Comcast/TWC Seen Facing Opposition From Content Companies, Smaller MVPDs

The opposition won’t be traditional, said consultant Howard Homonoff, who focuses on media content distribution. “It won’t look like the old days of broadcasters coming out and programmers coming out so uniformly against this, in part because Comcast is a cable operator and obviously one of the biggest broadcasters and owners of cable networks.” The biggest concerns will probably be raised by net neutrality advocates, he said. “That’s where you'd see either outright opposition, or arguing for conditions that are more specific and preventative from their perspective in a net neutrality area.” It will be interesting to see what companies and groups such as Amazon, the Computer & Communications Industry Association (CCIA), Electronic Frontier Foundation and Netflix will say, he said. “The battle might not be around opposition, but seeking some kind of conditions attached to approval."

Companies, like independent networks, might weigh in against the deal due to Comcast’s market dominance, a media attorney said. Some companies accused Comcast of favoring its own networks over competing channels, the attorney said. “That situation will probably be perceived as likely to be exasperated by the upcoming merger.” Technology companies that depend on access to broadband to have a viable business model will end up weighing in against it, the attorney said. Entities that have been vocal in the net neutrality issue will trickle over, arguing that a Comcast/Time Warner Cable may have the opportunity to choke competitive services, the attorney added.

The possibility of losing Time Warner Cable concerns smaller pay-TV companies, said an attorney who represents an MVPD. “You take away a strong voice with a sophisticated lobbying effort from that fight and it’s a big loss for folks on the other side of the business who are fighting for retransmission reform.” A merged Comcast/Time Warner Cable will acquire more must-have programming, like Los Angeles Dodgers and Lakers games, which would make it even more powerful in its negotiating leverage, especially with companies that have a footprint in the southern California market, the attorney said. That, in turn, could affect retrans fees for smaller MVPDs, the attorney said. Companies like Viacom have their budgets and they're going to hit a revenue number next year and it’s going to be bigger than their revenue number this year, the lawyer said. “So to the extent Comcast lowers their Viacom payment, that means that Dish, DirecTV, Charter and others will have to pay more for it. … So their savings is an increase to the rest of us."

American Cable Association and all the smaller cable system operators outside of the top 10 have always had concerns about paying more for programming than the big operators pay, said Bruce Beckner, a cable lawyer at Garvey Schubert. “With this deal making Comcast even more number one than it was before in terms of subscribers, folks are going to have that concern that Comcast ends up paying less for programming than a rural or small town cable system that isn’t connected with the big multiple system operator.” In the past, some smaller operators felt they were subsidizing the big guys by paying more so the big guys could pay less, he said. “There are a lot of potential players in this that we might not see in addition to the ones that we do see who may file comments at the FCC.” State attorneys general could weigh in, he said. “The Justice Department or FTC won’t brush those concerns off if they are expressed by state attorneys general.”

A lot of industries are going to be on both sides of the issue, said Scott Flick, a broadcast lawyer at Pillsbury Winthrop. “If you're a competitor of either one of those entities, it makes you concerned because you're up against a larger competitor.” A single broadcaster negotiating against Comcast or Time Warner Cable is on playing field that’s not level, he said. “When you combine the two, it’s not going to become any more level than it was before.” When very large entities look to become larger entities, the FCC and DOJ and/or FTC review that increased size as part of the transaction, he said. The concerns may be worked out through conditions as opposed to just opposition to the deal, Flick said. Internet content providers could become more nervous, “particularly until we see what happens on the net neutrality rules,” he said.

A combined Comcast/Time Warner Cable will need to face local franchising authorities, some of media professionals said. The root of the cable system’s existence is the local franchising authority, Homonoff said. “Whether it’s a city or a state, you still have a franchise that, when the owner of a franchise owner changes, there’s a requirement for the local franchise holder to approve of that transfer of the franchise.” The legal authority that can decide not to approve a transfer has been narrowed over the years, he said. “But there’s still a role for the local franchises in that process and whether it’s more political than legal, they are participants in a process that I don’t think you can ignore.”

A group of municipal cable systems “might express concerns at the FCC level about, perhaps, the effect of the deal on program acquisition costs and whether or not they feel they're going to be at a competitive disadvantage because they'd have to pay more for programming than the combined Comcast-Time Warner system they're competing with pays,” Beckner said. Municipal lawyers said Comcast and Time Warner Cable will have to deal with amending thousands of local cable franchise agreements (CD Feb 24 p16).

The franchise authority usually has some say in a transfer of control of a franchise, Flick said. There will be a lot of local entities that arguably are being asked to approve transfers of control of the Time Warner system, he said. “However, if a franchising authority opposes, it’s unlikely to put a halt to the deal.”