Comcast strikes deal to buy Time Warner

Associated Press

LOS ANGELES

With a single behemoth purchase, Comcast is creating a dominant force in American entertainment and presenting federal regulators with an equally outsized quandary: How should they handle a conglomerate that promises to improve cable TV and Internet service to millions of homes but also consolidates unprecedented control of what viewers watch and download?

Comcast, which already was the nation’s No. 1 pay-TV and Internet provider, says its $45.2 billion purchase of Time Warner Cable will provide faster, more- reliable service to more customers and save money on TV programming costs. If the acquisition is approved, Comcast will serve some 30 million pay-TV customers and 32 million Internet subscribers.

But industry watchdogs say the deal will give the company too much power and ultimately raise the price of high-speed connections.

“How much power over content do we want a single company to have?” said Bert Foer, president of the American Antitrust Institute, a Washington-based consumer-interest group.

The all-stock deal approved by the boards of both companies trumps a proposal from Charter Communications to buy Time Warner Cable for about $38 billion. It also represents another giant expansion after Comcast’s $30 billion purchase of NBCUniversal, operator of networks such as NBC, Bravo and USA, which was completed last March.

Comcast says it will continue to operate under conditions the government imposed when it approved that transaction, including a requirement that it provide standalone Internet service without tying it to a pay-TV package, make programming available without discrimination to other providers, and treat all Internet traffic the same, even if it is for video competitors such as Netflix. However, those conditions expire in 2018, and Comcast CEO Brian Roberts was not prepared to voluntarily extend those into the future in a conference call with journalists.

“Those Internet conditions would apply on Day One,” he said. “How long that goes is not something I want to speculate on, but many years at the very minimum.”

Roberts argued that the cable industry has been losing TV subscribers for the past decade because of increased competition from satellite-TV providers that include DirecTV and Dish and telecom companies such as AT&T and Verizon. Despite gaining subscribers in the final quarter of last year, the forecast is to lose more in 2014.

“It’s a very competitive business,” he said. “That being said, we’ve expanded for consumers their capabilities and access to content in remarkable ways.”

Though video services are competitive, they are becoming less important for cable operators as higher programming costs cut into profits. On the other hand, Internet services are highly profitable, and in many markets, cable companies offer the best speeds available.

Antitrust attorney Michael Keeley of Axinn, Veltrop & Harkrider in Washington, predicted that the Federal Communications Commission will use its review of the deal to extract concessions such as an extended promise to treat all Internet traffic fairly after the commission’s rules on the subject were struck down last month by a federal appeals court.

The Justice Department and the FCC declined to comment.