Railing—but no derailing

AT&T-Comcast merger draws criticism from Hill but is still expected to go through

Though senators voiced concern over allowing AT&T Broadband and Comcast to become one huge cable company, the merger is expected to be approved because it violates no antitrust guidelines and does not reduce consumer choice.

But Comcast President Brian Roberts and AT&T Broadband Chairman and CEO C. Michael Armstrong had some persuading to do in a hearing in Washington last week, where members of the Senate Antitrust Subcommittee expressed their concerns that the merger will hurt consumers.

Sen. Mike DeWine (R-Ohio), the panel's ranking member, conceded the deal "avoids many of the traditional antitrust concerns raised by horizontal mergers" but urged the FCC to "thoroughly examine cable ownership limits and establish an appropriate limit that would ensure healthy competition and a diverse marketplace. If they can't do it, then Congress will need to take a look at it."

A year ago, the U.S. Court of Appeals for the D.C. Circuit struck down an FCC rule capping cable companies' system ownership at 30% of multichannel subscribers. The FCC is rewriting those rules but is sure to consider that a merged AT&T/Comcast would have about 22 million of nearly 70 million U.S. cable subscribers—or 32%.

Committee Chairman Herb Kohl (D-Wis.) finds allowing media companies to grow that large worrisome. "Since this merger was announced, we have been asking ourselves over and over: How is this good for consumers? We know it's good for the companies, but what does it do for the average consumer?" he said. "Ten years from now, if trends like this merger continue, consumers may find almost all of their personal communications and information dominated by a very few, large media companies. Their phone, their movies, their Internet, their cable, their link to the outside world will be priced, processed and packaged for them by one company that faces virtually no competition."

Roberts and Armstrong responded to those concerns, saying that merging will allow the new company to bring consumers more competition and better offerings in local cable telephony and high-speed Internet access. "Combining these two companies and drawing on the special strengths and capabilities and resources of each," Roberts said, "will ensure that more Americans have access to more digital services and features sooner."

He wouldn't go so far as to say he'd accept a government-imposed condition that the new company open its networks to competitors, but Armstrong assured Kohl and the subcommittee that "AT&T Broadband and Comcast share a strong commitment to providing multiple ISP access on their broadband networks. ... both companies have ample market incentives to make commercially reasonable, customer-friendly arrangements with unaffiliated ISPs in order to maximize the attractiveness of their Internet offerings to customers and potential customers."

Both companies have run trials letting consumers choose their own ISP. In a $20 million test in Boulder, Colo., AT&T gave customers a choice of four ISPs: the now-defunct Excite@Home, EarthLink, Juno and WorldNet. It plans trials in Boston and Seattle this year. Comcast's trials, Armstrong said, will help the new company offer ISP choice on a "more efficient and widespread basis than the two companies could hope to achieve independently."

Still, Kohl remained concerned because the two companies won't voluntarily make "binding" the promise of ISP choice, as the Federal Trade Commission forced AOL and Time Warner to do when they merged.

Senate Judiciary Committee Chairman Orrin Hatch (R-Utah) worries that independent cable programmers would not be able to gain carriage on such large systems. "Any merged entity with such power must exercise carefully its powers to ensure that consumer choice and marketplace competition are not unfairly hindered."