Comcast-TWC Demise Points to Online Video's Ascendency

April 27, 2015
By: Tara Seals

Comcast may have called off its $45 billion megamerger with Time Warner (News - Alert) Cable, but the legacy of what that means for the FCC’s policy for online video will live on.

The cable giant's announcement comes after the Commission informed the companies of their “serious concerns” that the merger risks outweighed the benefits to the public interest.

There is, of course, the fact that the proposed transaction would have created a company with the most broadband and video subscribers in the nation (20 to 33 million, or a third of American households), alongside the ownership of significant programming interests (NBCUniversal, specifically).

But the Commission seemed particularly concerned that consolidating broadband ownership like that would impact online video competition.

"Today, an online video market is emerging that offers new business models and greater consumer choice," Chairman Tom Wheeler (News - Alert) said in a statement. "The proposed merger would have posed an unacceptable risk to competition and innovation, especially given the growing importance of high-speed broadband to online video and innovative new services."

This comes into even higher relief when one considers the new definition of broadband by the FCC, to mean 25 megabits per second. That would mean that the new Comcast (News - Alert) would have controlled 57 percent of broadband access in the United States -- giving it, some say, decided gatekeeper status to decide who wins and loses on the Internet.

“Comcast has demonstrated how its size can lead to bad outcomes for consumers,” said Joshua Stager, policy counsel of the Open Technology Institute, at New America. “Shortly after announcing the merger — precisely when the company should have been on its best behavior — Comcast allowed its own network to congest until Netflix agreed to pay an access charge. For months, many Comcast customers frequently saw their broadband connections fail entirely. Comcast's willingness to use its own customers as pawns in a business dispute was dangerous for the Internet and an abuse of market power.”

Attorney General Eric Holder meanwhile was more succinct, and called the deal's collapse a victory "for providers of content and streaming services who work to bring innovative products to consumers across America and around the world."

Even as Comcast-TWC faced demise, the $49 billion AT&T-DirecTV (News - Alert) deal is still proceeding through the regulatory process. And in filings with the FCC earlier this week, AT&T warmed to the online video theme, and talked up the benefits of the deal, including bringing more consumers cheaper broadband. That in turn will support wider distribution for over-the-top providers it said, and reiterated its broadband deployment commitments if the deal is approved.

Image via Shutterstock

The demise of the Comcast deal leaves Charter and TWC swinging in the wind a bit — for its part, TWC appears to be positioning for a new suitor -- possibly Charter. A Charter-TWC tie-up would have 16.5 million broadband subscribers together.

"We have always believed that Time Warner Cable is a one-of-a-kind asset," said chairman and CEO Robert Marcus. "We are strong and getting stronger. Throughout this process, we've been laser focused on executing our operating plan and investing in our plant, products and people to deliver great experiences to our customers. Through our strong operational execution and smart capital allocation, we are confident we will continue to create significant value for shareholders."

Comcast seemed resigned but bullish on the future. Richard Greenfield of BTIG intimated that the next move may be ironically on the online video front—like, maybe, the acquisition of Netflix.

"Of course, we would have liked to bring our great products to new cities, but we structured this deal so that if the government didn’t agree, we could walk away,” said Comcast chairman and CEO Brian Roberts, in a statement. “Comcast NBCUniversal is a unique company with strong momentum. Throughout this entire process, our employees have kept their eye on the ball and we have had fantastic operating results. I want to thank them and the employees of Time Warner Cable for their tireless efforts. I couldn’t be more proud of this company and I am truly excited for what’s next."

Edited by Rory J. Thompson