The U.S. Federal Communications Commission threw up a significant roadblock to the planned merger of Comcast and Time Warner Cable on Wednesday. The agency could put an end to the $45 billion deal. The FCC officials’ recommendation reflects the complexity of the deal and requests that regulators consider handing down a “death sentence” on the deal.
Comcast-Timer Warner Cable Merger
As detailed by ValueWalk, last year Time Warner Cable agreed to become a wholly owned subsidiary of Comcast. As part of the $45.2 billion deal, Comcast agreed to divest 3 million subscribers. The deal envisages Comcast getting exposure to 19 of the nation’s top 20 markets and 43 of the top 50 markets. In addition, the company said it will improve the services received by Time Warner Cable customers and improve efficiency for both companies.
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Later, Netflix and DISH Network filed petitions to ask the FCC to block the deal, stating that the merger would stifle innovation. The agency joined lawyers at the Justice Dept. in opposing the planned merger. Opposition from the FCC, which met on Wednesday with Comcast and Time Warner Cable executives, was stronger than the Justice Dept.’s and could be the bigger obstacle of the two.
Citing a person having knowledge of the situation, Bloomberg reports that representatives of the two biggest U.S. cable companies were told that FCC officials are leaning toward concluding that the merger doesn’t help consumers. It is felt that while the DOJ has to present a case in court to block the deal, the FCC can effectively kill it by calling a hearing that will drag the approval process out beyond the companies’ time frame for completion. The FCC’s concern could represent an opening salvo in negotiations because any final decision would need to be made by the five-member commission.
Sena Fitzmaurice, a spokeswoman for Comcast, said: “We had one in a series of meetings with the Department of Justice today, as well as another meeting with the FCC.” However, Comcast, Time Warner Cable and spokesmen for the Justice Dept. and the FCC declined to comment on Wednesday’s meetings.
“Deal in public interest”: Comcast
The FCC’s recommended hearing could be a drawn-out process, and some regulatory experts describe the procedure as a deal-killer, though Comcast would be entitled to make its case for the tie-up. Citing people familiar with the situation, The Wall Street Journal reports that Comcast and Time Warner Cable may still have an opportunity to weigh in on the matter before the proceeding moves forward and no final decision has been made.
Earlier Comcast emphasized that its deal is in the public interest because it will bring a better video and broadband experience to Time Warner Cable customers and expand low income broadband options. The two telecommunications giants may now be prevented from creating a single operator that would have controlled up to two-thirds of U.S. internet connections and provided cable television to more than a quarter of the American market.
It is felt by some that the easiest way forward for Comcast to pursue the evaporating deal now appears to be facing a lengthy legal battle on two different fronts – or else to scuttle the merger entirely.