Comcast deal raises 'Net issues

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Comcast's $45 billion bid for Time Warner Cable would create a cable television behemoth in an industry that has steadily increased prices for bundles of channels and services that many consumers dislike but feel forced to buy.

But the merger would have far greater implications for the future of media and communications, with one firm controlling more fast Internet lines into American homes than any other company, along with a huge swath of content through its ownership of NBC Universal.

The combined company would have 33 million cable subscribers and nearly as many broadband users, giving it enormous power in negotiations with networks over licensing fees, and in determining what shows reach consumers on mobile devices, laptops and television sets.

It could influence whether the next Apple TV or Google device gets a fair shot at replacing cable set-top boxes. Without the second-biggest cable firm to help keep pressure on prices for triple-play television, Internet and phone service, Comcast would have flexibility to set the market rates.

The expansion of Comcast's U.S. footprint would give it greater control of lines known as the "last mile" into homes and businesses, infrastructure that has increasingly become like a utility for consumers who look to the Web for entertainment, education and communications.

The company said it would not block competitors on its network or deliver its own video products with better quality than a competitor such as Netflix. Comcast does not overlap with Time Warner Cable in any cities, which means it would not eliminate competition, the firms said.

The broad implications will invite scrutiny by regulators who must judge whether a combined company would be anti-competitive or in the public's interest.

Consumer groups, lawmakers and unions have criticized the proposal, saying it could send many consumers back to the monopoly telephone era, when Ma Bell set prices and controlled the kinds of phones consumers were allowed to use.

"This is the future. Comcast is in the driver's seat on how to define how Internet-enabled equipment, software and applications touch consumers," said Gene Kimmelman, president of the consumer advocacy group Public Knowledge and a former Justice Department antitrust official. "And everyone in programming and the television ecosystem will need to be in front of Comcast customers, so they will have to adjust their specifications for Comcast."

To head off regulatory concerns, Comcast offered to shed 3 million subscribers to keep its ownership of the entire cable marketplace below 30 percent, a figure that television programmers say is the threshold for competition in licensing negotiations.

If the acquisition is approved, Comcast will serve some 30 million pay TV customers and 32 million Internet subscribers. The company said it is confident of winning regulatory approval because it and Time Warner have no overlapping customers.

Comcast operates in Chicago and mainly in Northeast markets that include Pittsburgh, Boston, Washington, D.C., and its home base of Philadelphia. Time Warner Cable has strongholds around its headquarters in New York City, as well in Los Angeles, Dallas and Milwaukee. In many of those areas, the combined Comcast-Time Warner Cable would face competition from rivals AT&T and Verizon, which provide both pay TV services and Internet hookups. Both AT&T and Verizon are growing quickly. They ended 2013 with 5.5 million and 5.3 million pay TV subscribers, respectively.

The merger would build on Comcast's strategy to transform itself from a cable television business into a broadband and media powerhouse. The company has experienced a slow but steady decline in cable TV subscribers, as consumers increasingly turn to broadband Internet services for entertainment and communications. Netflix, with 31 million subscribers, has exploded in growth while using as much as one-third of bandwidth on broadband networks at peak hours.

Comcast will argue to regulators that the cable market is fiercely competitive, with new rivals among online video providers such as Hulu, and from television and broadband Internet providers such as Verizon's FiOS service and Google with its experimental ultra-fast fiber network in a few small cities.

Analysts generally agree that Comcast is likely to win approval for the merger from antitrust regulators. The lack of overlapping markets means regulators won't approach the merger with the same concerns as in AT&T's proposed bid for T-Mobile, experts said. That deal, which regulators rejected, would have eliminated a major national carrier and given consumers fewer options.

Comcast said it expects to win approval within nine to 12 months.

Leaders of the Senate Judiciary Committee's antitrust subcommittee said Thursday that they will hold a hearing on the proposed merger to look at how consumers could be affected.

Associated Press contributed.


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