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Cable Technology Feature Article

July 09, 2014

FCC Names Comcast-TWC Merger Review Board

By Tara Seals, TMCnet Contributor

The battle of public opinion has been playing out when it comes to the Comcast (News - Alert)-Time Warner Cable merger and whether or not it will be a good thing for consumers—and everyone has an opinion. But real regulatory review will now commence thanks to the Federal Communications Commission naming its review committee for the deal.

The members include FCC (News - Alert) head counsel Jon Sallet and other FCC department heads, including William Lake, chief of the Media Bureau; Mindel de la Torre, chief of the International Bureau; Julie Veach, chief of the Wireline Competition Bureau; and Roger Sherman, chief of the Wireless Telecommunications Bureau. It will also have three outside voices. William Rogerson, the economics chair at Northwestern University, was chief economist of the FCC during the Clinton administration and is considered a “merger hawk”—as in, he won’t be inclined to be soft on the companies. He opposed the Comcast-NBCUniversal merger, as an example.

Jamillia Ferris is joining the team as well and also has a left-leaning background, having worked during the first Obama administration as chief of staff in the Justice Department's antitrust division. And, another Northwestern professor from the Kellogg School of Management, Shane Greenstein, will come to the table with expertise in management and communications.

"Outside hires for merger reviews aren’t unusual, but these particular officials certainly bring heavy-duty antitrust expertise," said Paul Gallant, a telecom analyst at Guggenheim Securities, told the Washington Post. "I think the chairman's message is that these deals will not be a cakewalk."

Ferris intimated as such back in May. She told Variety, before her appointment, that “Horizontal competition won’t be the only way they look at market dynamics and the competitive effects of the transaction,” adding, “For example, you can expect that they will examine whether the combined company will have enhanced buying power that results in less or lower quality output when negotiating with content providers. DOJ may also analyze whether that power harms competition with other media companies trying to access content.”

Rogerson and Ferris will also be involved in the AT&T (News - Alert)-DirecTV merger review, the FCC said.

Whatever the FCC says, the Justice Department will also have to weigh in on the merger and give approval for it to go through. There’s an informal 180-day window for review, and Bernstein Research’s Paul de Sa wrote in an analyst note that he predicts that both transactions will be approved “with conditions” in the first part of 2015.

There’s much at stake here given the scale. Comcast’s plans to acquire Time Warner Cable include a related transaction in which Charter Communications (News - Alert) will acquire 1.4 million Time Warner Cable subscribers. Another 2.5 million Comcast subscribers will become part of a spinoff company controlled by Charter. According to SNL Kagan, a combined Comcast and Time Warner (News - Alert) Cable would have an estimated 35.5 percent of the national fixed broadband market, after divestitures, based on June 2013 data that the companies filed in a recent letter to the FCC.

Broken down, the numbers reveal that Comcast serves 21.8 million residential video customers, 19.7 million residential fixed broadband subscribers and 10 million residential voice customers pre-merger. When it comes to business, Comcast has about 800,000 video customers, 1.4 million in broadband and 800,000 for voice.

Time Warner Cable serves 11.1 million home video customers, 11.4 million residential fixed broadband subscribers and 5 million residential voice customers. In business, it has around 200,000 video, 500,000 broadband and 300,000 voice clients.

After divesting of 3.9 million customers, the combined company would end up with 29.1 million home video customers, 27.9 million residential fixed broadband subscribers and 13.4 million residential voice customers. In business, they would have around 900,000 video customers, 1.7 million fixed broadband clients and 1 million voice subscribers.

Charter, which would receive the divested subs, would end up with 5.6 million home video customers and 5.5 million in residential fixed broadband as well as 2.8 million in residential voice after the transactions. In business, it would count about 100,000 video clients, 300,000 in fixed broadband and 200,000 in voice.

Meanwhile, the spin-off company would have 2.4 million home video customers, 2.1 million residential fixed broadband subscribers and 1.1 million in residential voice. In business, it would have around 100,000 video clients, 200,000 fixed broadband and 100,000 in voice.

Edited by Adam Brandt

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