $160 per share in cash and stock.

(Continued on page 2)

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