Internet handling is key to Comcast deal - The Buffalo News
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Internet handling is key to Comcast deal

Comcast Corp.’s proposed purchase of Time Warner Cable goes before U.S. regulators who may be more interested in ensuring Internet users can see Netflix Inc.’s videos than parsing the combined company’s market share.

U.S. Federal Communications Commission Chairman Tom Wheeler, a Democrat, may use his agency’s power to review the $45.2 billion deal announced Thursday to get faster Web access to more residences and schools, and limit what online video providers like Netflix can be charged to stream content.

“It enables the Wheeler FCC to implement public policy that it might not be able to get done through rule making,” Robert McDowell, a former Republican commissioner, said in an interview.

Comcast said it’s willing to give up 3 million of the approximately 11 million pay-television subscribers the deal would bring. That would keep the combined company below a threshold U.S. regulators once set of making sure no cable company served more than 30 percent of the market, said David Cohen, a Comcast executive vice president.

A traditional U.S. antitrust review focusing on market share may take a back seat to negotiations on how Internet traffic and online video will be handled, Paul Glenchur, Washington-based senior analyst with Potomac Research Group, said in a note.

Spokeswomen Shannon Gilson of the FCC and Gina Talamona of the U.S. Justice Department declined to comment on the deal. The Justice Department shares antitrust oversight with the U.S. Federal Trade Commission.

A 2009 court ruling on a lawsuit brought by Comcast threw out the U.S. cap on pay-TV market share, and Comcast doesn’t compete head-to-head for subscribers with New York-based Time Warner Cable because they have different franchise areas. They compete in providing video programming and high-speed Internet, or broadband, service against such rivals as AT&T Inc., Verizon Communications Inc. and satellite-TV providers Dish Network Corp. and DirecTV.

Comcast officials made the argument that it and Time Warner should be reviewed by regulators as a competitor to other broadband providers, not as rivals in cable TV.

Together, Comcast and Time Warner will have about 30 million subscribers after divestitures, Comcast said in a fact sheet on the deal. At the end of 2013, AT&T had 21.9 million subscribers for video and broadband, and Verizon had 14.3 million, according to data compiled by Bloomberg Industries that excludes wireless customers.

Comcast probably will need to make some divestitures and agree to conditions like those it accepted when it bought NBC Universal in 2011, Stifel Nicolaus & Co. analysts Christopher King and Josh James said in a note.

As part of that deal, Comcast agreed to follow the FCC’s open-Internet rules, which required service providers to treat Web content equally, until 2018 regardless of how the regulations fared before judges. An appeals court vacated the rules last month, and Wheeler is considering how to respond.

With a merger the rules would extend to the acquired Time Warner broadband subscribers, Comcast’s Cohen said.

Questions for the FCC include whether Comcast unfairly charges more to middle-mile Web carriers such as Level 3 Communications Inc. and Cogent Communications Group because they carry traffic for competing video provider Netflix, Harold Feld, senior vice president of the Washington-based policy group Public Knowledge, said in an interview.

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