FCC listens as states raise red flags on Comcast and Time Warner

Shareholders approves the cable giants' merger, but the FCC extends the deadline for public comments as opposition to the deal mounts

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Comcast and Time Warner shareholders voted overwhelmingly to approve the merger of the two cable giants this week. But any bubbly they broke out to celebrate the deal will have to go on ice -- and plenty of it. The FCC has decided to extend the period for public comments on the proposed deal until Oct. 29 and paused the "shot clock" at day 85 in its 180-day self-imposed review deadline.

Comcast CEO Brian Roberts declared last month that he was "cautiously optimistic" his company's pending acquisition of Time Warner would be approved early next year. But Rep. Tony Cárdenas (D-Calif.) this week observed that "by extending the comment period, the FCC clearly realizes that there are still voices that have legitimate concerns with the merger who still need to be heard." Cárdenas also noted that the FCC took a similar action in the proposed AT&T acquisition of T-Mobile -- and wound up denying that deal.  

There is no shortage of voices expressing "legitimate concerns" that merging the country's two largest cable companies will reduce competition in an industry known for high prices and poor customer satisfaction. Lexington, Ky., this week made clear its residents' unhappiness with their cable service. The city council of Kentucky's second-largest city "voted unanimously during a council work session Tuesday to put two resolutions denying transfer of ownership [of Time Warner] on the agenda," the Lexington Herald-Leader reported. City officials said the move was a result of frustrations with Time Warner, which refused to assure the city that its customer service will improve, despite months of negotiations.

New York has also threatened to block the merger, and this year passed a law that explicitly requires cable mergers to benefit the public. New York's State Public Service Commission is scheduled to vote on Nov. 13, and its staff has recommended the acquisition be approved only if Comcast makes costly concessions to improve service. "The proposals would require a post-merger Comcast to keep jobs in New York, offer faster broadband, improve customer service, expand in rural areas, and ease enrollment standards for a program that offers cheap broadband to poor families," according to Bloomberg.

California's Public Utilities Commission has placed the deal under scrutiny as well and is "requiring that Comcast explain how a merger with Time Warner Cable would benefit California voice and broadband customers, as well as to prove that the deal will improve Internet access among students and the poor," the Washington Post reports.

"States do have jurisdiction over cable phone services and the like," said Rob Frieden, a professor of telecommunications and law at Penn State University. "What the Comcasts of the world can do in these deals is quote-unquote voluntarily provide certain concessions that sweeten the deal, make it more in the public interest and more palatable to these regulatory authorities," Frieden said.

In August the FCC denied a request from the Los Angeles mayor's office to extend the comment period. But by September, when Dish Network also requested an extension, circumstances had changed; Comcast was late in meeting a Sept. 11 deadline for providing information, and then on Sept. 23 filed an 850-page tome that added new information not included in the original application for the merger. The FCC granted Dish Network's motion to extend the comment period, providing more time to digest and respond to the new information.

Tim Wu, a Columbia Law School professor and former senior adviser to the FCC, offers a well-reasoned argument why the FCC should not approve the cable merger. Wu, who coined the term "Net neutrality," writes:

The Federal Communications Commission, by law, is only supposed to approve the merger if it finds that it serves "the public interest." Given recent history, and in today's cable business, the public's interest can be captured in two words: "lower prices." The F.C.C., in fact, is supposed to ensure that cable prices are "reasonable." Here's a simple rule of thumb: unless the F.C.C. thinks that there is a realistic chance that the deal will reverse two decades of rising prices, it should stop the merger.

Comcast, in announcing its deal, has said nothing about how it might save consumers money. Instead, it calls the deal "an exciting opportunity" for its customers, promising "accelerated deployment of existing and new innovative products and services." I suspect that I'm not alone in thinking that a lack of excitement isn't what most customers call to complain about. Everyone, even people in the industry, knows that the prices are too damn high. But tellingly, nowhere in any of its materials does Comcast suggest a plan to do anything about it. So just what makes this merger in the public's interest?

Wu concludes by pointing out that "even AT&T, when it tried to buy T-Mobile, had more to promise customers than this."

FCC chairman Tom Wheeler spoke out this summer on the need for increased competition in broadband. We'll have to wait a little longer to hear whether Wheeler will act on his words and block a merger that would result in Comcast controlling 40 percent of the broadband market.

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