Skepticism wells up at Comcast-Time Warner hearing

A former U.S. Justice Department official warned at a Senate hearing Wednesday in Washington that the $45.2 billion merger of Comcast Corp. and Time Warner Cable Inc. would lead to a dangerously large corporation with “massive tentacles” in the pay-TV and Internet industries.

Comcast executive David Cohen, meanwhile, told the Senate Judiciary Committee that “consumers will be big winners in this transaction.”

A three-hour, sometimes tense hearing revealed deep skepticism among Democratic senators about the proposed merger of the nation’s largest and second-largest cable-TV operators. Issues of concern ranged from constantly rising cable-TV bills and poor cable-TV customer service to the cost of regional sports networks, the fate of independent programmers, and the multi-million-dollar golden parachutes for Time Warner Cable executives.

Robert Marcus, who was appointed in 2013 as the top executive at Time Warner Cable, is expected to be compensated $80 million if the deal goes through. A Time Warner Cable executive at the hearing called the parachutes “moderate,” based on the deal’s complexity and scope.

Sen. Michael S. Lee, R-Utah, even suggested that the combined Comcast/Time Warner Cable, which would own NBCUniversal and its left-leaning MSNBC cable channel, could discriminate against TV channels that display conservative political viewpoints.

Separately, a coalition of six advocacy groups said on Wednesday it has collected – via email lists – the names of 400,000 Americans who were urging Washington regulators to reject the merger.

Concern was expressed at the hearing that Comcast/Time Warner Cable could leverage its economic power in the telecommunications and programming markets.

“Comcast will be in the driver seat,” said Gene Kimmelman, a former chief counsel in the Justice Department’s antitrust division who is now president and chief executive officer of the nonprofit Public Knowledge. He said the effects of a merger of Comcast and Time Warner Cable will “cascade through the economy.”

Two hundred people attended the hearing in the Hart Senate Office Building. It lasted an hour longer than expected. The Senate Judiciary Committee can’t block the merger; that is the responsibility of the Federal Communications Commission and the Justice Department’s Antitrust Division. The Senate hearing, though, is viewed as an airing of public concerns.

Sen. Al Franken, D-Minn., a frequent Comcast critic, told the hearing, “I am against the deal.” Franken referenced Comcast Chief Executive Brian Roberts’ testimony during Comcast’s Senate hearing to acquire NBCUniversal in 2010. Roberts told senators then that Comcast “is not getting any larger in cable distribution,” Franken said.

Now, he said, Comcast was growing its cable-TV distribution system with the addition of Time Warner Cable after it acquired NBCUniversal.

“You can’t have it both ways,” Franken told Cohen.

Cohen responded calmly to Franken’s persistent questioning and insisted that the merger would benefit Time Warner Cable subscribers and allow Comcast to compete with Google Inc., Apple Inc., and other national media or telecommunications companies.

Comcast and Time Warner Cable say there are minimal antitrust concerns because the two companies don’t compete head-to-head now.

Cohen had previously said the deal would not bring down cable-TV bills or slow cable-TV rate increases. He qualified that statement Wednesday, telling Sen. Patrick Leahy, D-Vt., the chairman of the judiciary committee, that, “There is nothing in this transaction that will make cable bills go up.”

Whatever economic benefits Comcast/Time Warner Cable realize through synergies or negotiating lower programming costs will ultimately flow to consumers, Cohen said.

“I think consumers are the big winners in this transaction,” he added.

Comcast was “deeply disappointed” with its low customer-service ratings, Cohen said. Comcast and Time Warner Cable have some of the lowest customer-service ratings in the telecom industry, though Cohen noted that Comcast recently had improved its J.D. Power rating.

Cohen announced at the hearing that it boosted its Internet speeds for the 13th time in 13 years and expanded its Wi-Fi network to 1 million hotspots.

Christopher Yoo, a University of Pennsylvania law professor and telecommunications expert, testified that the proposed merger did not pose an anticompetitive threat to consumers and that the telecommunications industry was a dynamic sector.

James L. Bosworth, chairman and chief executive officer of the independent Back9Network golf channel in Connecticut, said he believed he would have a hard time gaining distribution for his channel on Comcast/Time Warner Cable because Comcast owns the Golf Channel and wouldn’t want the competition.

“I don’t think there is a distributor who has done more for independent programmers,” Cohen said in response to the claim that independent programmers would be frozen out of Comcast cable system.

Sen. Richard Blumenthal, D-Conn., told Cohen there was a “general sense of skepticism. . I think the Justice Department has to conduct a comprehensive review of the merger.”

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