Since announcing its planned $45 billion merger with Time Warner Cable (NYSE: TWC) in February, cable giant Comcast (CMCSA +1.05%) has embarked on a public relations crusade to woo not only potentially affected consumers, but also the Federal Communications Commission, which must ultimately approve the merger.
But despite Comcast's best efforts, public interest groups, labor unions, businesses, and other media companies have formed the Stop Mega Comcast coalition -- a massive organized movement which seeks the FCC's denial of the merger.
So can all of this widespread public disapproval actually lead to a denial? Let's explore the likelihood.
Comcast will gain millions of cable and broadband customers if it successfully merges with Time Warner Cable. Source: Comcast.
The coalition's platform
While some coalition members, such as DISH Network (DISH +0.00%), are obviously protecting their own interests by joining, the diversity in membership suggests opposition to the deal goes beyond normal levels. In addition to the usual left-wing groups that oppose big mergers, the group surprisingly includes conservative pundit Glenn Beck's The Blaze Internet television network and the Parents Television Council (the right-leaning group that protests what it sees as inappropriate television content.)
To make its case, Stop Mega Comcast's website offers a laundry list of Comcast's greatest transgressions, including the following verifiable facts:
- In the May 2014 American Customer Satisfaction Index survey of consumers, Comcast and Time Warner Cable respectively ranked last and second-to-last in customer satisfaction among the the American ISP cohort.
- In June 2012, Comcast paid the FCC $800,000 to settle allegations that it failed to sufficiently market its stand-alone Internet service, a condition in the Comcast-NBCUniversal merger to ensure Comcast did not force customers to buy bundled services if they only wanted high-speed Internet.
- In 2010, and again in 2014, Comcast won the distinct honor of being named "Worst Company in the World" by The Consumerist, for its high prices, lack of reliable service, and abysmal customer service. It is one of only two companies to ever win the award twice.
The site also lists lawmakers who have expressed reservations about the merger and references the now-infamous phone call recorded by a former Engadget editor in which a Comcast "retention specialist" made every effort to prevent him from canceling service. StopMegaComcast.com also highlights comments made by Comcast CEO Brian Roberts including linking to a 2013 speech where he publicly blamed his customers for Comcast's bad reputation, "boldly claiming it's only noticed because the company gets lots of service calls."
What Comcast is saying
In a press release announcing the agreement, Comcast stated, "Through this merger, more American consumers will benefit from technological innovations, including a superior video experience, higher broadband speeds, and the fastest in-home Wi-Fi." Comcast also has pointed out repeatedly that because its service area does not overlap with Time Warner's, the deal would not mean less choice for consumers.
To address consumers' concerns, Comcast launched a Web page outlining benefits of the merger and appointed longtime executive Charlie Herrin to oversee its often troubled customer service. Comcast has also aggressively rebutted arguments that the deal is anti-consumer, and has stated publicly that some opposing the merger had offered to support it in exchange for financial considerations.
The cable company filed a document with the FCC charging that a number of companies offered to support (or at least not oppose) the deal if Comcast shared access to its advertising technology, agreed to carry yet-to-be-launched TV networks, paid higher carriage fees for channels and allowed interconnection of Web traffic without charge, The Wall Street Journal reported. In the document, Comcast specifically called out Netflix, which has been staunchly against the deal.
What will the FCC do?
If approved, the merger would combine the No. 1 and No. 2 U.S. cable providers, leaving Comcast with 30 million pay television subscribers and making it the dominant video and broadband provider in 19 of the nation's top 20 residential markets, TechCrunch reported. And while past precedent suggests an outright denial is unlikely, the FCC will almost certainly address the massive opposition to this major deal.
The agency could approve it with conditions that cause the deal to fall apart.That has happened before when the FCC did not formally need to deny AT&T (T +1.48%) and T-Mobile (TMUS 1.35%) permission to merge to quash the deal. (Instead, the two companies pulled their merger application after the FCC signaled the deal had little chance of being approved without major concessions and conditions.)
In this case, the FCC could force the combined companies to adopt net neutrality or make other concessions, such as forcing them to maintain prices for a period of time or offer service in less-profitable, underserved, or unserved markets.
Whereas Comcast Executive Vice President David Cohen said it was "absolutely possible" the FCC could demand such stringent conditions that the company walks away from the deal, he said he has "no instinct, no message that we are remotely in that situation," The Wall Street Journal reported. If, for example, the FCC, whose chairman has publicly expressed concern over the broadband side of the deal, makes the combined company divest itself of some of its Internet customers, Comcast might walk.
Nevertheless, Comcast and Time Warner Cable have already made the moves the federal agency has required of other companies attempting similar deals, The New York Times reported. The deal between the two companies literally specifies that Comcast will comply with anything the FCC has ordered in the last 12 years in connection with the approval of other cable systems. The most obvious move to meet this condition was Comcast divesting itself of 3 million cable homes in order to avoid antitrust allegations.
Based on its past history, the FCC has no reason to deny the merger, but public pressure and the size of the transaction makes using past actions to gauge future results less of a sure thing than in the past. Comcast and Time Warner Cable are likely to receive a conditional approval, but those conditions may make the deal unattractive and it could fall apart.
If that happens, it will be a new chapter in the strength of public opinion and its power over government watchdogs and big business.
