Comcast/TWC Submit Deal To FCC

Comcast asserts there are no public interest harms and plenty of benefits
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Comcast has launched its full court press in Washington to get its proposed merger with Time Warner Cable approved, including commitments on third-party arbitration for TWC RSNs, extending over-the-top access conditions and network neutrality, and coming up with a new "master plan" on diversity issues.

The campaign actually began last week with its official Hart-Scott-Rodino filing at the Department of Justice, which is reviewing the deal for antitrust issues, and an ad campaign about how Comcast and Time Warner Cable are "better together."

But April 8, Comcast and Time Warner Cable filed the deal with the FCC, which has to approve the transfer of various licenses as well as vet the deal for public interest considerations. Their baseline pitch is that the deal has a host of consumer benefits without reducing competition in video, broadband, phone, programming, advertising and "other markets." To that end, the companies filed their public interest statement outlining all the ways it says they are better together (a new twitter account was also launched), including being able to offer more products and services at lower cost than they could do separately.

The public interest statement asserts that of the 150 conditions imposed in the NBCU transaction, there is only one instance where the FCC took issue with compliance, which was fully addressed by a voluntary consent decree.

Among the conditions in the NBCU deal that Comcast says will be extended to the TWC deal:

1. Open Internet Rules. The deal will extend enforceable no-blocking and non-discrimination rules to TWC subs.

2. Stand-alone broadband commitment. Comcast promises to "vigorously" market and sell stand-alone broadband in the future former TWC systems.

3. Program Access. Comcast says it will continue to make programming, including TWC programming, available to MVPDs at fair market value and on nondiscriminatory terms. Comcast says that will include making TWC's regional sports networks subject to stand-alone arbitration, while adding that is "not necessitated by the transaction."

4. Comcast will extend the online video commitment in the NBCU deal to TWC systems. "The NBCUniversal Condition allowing OVDs to demand, and, if necessary, arbitrate over access to NBCUniversal programming networks in certain circumstances will apply to TWC’s controlled programming assets as appropriate – though, again, nothing in this transaction creates any new issues in this regard," says Comcast.

5. Broadcast commitments. Comcast says it will maintain separation between its cable and broadcast businesses with respect to NBCU's retrans negotiations with MVPDs, Comcast's retrans negotiations with TV stations, and affiliate agreements. Comcast also will not import NBC distant signals into markets where there are retrans impasses.

6. Other programming commitments. Comcast will make VOD content available on the TWC systems at no additional charge, will expand family and kid-friendly VOD programming, improve on-screen ratings icons and restrict use of interactive advertising in programming primarily targeted to kids.

7. Comcast will continue to carry noncommercial educational TV stations that give up their spectrum for auction.

8. Diversity. Comcast says diversity is part of its DNA, which will extend to TWC systems. That includes coming up with a new "master plan" for the combined companies within 120 days of the close of the transaction. In addition, "Comcast will commit to use its VOD and Online platforms to feature Telemundo programming and increase the number of Telemundo and mun2 VOD choices, as well as other diverse VOD content, available to customers in the acquired TWC systems, as soon as TWC’s VOD content and delivery platforms can be upgraded."

9. Accessibility. Comcast and TWC both have a "deep commitment" to customers with disabilities, a commitment Comcast suggests will be better together.

Comcast, the largest cable operator, has been arguing in Washington that it needs the added scale of combining with TWC, the second largest cable operator, to compete with national video distributors like "AT&T, Verizon, DirecTV, DISH, Netflix, Amazon, Apple, Yahoo, Google and Facebook."

In its public interest filing, Comcast points out that the market cap of both Comcast and TWC trail that of Apple, Google, Microsoft, Verizon, Facebook, Amazon and AT&T. Comcast suggests that the TWC merger is another step on its path from regional cable company to leading communications, media and technology company.

Comcast says the deal will allow it to invest more in research and development and cybersecurity, and boost broadband deployment and speeds at TWC. "The transaction will benefit TWC’s broadband consumers by providing them with new, more robust tools and capabilities to protect against cyber threats," says Comcast.

It says there are no public interest harms, no reduction of competition in any market, new competition in business services and "no plausible basis to conclude that the combination of Comcast and TWC will harm competition in any market for peering and transit services." Comcast has drawn some criticism for its paid peering deal with Netflix, which some have conflated into a network neutrality issue.

Comcast says scale means more opportunities for innovation, pointing to its acquisitions of AT&T Broadband and Adelphia systems. "This increased presence will provide equipment manufacturers, app developers, programmers, and other companies with increased incentive to take chances on new technology projects with the combined company, and to do so on reasonable terms," it says. "For example, it is far easier to attract developers to build applications for national or global platforms such as Apple TV, Google, Microsoft, and Sony, than to create an app for a limited regional platform – or to convince a manufacturer to embed a tailored feature that has nationwide appeal, than one that has localized, geographically constrained appeal. In short, larger scale and scope will help the combined company attract more collaborators and partners more easily throughout the ecosystem."

Comcast says it will be easier to upgrade systems once it has the geographic efficiencies of additional TWC markets where it currently lacks them—New York City, Los Angeles, Dallas/Fort Worth—and TWC markets "clustered" near existing Comcast markets in Georgia, North and South Carolina and Virginia.

TWC will get Xfinity-On-Demand and its 50,000 programming choices--compared to 15,000-20,000 on TWC now. Comcast also points out that the network neutrality rules it is already subject to will now extend to TWC systems (at least through 2017, when Comcast's NBCU commitment expires). Comcast is also extending its low-income broadband program, Internet Essentials—to TWC markets.

Comcast says the deal will increase competition in the business services market, where AT&T and Verizon remain the dominant providers. "The combined company’s greater geographic reach and its combined expertise and services will allow it to become a stronger competitor, offering businesses of all sizes better options, lower prices, higher quality, and enhanced services," said Comcast executive VP David Cohen (pictured) in a blog posting. Cohen is leading the charge for government approval of the deal.

Cohen also says that the combined company will have the scale to invest in dynamic ad insertion and addressable technologies for VOD and online programming that will create a virtuous cycle. "[T]he increased scale of the combined company should make such advanced advertising buys more attractive to advertisers looking for larger audiences. This, in turn, should encourage programmers to make additional popular content available on VOD and other platforms, to the benefit of consumers," he says.

Comcast has been criticized in some quarters—notably by Bloomberg TV and Sen. Al Franken (D- Minn.)—for not honoring all of its commitments in the NBCU deal, but Cohen says the company has kept all its promises and overdelivered on others.

Cohen says he is convinced that a rigorous, "objective" review of the deal will reveal significant public interest benefits, a lack of competitive concerns, and ultimately lead to approval.

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