It’s not clear if the FCC and Department of Justice will approve the Comcast/Time Warner Cable deal, but if they do, the companies could walk away from it if imposed conditions affect broadband pricing, analysts, cable attorneys and industry executives said in interviews last week. While a host of conditions ranging from divestitures to rules requiring greater transparency have been suggested by filers in docket 14-57, most industry observers told us those that could regulate broadband pricing have the highest potential to make the transaction unprofitable in Comcast’s eyes. “Anything that Comcast perceived as indirect price regulation of broadband” could cause it to walk away from the deal, Guggenheim Partners analyst Paul Gallant said.
Monty Tayloe
Monty Tayloe, Associate Editor, covers broadcasting and the Federal Communications Commission for Communications Daily. He joined Warren Communications News in 2013, after spending 10 years covering crime and local politics for Virginia regional newspapers and a turn in television as a communications assistant for the PBS NewsHour. He’s a Virginia native who graduated Fork Union Military Academy and the College of William and Mary. You can follow Tayloe on Twitter: @MontyTayloe .
The FCC should extend the deadline for low-power TV stations to transition to digital and build new facilities after the post-incentive auction repacking, said virtually every response to the NPRM seeking comment on the auction's effect on LPTV. Comments were due Monday, and posted in dockets including 12-268. Though all agreed the deadline should be extended, the low-power broadcasters, wireless and translator associations and public interest groups agreed on little else in the NPRM.
The FCC restarted the “shot clock” for the Comcast/Time Warner Cable transaction, a spokeswoman for the Media Bureau told us. The clock was stopped Dec. 22 (see 1412220062) because TWC hadn't submitted all of the information requested by the commission, said a letter sent to TWC. Though the bureau wouldn't comment on whether TWC had since completed its submission, an attorney involved in the deal told us it has done so. With all the information requests to the merging companies complete, the FCC will now focus on analyzing the data, the attorney said. Information requests from the FCC to DirecTV, Netflix and several other companies for information related to the deal are outstanding (see 1501050043).
The lease on the FCC’s current headquarters at the Portals building runs out in 2017, and the commission could end up moving to a different location or a smaller space within the same building, FCC officials, former FCC officials and the General Services Administration told us last week. Proposals for moving or consolidating into a smaller portion of the building have been discussed in the chairman’s office and the Office of Managing Director, several FCC officials told us, though the GSA makes a final decision on the matter. Though the lease’s end is two years away, planning for a potential move or consolidation of space likely needs to begin well in advance of the Oct. 16, 2017, end date, several former FCC officials told us.
AT&T's proposed buy of DirecTV will have anticompetitive effects on online video and local broadcasting and the FCC should impose conditions on any deal approval, said Comptel, Dish, NAB and Netflix in reply comments posted online through Thursday in docket 14-90. Though network BabyFirst and broadcasting and direct broadcast satellite company Hubbard Broadcasting filed reply comments supporting the deal, most replies focused on alleged public interest harms. If combined with DirecTV, “AT&T would have a direct and powerful incentive to favor its combined entity’s video offerings to protect its $48 billion investment -- either by foreclosing OVDs [online video distributors] from access to those customers, or at least by seeking anti-competitive rents from them,” Netflix said.
Price hikes for video and broadband in 2015 for Comcast, DirecTV and Time Warner Cable likely have more to do with rising content costs than their pending deals before the FCC, several communications attorneys and the companies themselves told us Tuesday. “The cost of content is increasing for everyone, and these rate hikes are just part of the trend,” said American Cable Association President Matthew Polka in an interview. Though price hikes could be an attempt to get ahead of possible conditions on the deal that would keep prices down, rising content costs are likely an influence, said Public Knowledge Senior Staff Attorney John Bergmayer. PK opposes media consolidation and the Comcast/TWC deal. Price hikes are always blamed on content costs, Bergmayer said. “There's nothing forcing Comcast to pass its costs on to consumers,” Bergmayer said.
The FCC wants information from some companies that deal with Comcast or provide similar services in order to complete its review of the cable giant’s proposed buy of Time Warner Cable, said letters posted online in docket 14-57 Monday. To complete its review, the FCC requires “information and data from other commercial wireline carriers against which the applicants compete,” said the letters to DirecTV, HBO, Netflix, Hulu, Sony Network Entertainment International and to network providers Limelight Networks, Level 3 Communications and Akamai Technologies. Though information requests to third parties are unusual in merger reviews, they aren’t in reviews of this scale, several communications attorneys told us. The focus on companies that provide content or deliver content-containing data suggests that the inquiry could be connected to the peering dispute between Netflix and Comcast last year, one cable attorney told us.
In the months leading up to the FCC incentive auction, communication and sharing of information among telecom companies will be severely restricted by anti-collusion and conflict of interest rules, likely shutting down mergers and acquisitions within that sphere, said attorneys studying the matter. The concerns are consistent with our report that many major communications law firms face potential conflicts of interest on the first-of-its-kind auction that should raise billions of dollars for the government, giving TV stations selling all or some of their frequencies a cut of proceeds. After the reverse auction application deadline, FCC anti-collusion rules will prevent all Class A and full-power broadcasters from communicating about their auction participation plans or lack thereof, and participants in the forward auction will be barred from communicating anything about auction plans with any TV licensee, the FCC’s incentive auction order said.
Cable associations and satellite providers disagreed whether the FCC has the authority to create a regulatory fee category that would apply to all multichannel video programming distributors. The split became clear in reply comments posted in docket 14-92 Tuesday. “It is long past time to end the competitive disparity that the current regulatory fee structure perpetuates,” the American Cable Association and NCTA said in joint reply comments. The associations devote too little attention to the FCC’s authority to enact such a system, DirecTV and Dish Network said in their own joint reply comments. “Such hand waving cannot suffice” when the law prohibits the cable proposal, the DBS companies said. CenturyLink and HyperCube Telecom also filed reply comments in the proceeding, focusing on how new regulatory fee rules would apply to toll-free services.
A review of the record in Comcast’s proposed buy of Time Warner Cable leads to the conclusion that it will deliver public interest benefits and generate no “cognizable competitive harms,” said Comcast in reply comments filed Tuesday, the last day docket 14-57 would be open for comments. Though Tuesday was the deadline for commenters to file, Comcast filed its own rebuttal. “We can think of no previous merger in which an Applicant has felt compelled to take this kind of action,” said Amanda Keating of Stop Mega Comcast Coalition, a group of opponents to the deal. The group held a press call Tuesday morning to highlight the evidence against the transaction.