Comcast Expected to Call Off Its Acquisition of Time Warner Cable

After multiple news reports on negative prospects for the deal at both the commission and the Department of Justice, there was widespread industry expectation Thursday that the deal would fail. “The Comcast deal isn't dead yet, but it's a bit like an elephant that has been dropped out of an airplane,” said MoffettNathanson analyst Craig Moffett, saying it's “falling fast" and has low odds of survival.

FCC staffers are concerned about Comcast’s track record of living up to merger conditions from its purchase of NBCUniversal, individuals familiar with the proceedings told us. The company has been “unable to rebut the feeling at the commission that Comcast did not live up to” the previous merger conditions, former FCC Commissioner Robert McDowell said. “We had one in a series of meetings with the Department of Justice [Wednesday], as well as another meeting with the FCC,” Comcast said. “As with all of our DOJ discussions in the past and going forward, we do not believe it is appropriate to share the content of those meetings publicly, and we, therefore, have no comment." FCC and DOJ also had no comment.

Though multiple industry sources told us the deal is unlikely to be saved, they also said they expected Comcast to try to offer concessions and apply lobbying pressure to try to salvage the transaction. “Never underestimate Comcast,” said Georgetown University Law School Institute for Public Representation Senior Counselor Andrew Schwartzman, who has opposed the transaction. McDowell said he thought it was unlikely Comcast would try to offer up a substantially altered deal, because it had the opportunity to make further concessions before now and didn’t do so. If the TWC deal “breaks” it’s “hard to imagine that they would return to the FCC and DOJ asking for permission to do a smaller deal,” Moffett said.

Former FCC Commissioner Michael Copps said the transaction's collapse would be “spectacularly good news for consumers concerned about the spiraling costs of cable and broadband.” The Stop Mega Comcast Coalition commended FCC Chairman Tom Wheeler for “setting up a rigorous, fact-based review that weighs all the evidence.” Consumers Union said it would “continue to make the case that there are no conditions or commitments that would make the deal palatable for consumers." Blocking the Comcast/TWC deal “won’t actually do anything to increase competition, encourage deployment or promote adoption among the underserved,” Berin Szoka, president of TechFreedom, said in an email. Not coming to an understanding with Comcast would be “a missed opportunity" to extend some of the protections put in place by the conditions on the Comcast/NBCUniversal deal, McDowell said.

"I've been opposed to this deal since it was first announced, and I'm glad that over the last 15 months, more and more people have come to see it the way I do," Sen. Al Franken, D-Minn., said in a statement Thursday. "This transaction would create a telecom behemoth that would lead to higher prices, fewer choices, and even worse service. We need more competition in this space, not less. If reports of the collapse of the deal are true, it would be a huge victory for American consumers." Franken is a member of the Judiciary Antitrust Subcommittee.

Thursday’s Senate confirmation of Loretta Lynch to replace current Attorney General Eric Holder is unlikely to have much effect on the deal, said former DOJ antitrust lawyer and University of Colorado Law School Dean Philip Weiser. Some industry officials told us Lynch would be unlikely to want to make such an important ruling so soon after gaining the post, and Weiser said it is very unlikely that Lynch would overrule the Antitrust Division. Though he said the regime change could slow the process leading up to a DOJ lawsuit to block the merger, he said all such considerations would be moot if reports are true that Comcast is walking away from the deal.

If the deal unravels, it leaves the future of participants Charter, Comcast and Time Warner Cable “clear as mud,” Moffett said. Charter’s proposed buy of Brighthouse was contingent on the Comcast/TWC transaction, but it’s possible that deal could still happen after further negotiation, Moffett said. Comcast won’t be hurt by the deal’s dissolution and TWC will come out stronger than it was before, he said. Though that could lead to further mergers and acquisitions involving those companies, the regulatory reaction to the Comcast/TWC deal is likely to chill future sales, he said. “Regulatory risks to the sector as a whole are now much higher than they were before,” Moffett said.