Comcast/TWC Opponents Offering No ‘Rational’ Arguments to Date, Cohen Says

"In any media or telecom transaction that has been unveiled in the last 20 years, there’s always been opposition,” Cohen said. “It tends to come from the same group of people whose basic argument is that anytime there is any consolidation in the media or telecom space the sky is going to fall and the world is going to end as we know it. The Internet is going to end, as we know it.” Cohen said he has been “struck” by “the absence of rational, knowledgeable voices in this space coming out in opposition or even raising serious questions.” That is very different from opposition to AT&T/T-Mobile, a deal effectively killed by federal regulators in 2011, he said.

In the case of AT&T/T-Mobile “you had really credible and serious economists and antitrust experts and antitrust lawyers saying from the outset ‘What is AT&T thinking here? The number one competitor acquiring the number four competitor in a straight horizontal transaction, absolutely eliminating or reducing consumer choice,'” Cohen said.

Most merger opponents believe “big is bad and whenever you get big that’s a bad thing,” Cohen said. “Sometimes big is bad. I will acknowledge that. But sometimes big is really important, really necessary and really good and that would tend to be in high-capital expenditure industries, in industries where innovation is fast moving and where you need a lot of investment and R&D in innovation in order to keep pace and that’s our industry.” While Comcast/TWC would have a broadband wireline market share of just below 40 percent “as soon as you factor wireless in it’s a market share of 20 percent,” Cohen said. “Twenty percent is not scary. I'd argue that 40 percent isn’t scary because the relevant market here is not national.”

Asked if the FCC will at some point draw a line on whether one competitor controls too much of the market, Cohen said he respects the FCC. “I think they're going to look at this based on the law and based on the facts and not an emotional commitment to something amorphous about how big is too big,” he said. “To the extent there’s an emotional attachment to the question of how big is too big, I think we are coming in underneath the level at which that emotional commitment might exist.”

The two cable companies plan to make key filings at the FCC on their proposed merger in early April, Cohen said. “The public interest statement is a major, major filing, and it does take a considerable amount of time to prepare and to prepare thoroughly,” he said.

Wave of the Past

Cohen was also asked whether paid peering agreements are the “wave of the future.” “I don’t know if it’s the wave of the future, but it’s the wave of the past,” he replied. “Peering agreements and interconnection agreements have been in existence since the birth of the Internet. It is how the Internet was built. It is how the Internet functions.” Comcast has more than 8,000 Internet edge providers that access its network through a variety of agreements the “vast majority” of which are free, he said.

Cohen fired back at Netflix CEO Reed Hastings, who complained about pressure to sign paid-peering agreements. “If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future,” Hastings said in a March 20 blog post (http://nflx.it/1pgX4cd). Hastings argued that companies like Netflix need strong net neutrality rules to protect them from ISPs (CD March 24 p1).

"I do expect the FCC to look at this,” Cohen said. “I think they were looking at it before Reed Hastings spoke.” Comcast’s message to the FCC is “this is not a place where government intervention is helpful or necessary.” Cohen said he respects Hastings. “He’s a great partner of Comcast,” Cohen said. “But his argument, with all due respect, on this issue is essentially hogwash. It has nothing to do with access to the Internet. That has nothing to do with net neutrality. ... The transit market is intensely competitive."

Cohen would not comment on reports Comcast and Apple are in talks to create a streaming-television service. “I'm going to just say we talk to people all the time,” he said.

After the February FCC meeting, Chairman Tom Wheeler noted that unlike Sprint executives interested in buying T-Mobile, Comcast executives never came in to see him before the deal was unveiled. Sprint Chairman Masayoshi Son and CEO Dan Hesse met with FCC Chairman Tom Wheeler in early February, though no deal has been announced. “We don’t believe that the FCC is in the business of issuing advisory opinions,” Cohen said. “It’s never in our interest to put an FCC chairman or the FCC as an institution on the spot to ask for an advisory opinion without the benefit of a filing.” Comcast didn’t see Wheeler’s comment as negative, Cohen said. “As somewhat of a professional in this space, I'd sort of take it as a compliment and I'm not sure he meant it as a compliment,” he said. “We understood the role of the FCC and the way the process works and maybe Sprint and SoftBank didn’t quite understand those rules."

Consumers shouldn’t find the deal scary, Cohen said. “We're going to have a serious governmental review of the transaction,” he said. “I think the transaction is a lot less scary, it’s a lot less large and a lot less complicated than some people would like to make it. ... It’s not a horizontal deal. We don’t complete with Time Warner Cable anywhere. There isn’t a consumer in America who has a choice between buying Comcast products or Time Warner Cable products.” Broadband prices have gone up only if you look at the “sticker price,” he said. “With promotions, prices for broadband have been amazingly stable. When you realize the additional speed and the additional capacity that we have built into our broadband network, today Comcast consumers pay 92 percent less per megabyte down of speed that is delivered to their homes than they did a decade ago.”