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Comcast-Time Warner Cable proposal comes under congressional scrutiny

By David McLaughlin and Todd Shields
Bloomberg News

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WASHINGTON: Comcast Corp. defended its $45.2 billion bid for Time Warner Cable Inc. on Wednesday as lawmakers questioned whether combining the two largest U.S. cable companies would raise prices on customers.

“I’m against this deal,” Sen. Al Franken, the Minnesota Democrat, said at a Judiciary Committee hearing. “My concern is that as Comcast continues to get bigger, you’ll have even more power to exercise that leverage — to squeeze consumers.”

While the deal has come under fire from public interest groups for giving Comcast “unprecedented” power to stifle competition and increase costs, Comcast Executive Vice President David Cohen told lawmakers that increased size will help the company improve its offerings.

“This will lead to new technologies, better services and more choices for consumers and businesses — keeping America at the forefront of the digital revolution,” Cohen said.

Cohen said he couldn’t promise that consumer bills will drop if the merger is approved.

“The No. 1 driver of our cost structure is programming costs,” he said.

The Senate hearing came after Comcast told the Federal Communications Commission on Tuesday that it can offer advanced video services and spread high-speed Internet service without harming competition if it’s allowed to buy No. 2 Time Warner Cable, based in New York.

Time Warner Cable’s third-largest business unit is based in Akron.

Under the deal, Philadelphia-based Comcast would have 30 million video subscribers, including customers in 19 of the 20 largest U.S. cities.

The combined company will have the means and incentive to overcharge for local sports programming it controls, Connecticut Sen. Richard Blumenthal said.

“The case has yet to be made that consumers will really benefit,” the Democrat said. “These markets are plagued by anticompetitive conduct.”

The merger raises “critical questions” about the public benefit, said Sen. Amy Klobuchar, D-Minn. She asked whether a larger Comcast will have market power to affect content and online video competition, she said.

“Consumers should know whether this merger enhances or limits the diversity of programming,” she said. “What will happen to the next Netflix that today is just a dream in a garage?”

Congress, which will not vote on the deal, has influence over the FCC and the Justice Department. Justice’s antitrust division will consider whether the combination could harm competition, while the FCC assesses deals against a broader standard of whether they are in the public interest.

The deal “may make a bad situation even worse” for independent programmers that need to appear in Comcast’s channel lineup in order to attract advertisers, said James Bosworth, chief executive officer of the nascent golf-lifestyle network Back9Network. Comcast, owner of the Golf Channel, has an incentive to keep competitors off the air, Bosworth said.

Cohen, the Comcast executive, said his company is “probably the most independent-programmer-friendly” video provider and carries 160 independent channels.

“While this transaction will make us bigger, that’s a good thing — not a problem,” Cohen told lawmakers.

Sen. Mike Lee, R-Utah, said the deal raises “potentially very serious concerns,” including whether Comcast would discriminate against conservative content because of the “well-known political leanings” of NBC.

Time Warner Cable Chief Financial Officer Arthur Minson Jr. also testified as did Richard Sherwin, chief executive of wireless provider Spot On Networks. Missing from the hearing were representatives of other cable companies or large content providers.

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