Comcast plans a media powerhouse
Comcast Corp. already produces movies, television shows and national and local news programs while operating theme parks and the largest pay-TV system in the U.S.
And now, with one bold stroke, the Philadelphia conglomerate could dominate the flow of information and entertainment into American homes with historically unprecedented power.
Comcast’s proposed $45.2-billion takeover of Time Warner Cable would allow it to provide television, telephone and Internet service and even home security systems to nearly 30 million homes across the country.
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The company’s reach would encompass the nation’s largest markets, among them Los Angeles, New York, Chicago, Philadelphia, Washington D.C. and San Francisco. By taking over Time Warner Cable’s nearly 1.8 million Southern California customers, Comcast would become the region’s dominant pay TV operator.
The audacious move comes just three years after Comcast took control of media giant NBCUniversal in a deal that was valued at more than $30 billion. It continues the half-century quest of Pennsylvania’s Roberts family to build the nation’s preeminent media company.
Six decades ago, Comcast founder Ralph J. Roberts, now 93, made a living selling suspenders and belts. But in 1963 he gambled on new technology by buying a 1,200-subscriber cable TV system in Tupelo, Miss.
Now the company controlled by his son Brian L. Roberts, 54, is hoping to build an electronic beltway into nearly a third of all homes in the U.S. with pay TV.
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“Brian Roberts is, in fact, the John D. Rockefeller of the 21st century,†Harvard Law School visiting professor Susan Crawford said Thursday. “He’s cornered an essential input into every aspect of American life.â€
Comcast already provides coverage of the Olympics, “Sunday Night Football,†auto races and NHL hockey to millions of American viewers, and the merger would extend Comcast’s reach into Southern California sports with channels devoted to the Lakers and Dodgers.
A prime motivation for the merger is an onslaught of competition and more places for consumers to get their entertainment. Satellite TV giants DirecTV and Dish Network and telephone companies Verizon and AT&T all offer television and, in some cases, Internet service.
Even search giant Google Inc. has been installing high-speed data lines for broadband service in Kansas City — and has plans to add systems in Austin, Texas, and Provo, Utah — to compete with cable companies.
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Internet streaming companies, including Netflix and Amazon.com, pose a threat too. They offer movies and original TV shows, and at much lower cost to customers than the traditional cable providers.
For these reasons, cable companies have been feeling squeezed and have lost some of their bargaining power when negotiating new distribution deals with programmers Walt Disney Co., 21st Century Fox, CBS Corp. and others.
Last summer, a stalemate between CBS and Time Warner Cable resulted in a monthlong service blackout to Time Warner Cable customers in Los Angeles, New York and Dallas. Time Warner Cable eventually agreed to CBS’ payment terms, but the battle ultimately cost it more than 200,000 subscribers.
By adding more cable subscribers to the Comcast fold, the company hopes that it will have more purchasing power during contentious negotiations and, thus, a greater ability to push back on rising programming costs.
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Media watchdogs and members of Congress quickly expressed concern about concentrating so much control into the hands of one company. Two ranking U.S. senators said they would convene hearings on Capitol Hill to scrutinize possible ramifications of a merger.
The Federal Communications Commission and U.S. Department of Justice must approve the transaction. Officials at both agencies declined to comment Thursday on the proposed deal.
If approved, Comcast would provide cable and Internet service in 19 of the nation’s 20 largest markets.
It would give more heft to an already massive cable and Internet service provider, one that has a unique position because it also churns out Hollywood hit movies including the “Fast & Furious†and “Despicable Me†franchises and top television shows like “Law & Order: SVU,†“Meet the Press†and “NBC Nightly News With Brian Williams.†Comcast also owns the Universal Studios theme parks in Los Angeles and Orlando, Fla.
“Under this proposed deal, two huge companies would become a behemoth,†said Delara Derakhshani, policy counsel for the Consumers Union, which is the advocacy arm of Consumer Reports. “This industry is notoriously unpopular with consumers due to poor customer service, not to mention ever-increasing bills, and a deal this size doesn’t exactly convince us that things will get better.â€
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By tightening its grip on the nation’s information network, critics have said, Comcast could control how fast millions of customers receive information over the Internet, and how much money they would have to pay for their television and Internet service.
“The combined company would serve 3.7 million California subscribers, or the equivalent of one quarter of the state’s households, and essentially be the only cable provider in all but one major California market,†said California Emerging Technology Fund CEO Sunne Wright McPeak. “This requires focused attention from both government and industry leaders. “
Although the proposal probably will face a lengthy review, Comcast structured its merger with Time Warner Cable in a way that, the company said, would not be a violation of antitrust rules because its current service area does not overlap with that of Time Warner Cable.
The deal is likely to be approved by regulators, said David Kaut, a telecommunications analyst at the brokerage firm Stifel, Nicolaus & Co.
“There will be concern that they’re just getting too big,†Kaut said. “It just seems to me, it’s going to be a very hard case to make from a pure antitrust perspective.â€
In addition, Comcast said it would divest about 3 million cable and Internet service customers to keep its national footprint to 30% of all pay-TV homes in the U.S. It hopes that concession will make it easier for Washington to swallow the merger.
The two companies had been talking on and off for the last year and accelerated their negotiations during the last two weeks, people close to the talks said. Another cable company, Charter Communications, made a bid last month for Time Warner Cable, but that one was promptly rejected.
Roberts was in Sochi, Russia, monitoring NBC’s coverage of the Winter Olympics, until Monday night, when he flew on a corporate jet back to the U.S. to help his team finalize deal terms.
Comcast’s and Time Warner Cable’s boards separately approved the merger Wednesday night. At 1:30 a.m. Thursday, Comcast and Time Warner executives signed the merger agreement.
Ralph Roberts, his son Brian said, was on the conference call when Comcast’s board voted to make the acquisition.
“My dad was on our board call last night and was very, very supportive and I think proud,†the younger Roberts said. “But we have a lot of work to do.â€
Times staff writer Jim Puzzanghera in Washington contributed to this report.
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