Lawmakers Wary of Comcast Deal to Buy Time Warner Cable

Senate Judiciary Committee Hearing On Comcast Acquisition Of Time Warner
Andrew Harrer/Bloomberg via Getty ImagesComcast executive vice president David Cohen speaks Thursday at a Senate Judiciary Committee hearing in Washington.
By Diane Bartz

WASHINGTON -- Lawmakers expressed concern about combining the top two U.S. cable operators at a congressional hearing Thursday to discuss Comcast's plan to merge with Time Warner Cable (TWC).

While none of the lawmakers asked federal regulators to block the transaction, both Republicans and Democrats cautioned there were potential negatives in the $45 billion deal.

Rep. Blake Farenthold, a Texas Republican, worried about whether smaller programmers would be able to sell video to cable operators.

"I don't want to sound hostile to this merger," he said, but constituents and interest groups have raised such concerns.

Rep. John Conyers, a Democratic critic of big mergers, said a combined Comcast/Time Warner Cable would have 30 percent of the cable market, at least 40 percent of the broadband market, 19 of the 20 biggest cable markets and a major Spanish-language channel, as well as movies and television shows and sports programming.

"Comcast is a cable company and a programmer. That raises a double concern with me," said Conyers, noting that federal regulators would review the deal's legality. "I don't know if it's resolvable."

Comcast (CMCSA) executive vice president David Cohen tried to allay the concerns.

"I think this transaction has the potential to slow the increase in prices. I think consumers are going to be the big winners in this transaction," he told a hearing of the House of Representatives' antitrust panel.

Comcast faced criticism from Dave Schaeffer, CEO of Cogent Communications Group (CCOI), which has been a high-speed go-between for Netflix (NFLX) and Comcast. In February, Netflix agreed to pay Comcast to connect directly.

Schaeffer said that, after years of free connections, Comcast demanded that Cogent pay to remedy Netflix's balky speed. Schaeffer said Cogent offered to pay for some hardware costs, but that Comcast had remained silent and no agreement was reached.

%VIRTUAL-article-sponsoredlinks%"That's not a free market. That's an abuse of market power," he said.

Comcast's Cohen disagreed vehemently.

"We did not force Netflix to enter into an interconnection deal with us. That was Netflix's idea," he said, noting that the company said they wanted to "cut out the middleman."

Cohen said he couldn't disclose the terms of the deal but added, "It has been publicly reported that Netflix is paying not more to us under this agreement, but less [than they paid Cogent]."

Netflix has been critical of the agreement it made, with one executive calling it "double-dipping," since Comcast customers and Netflix both pay to have the movies and television shows delivered to living rooms.

A second critic of the merger was Patrick Gottsch, founder of Rural Media Group, whose RFD-TV channel provides programs aimed at farmers and about rural living.

Gottsch complained that, after Comcast bought NBC Universal in 2011, it stopped carrying rural television in some areas.

The American Cable Association's Matthew Polka also worried about video programming and urged the Justice Department and Federal Communications Commission, which must review the deal, to ensure Comcast doesn't raise prices or withhold shows from smaller rivals.

Comcast said April 28 that it was willing to divest nearly 4 million subscribers to win approval for the deal. That would leave Comcast with 29 million subscribers if the deal goes through.

The deal was reviewed by the Senate Judiciary Committee on April 9.

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