Still fresh from its 2011 acquisition of NBC Universal’s (NBCU’s) cache of valuable programming content, Comcast Corporation announced on February 13, 2014 its intention to acquire Time-Warner Cable (TWC) for $45 billion.2 The proposed merger takes Comcast-NBCU to another level. The deal would horizontally integrate Comcast’s and TWC’s cable television (TV) and broadband Internet service provider (ISP) assets, creating a larger video distribution footprint. The expanded footprint would raise Comcast-NBCU’s shares in the national cable TV and broadband ISP markets from 23% to 36%, and 24% to 38%, respectively.3 The merger would also pair up Comcast- NBCU’s content holdings with yet another video distributor, TWC, further enhancing existing vertical integration.While critics and analysts have examined a range of competitive issues raised by the proposed transaction, two major categories are particularly important. First, as a larger cable TV provider and broadband ISP, Comcast-TWC would become an even more powerful buyer of products and services ranging from programming content to wholesale “middle” market services. The latter are provided by the Internet backbone providers (IBPs), content delivery networks (CDNs), and peering intermediaries that interconnect upstream content with downstream ISP networks. Second, the merger could enhance Comcast-TWC’s ability and/or incentive to potentially engage in exclusionary conduct. By virtue of an enlarged video distribution footprint, Comcast-TWC could serve as a “gatekeeper,” i.e., to control what rival content reaches its subscribers. Moreover, by pairing Comcast-NBCU content with TWC distribution, the merged company could exercise more control over whether its own content reaches rival multi-video programming distributors (MVPDs) and online video distributors (OVDs).All told, the combination would grant Comcast-TWC a vast measure of economic control over whether, what, how, and when important news, opinions, sports, and entertainment video programming is delivered to tens of millions of Americans. This landscape raises the troubling prospect of spillover effects from more concentrated economic power to expanded political control and diminished diversity and independence in the media. Comcast-TWC comes at a time when the industry is grappling with fundamental policy questions about an open Internet, the answers to which could well be shaped by the proposed merger. Moreover, the American consumer appears to be particularly unhappy with the merging parties’ cable TV and ISP products and services.The Comcast-TWC deal raises potentially significant competitive issues, little or no offsetting cost savings or consumer benefits, and would be extraordinarily difficult to “fix” with either structural or behavioral remedies. While Comcast describes itself as the “perfect partner” for TWC, the merger is nevertheless a poor match for competition and consumers.4 In light of these concerns, the interests of consumers might be better served if the U.S. Department of Justice (DOJ) and Federal Communications Commission (FCC) took a step back to contemplate the sea-change the deal would imply for the cable TV and broadband ISP industry. Adding in AT&T’s bid for DirecTV, and the widely predicted transaction between Sprint and T-Mobile, makes the case for why competition authorities should consider a “go slow” policy for the next two years, or even a temporary moratorium on such mega-deals. At the very least, these various transactions should not be viewed as if each were an isolated event. Rather, industry-wide dynamics and overarching policy goals should factor prominently into an enforcement framework.This White Paper explores what the American Antitrust Institute (AAI) believes to be the major competitive issues raised by the proposed merger and why it should be blocked. In contrast to the DOJ and FCC, which have access to proprietary data, AAI’s analysis is based on public data and information and our conclusions are limited accordingly. The paper proceeds as follows. Section II provides background on Comcast’s historical expansion through mergers and acquisitions. Section III sketches out the important backdrop for evaluating the proposed merger, namely the trend toward mega-deals, a history of swaps involving the parties, and their relatively poor performance. Section IV evaluates two major competitive issues raised by the proposed merger, namely how the merger could enhance the ability and/or incentive for a combined Comcast-TWC to potentially exercise buyer market power and engage in exclusionary conduct with regard to rivals. Section V analyzes Comcast-TWC’s efficiencies claims. Section VI discusses the inadequacy of approving the proposed deal with remedies, particularly any proposal to graft the behavioral fixes imposed in Comcast-NBCU onto the Comcast-TWC transaction. Section VII concludes.
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Feb 28, 2022
Xianmei Wang + 2
Open Access