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  (Source: The Cable Show)
Comcast's purchase of Time Warner Cable is facing regulatory scrutiny from the FCC

For Time Warner Cable Inc. (TWC) subscribers dreading the pending takeover by Comcast Corp. (CMCSA), the news isn't pretty.  Hopes to avoid getting the "Comcast experience and witnessing the company's beloved customer service appear to be waning as America's largest cable company ratchets up its charm offensive in Washington, D.C. -- and it's "generous" gifts to federal regulators.
 
I. Approval at Any Cost?
 
Having already paid millions to members of Congress in hopes of swaying regulatory decisions regarding the proposed $45.2B USD deal, Comcast appeared to make yet another brazen move this week, donating $110,000 as a "presenting sponsor" for a lavish dinner party honoring U.S. Federal Communications Commission (FCC) Commissioner Mignon L. Clyburne.  Time Warner Cable chipped in a more modest $22,000 USD.
 
The donations were reported on by Politico and Fierce Cable, among others, following a blog by the group Citizens for Responsibility and Ethics in Washington (CREW).
 
The dinner in question -- the Walter Kaitz Foundation’s annual dinner -- is scheduled to be held in September.  The organization -- which "seeks to advance the contributions of women and multi-ethnic professionals in cable" -- is expected to give the "diversity advocate" award to Commissioner Clyburne for her work at the FCC, and prior to that at the Public Service Commission of South Carolina.

Mignon Clyburne
FCC Commissioner Mignon Clyburne [Image Source: Daily Yonder]

Comcast scoffed at critics of the donation arguing it has "long standing financial commitments" to the dinner.  Comcast spokeswoman Sena Fitzmaurice blasted the reports, stating:
 
We've given at the highest level for several years.  We are the industry leader—in our size and in our commitment to diversity—and it is important that we reflect that in our financial support of the Kaitz Foundation. As the industry has consolidated over time, especially after we became the largest operator in 2003, and then again with acquiring NBCUniversal in 2011, we’ve taken a larger role in giving to Kaitz.
 
The identity of the honorees is irrelevant to our long standing financial commitments.  We absolutely dispute the notion that our contributions have anything to do with currying favor with Commissioner Clyburn or any honoree. Such claims are insulting and not supported by any evidence. They are purely fiction.
 
She also pointed out to Newsweek that Comcast gave $140,000 USD, $145,000 USD, and $122,500 USD in 2013, 2012, and 2011, respectively.  Hence this year's donation is actually somewhat smaller than previous years.
 
As the guest of honor at the dinner, Comcast's name will be prominently advertised, and it will be able to invite up to 40 guests.
 
Kaitz Foundation spokesman Bobby Amirshahi similarly brushed of the critics, saying:
 
The [foundation] is the centerpiece of this industry’s efforts to not just recruit but to advance and train people of multi-ethnicity.  The reality is the honoree was not a consideration for us as one of many companies that supported [the dinner.]
 
The donations were disclosed in a filing to the U.S. Senate by Comcast and were pledged in May.  A month later in June, Commissioner Clyburne argued that sometimes monopolies could be "natural" and healthy for consumers, if properly monitored by the government.  



She states:

Well from a regulatory standpoint you have to look at the marketplace. Sometimes there's natural monopolies or oligopolies
 
There are instances... there are entities... where it may makes sense for their to be one or two in the market.
 
Take your uh... primary electric and gas company... there's usually one or two in the area.  You might have marketers that provide you gas.  But in terms of the infrastructure it usually is that legacy ... legacy industrial-owned utility.   It is quite natural. You don't want ten companies digging up the ground at different times.  So it is natural in some instances for their to be a monopoly.
 
In this case [Sirius XM] the commission concluded before I came in... that this might be a natural monopoly...
 
You've got a regulatory body in place that says, "Ok. We're going to look closely at this monopoly to ensure that the consumers that are engaging in this space are protected."
 
Again, that's why you have bodies like mine because we know markers are not perfect...
 
We will put We will evaluate the [Comcast-Time Warner] application and we will put the notice to public so the public can weigh in on this.

To be fair, the donation may not necessarily be causative of Commissioner Clyburne's apparent support of the deal, although it can't hurt.  As a Democratic commissioner she may face pressure to approve the deal from President Obama.  Comcast's chief lobbyist is a top Obama donor.  His fundraising donated more than a million to the Obama campaign in a single event alone.
 
Also a potential factor is the example Comcast set with Meredith Attwell Baker, a former Bush Administration official and Obama appointee.  After Ms. Baker helped secure Comcast approval of its NBC Universal purchase in 2011, Comcast returned the favor appointing her to a much better paying job as one of its lobbyists.
 
II. Let's Make a Deal
 
The merger proposal is one of two major market consolidations on the docket (the other is the $48.5B USD sale of DirectTV (DTV) to AT&T, Inc. (T)).  A third proposal -- a possible buyout of Time Warner Inc. (TWX) by News Corp.'s (NWS) Fox is currently in the works as well.  Rupert Murdoch's firm bid $80B USD to try to acquire Time Warner recently, but were rebuffed.  The media mogul is reportedly considering testing the waters with a larger bid soon.
 
Together these deals could impact the lives of more than 80 million Americans, or roughly 1 in 4 U.S. citizens.
 
The Comcast deal, if approved, is expected to give the company more than a third (33 to 50 percent depending on whose numbers you trust) of the broadband internet market and roughly 30 percent of the paid television market.  Remove satellite TV and Comcast would control roughly 60 percent of the cable TV market, according to Consumer Reports.

Comcast Getty Images
Comcast breached some of its regulatory promises following its NBC Universal purchase. 
[Image Source: Getty Images]

The push for approval is being led by Comcast's top lobbyist, David Cohen.  Mr. Cohen last year pushed $18.8M USD into the federal political arena, according to the Center for Responsive Politics.  That tidy sum was large enough to make Comcast the seventh largest corporate lobbyist.
 
Mr. Cohen won acclaim among Washington, D.C.'s elite special interests when he managed to push through Comcast's controversial $30B USD deal to acquire 80 percent of NBC Universal back in 2011.  His strategy back then was similar to the one now -- flood Congress with cash and make strategic investments to placate the FCC and the U.S. Department of Justice (DOJ) -- the primary two antitrust enforcement bodies capable of shooting down U.S. telecom deals.
 
This time around Comcast might have a tougher time selling its case to the public, at least.  After making big promises during the NBC Universal acquisition, it ended up going back on some of its pledges, a matter which the FCC eventually settled by allowing Comcast to pay a "voluntary" $800,000 USD fine.
 
David Cohen is already getting creative to try to sell the deal.  At one point he told reporters that Comcast and Time Warner did not compete against each other in any market, stating:
 
Comcast and Time Warner Cable do not compete against each other in any area. So this transaction will not result in any reduction in consumer choice in any market.
 
While that claim may be true in many markets, Comcast's own map admits that both companies compete in Louisville, Kentucky; St. Louis, Missouri; and New York City, New York.

Comcast and Time Warner
Comcast's own map admits that the pair compete in some major markets, including New York City.
[Image Source: Comcast]

Another angle tried by Mr. Cohen and his allies is to argue that wireless broadband and wireless video services are viable alternatives to broadband home internet and cable TV.  Time Warner Cable CEO Robert Marcus argued to Congress in May:
 
I would also note that mobile wireless is rapidly becoming a viable alternative to cable broadband given the ever-increasing capabilities of LTE as well as continued advances in compression technology.
 
Critics like Timothy Stenovec from The Huffington Post have called that claim "hilariously absurd" as it fails to account for the fact that most users have data caps and are not free to liberally consume wireless video or data at high speed rates.
 
III. Opposition Grows, DISH Piles On
 
Comcast who has inflated its profits over the last four years by raising basic rates by as much as 70 percent in markets it tightly controls, hasn't promised that customers will see any major price savings from the deal.  However, it claims that they may see peripheral benefits such as high data speeds and improved security.  Given Comcast's history of throttling users, though, claims of speed increases should be taken with a grain of salt.
 
A number of groups including The Free Press [source; PDF], the International Brotherhood of Electrical Workers (IBEW) [source], and Public Knowledge [source] have all written letters to the FCC and/or Congress in opposition of the deal.
Comcast Public Knowledge
[Image Source: Public Knowledge]

Netflix, Inc. (NFLX) also blasted the deal as anticompetitive.

Most recently, satellite cable firm DISH Network Corp. (DISH) blasted the merger in a letter to the FCC.  DISH's deputy counsel Jeffrey Blum addressed the Commission's secretary Marlene H. Dortch, writing:

The ability for Dish and other nondominant players to compete in the broadband and video markets will be impacted by how the commission responds to the mergers before it.  There do not appear to be any conditions that would remedy the harms that would result from the merger.

Comcast spokeswoman Sena Fitzmaurice fired back:

Dish not wanting stronger competitors isn’t surprising and it isn’t new.

DISH also voiced opposition to the AT&T purchase of DirectTV.

Sources: CREW, Politico, Fierce Cable, Newsweek





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