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Comcast-Time Warner Merger Slightly More Doubtful

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By Mark Wilson, Esq. on April 20, 2015 12:01 PM

The merger between Comcast and Time Warner may have hit some rocky shoals, The New York Times and other outlets have been reporting all weekend. Sources inside the Justice Department, which has the final say over whether merger would go through, are skeptical of the deal because it would give the new company "just under 30 percent of the country's pay television subscribers" and "an estimated 35 to 50 percent of the nation's broadband Internet service," according to the Times.

That's got regulators concerned, despite Comcast's protestations that the deal is really in consumers' best interest.

This Might Not Be as Easy as NBC Was

The deal comes a scant few years after Comcast acquired NBC Universal in 2011, giving it control not only of TV transmission, but also TV content. The fact that the new company would control a plurality of television and Internet transmission isn't necessarily a deal breaker; the government could impose conditions on the merger as it did in 2011.

In order for Comcast to acquire NBC Universal, the FCC required Comcast to adhere to several conditions, forcing it to ensure access to non-NBC content through its online distribution systems, and to make NBC content available to other companies at a fair market rate.

Things seemed to go well for the new Comcast-NBC Universal after the merger, but in the intervening years, Comcast's Internet business has been the target of criticism. Comcast, along with other ISPs like AT&T and Verizon, have fought the FCC's net neutrality regulations with both lawsuits and faux grassroots organizations designed to appear as though ordinary Americans are against net neutrality. It also didn't help that we learned Comcast was asking Netflix for more money to ensure that Netflix content wasn't unreasonably delayed on Comcast's network.

Trust Us, We're the Cable Company

Comcast continues to insist, however, that further consolidation of ISPs is actually a benefit to consumers. "The Comcast/Time Warner Cable transaction will result in significant consumer benefits -- faster broadband speeds, access to a superior video experience and more competition in business services resulting in billions of dollars of cost savings," a spokesperson told the Times.

Consumer advocates, of course, heartily disagree. Chris Meyer of the Consumers Union said last year that Comcast's claims weren't supported by the evidence: "[I]t's clear that the market is already suffering from too little real competition, and this merger could make things much worse. A Comcast executive has even acknowledged that the company can't promise that customer bills 'are going to go down or even that they're going to increase less rapidly.'"

Those are the same concerns keeping the government up at night. According to The Wall Street Journal, the FCC could send the merger approval to an administrative law judge, a sign that "the FCC isn't convinced the deal would be good for the public."

Officially, the DOJ and FCC have taken no position, but clearly Wall Street thinks there's something to these rumors: Share prices of both Comcast and Time Warner fell after Bloomberg News reported the story on Friday.

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