After months of delays, the Federal Communications Commission has again stopped the clock on its review of Comcast's (NASDAQ:CMCSA) proposed $45 billion merger with Time Warner Cable (UNKNOWN:TWC.DL).
Comcast broke the news in a post on its website that was mostly about Executive VP David Cohen's trip to speak at the Center for Media Law and Policy of the University of North Carolina.
"The FCC and the DOJ [Department of Justice] are continuing their regulatory reviews of the TWC transaction," Cohen wrote. "Given the FCC's recent decision to pause the shot clock, we have recently reassessed the time frame when we expect the government's regulatory review to be completed and now expect that the review should be concluded in the middle of the year."
That's a big delay from Comcast's estimate in the press release announcing the deal that it would close by the end of 2014.
What did the FCC do?
No timetable has been given for the decision from the FCC, which issued a public notice saying it will pause its 180-day clock to review both the Comcast/Time Warner deal and one involving AT&T (NYSE:T) and DirecTV (NYSE:DTV.DL).
This is the third time the "clock" has been paused. It happened once before in October and again in December. The FCC blamed the delay this time on wanting to know a court's decision on whether it can see certain confidential information related to both mergers.
That may be true, but it also seems like a delaying tactic designed to give the FCC more time to gauge exactly how much public outrage will be generated if it allows the deal to go through. The agency gave little detail in its public notice, but it did devote about a quarter of the short document to remind the public that it can take as long as it wants:
We take this opportunity to remind the public that the 180-day clock represents a good faith undertaking by the Commission to complete action on assignment and transfer of control applications within a certain timeframe and is a means to keep interested parties informed of the progress of those reviews. The clock carries with it no procedural or substantive rights or obligations but merely represents an informal benchmark by which to evaluate the Commission's progress. Although the Commission seeks to meet the 180-day benchmark, the Commission retains the discretion to determine whether, in any particular review proceeding, events beyond the agency's control, the need to obtain additional information, or the interests of sound analysis constitute sufficient grounds to stop the clock.
To translate, "We can do whatever we want, and we can take as long as we want to do it."
What the delay means
The FCC's taking a long time to approve a deal doesn't mean it will ultimately reject the deal. It does, however, suggest that the merger won't sail through without significant conditions.
That's what happened in the case of the merger between Sirius and XM Satellite Radio. Approval for that deal took 16 months before it was approved by a 3-2 FCC vote, with a number of caveats. In exchange for approving the deal -- without which it was very possible both companies would have closed and satellite radio would have ceased to exist -- the agency enacted a number of long-term pricing considerations.
In this case, it seems almost certain that the FCC will seek to add some face-saving conditions to the merger, given the public outrage over the idea of having one cable company control just under a third of the country's subscribers. That could be anything from setting a ceiling on price increases to getting the merged company to agree to provide service to underserved areas.
The FCC could say no
Unlike any other time in recent memory, the FCC under Tom Wheeler seems sensitive to what the public wants. Wheeler's FCC, spurred on by the media, the public, and support from President Obama, was willing to pass a proposal that will regulate Internet providers under Tittle II of the Telecommunications Act.
That wasn't a popular move with the cable industry, which has usually been able to get the FCC to do whatever it wants. It was also a show of independence, demonstrating that despite Wheeler's background as a cable industry lobbyist, he's willing to put the American people before his former employees.
It's hard, if you're Comcast or Time Warner Cable, to see this delay as a positive sign. If public backlash against the deal continues to grow, the FCC could reject the merger. At best, the two companies are being dealt a setback that includes not only delays, but also probably major conditions on the merger.