Online programming poses threat to cable television providers - The Buffalo News
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Online programming poses threat to cable television providers

NEW YORK – On the face of it, the merger of the two largest U.S. cable companies would seem like a non-starter, given its steep regulatory hurdles and skepticism from consumer watchdogs.

But Comcast’s proposed acquisition of Time Warner Cable comes at a moment of seismic change in the television industry, with consumers increasingly cutting their cable cords and instead streaming their favorite shows via the Internet through services like Netflix, YouTube, Amazon and Hulu.

This shifting landscape may aid Comcast as it seeks to persuade government officials – and deploys its prodigious army of lobbyists – to get its $45 billion takeover approved.

“I believe television will change more in the next five years than in the last 50,” Brian L. Roberts, Comcast’s chief executive, has said.

Still, the combination of the two companies, creating a cable and broadband behemoth serving 30 million customers across 42 states, is expected to come under intense scrutiny from the Obama administration, which has toughened its enforcement of federal antitrust laws.

But much of the focus Thursday on how the proposed deal would affect competition in cable TV overshadowed what could be a more important consideration for regulators: the merger’s effect on broadband Internet service, which is rapidly becoming the most important pipe running into the homes of most U.S. consumers.

A merged Comcast and Time Warner Cable would have nearly twice as many high-speed Internet subscribers as the next largest company and would control roughly 38 percent of the high-speed Internet market, according to figures compiled by the Leichtman Research Group, an independent firm in Durham, N.H. The combined companies would account for nearly 32 million broadband customers, compared with 16 million for AT&T and 9 million for Verizon.

The effect of the deal on cable-TV and Internet service prompted many consumer advocacy organizations to immediately express hostility toward the deal.

“This industry is notoriously unpopular with consumers due to poor customer service, not to mention ever-increasing bills, and a deal this size doesn’t exactly convince us that things will get better,” said Delara Derakhshani, policy counsel for Consumers Union.

Washington lawmakers also said they would give it close scrutiny. Sen. Amy Klobuchar, D-Minn., chairwoman of the Senate Antitrust Subcommittee, said that because the proposed merger “could have a significant impact on the cable industry and affect consumers across the country,” she plans to convene a hearing to examine the deal.

But Comcast officials dismissed much of the criticism of the deal as “hysteria” and noted that the new company’s market share of cable subscribers will be no higher than it was after completing a similar transaction with Adelphia in 2006.

In addition, Comcast said that it and Time Warner Cable do not compete in a single U.S. ZIP code.

Nor is the deal likely to have an effect on other providers of television programming – including Verizon, AT&T, DirecTV and Dish – which in recent years have performed better than the cable companies. Since 2005, Comcast said, telecommunications companies and satellite providers gained 18 million customers while traditional cable companies lost 10 million subscribers.

“Previous antitrust concerns are truly antiquated in light of today’s marketplace realities,” said David L. Cohen, a Comcast executive and its chief lobbyist.

There are also “cord cutters” who jettison their cable providers and watch television on the Internet via fast-growing services like Netflix and YouTube.

Comcast already has plenty of experience dealing with antitrust and other regulatory officials in Washington.

In 2011, the company spent a year convincing officials at the Justice Department and the Federal Communications Commission to approve its takeover of the entertainment giant NBCUniversal. It gained the approval in part by agreeing to certain conditions, among them a promise not to use NBC’s clout as a provider of programming to deny access to its customers by competing producers of television and films.

Many in Washington say that Cohen, a veteran of Philadelphia politics, is Comcast’s secret weapon in trying to convince government regulators to sign off on the deal.

Cohen has close ties to President Obama, perhaps even closer than Comcast’s chief executive, Roberts, who has golfed with the president on Martha’s Vineyard.

A major Democratic fundraiser, Cohen and his wife hosted Obama at their Philadelphia home in 2011, raising $1.2 million at an event where the president called the couple “great friends.”

Other Comcast officials have the ability to reach deep into the regulatory agencies that will review the merger, while officials at those agencies also are very familiar with Comcast and the cable business. Shortly after the FCC approved Comcast’s purchase of NBCUniversal, one of the commissioners who voted in favor of the deal, Meredith Attwell Baker, joined Comcast as a lobbyist.

The current FCC chairman, Tom Wheeler, once served as the leader of the cable industry’s chief lobbying group. And the current director of the antitrust division of the Justice Department, William J. Baer, represented NBCUniversal during the Comcast deal as a lawyer in private practice.

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