Comcast and Time Warner Cable execs grilled by lawmakers

Senior executives from Comcast and Time Warner Cable were grilled for more than three hours Wednesday about their proposed merger by a mostly skeptical Senate Judiciary Committee concerned that the more than $40-billion deal would be bad for consumers and competition.

“Where’s the beef? Where’s the ‘there’ there for consumers?� asked Sen. Richard Blumenthal (D-Conn.), who added that there is a “general sense of skepticism� that a combination of the nation’s biggest cable and broadband suppliers will benefit anyone other than the two companies.

Comcast and Time Warner Cable executives countered that by combining they would be in better position to compete against rivals including new entrants from Silicon Valley, and that customers would be the winners.

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“While this transaction will make us bigger, that is a good thing, not a problem,� said Comcast Executive Vice President David Cohen, who did most of the heavy lifting for the two companies during the hearing. In his opening remarks, Cohen said customers will get “more choices and better prices� and added that Comcast “represents the American dream.� Time Warner Cable Chief Financial Officer Arthur Minson Jr. also was at the hearing.

The hearing came one day after Comcast and Time Warner Cable filed their 175-page Pubic Interest statement at the Federal Communications Commission defending the deal.

Lawmakers raised several issues over the course of the hearing including the clout a combined Comcast - Time Warner Cable would have over programming choice as well as its role as an Internet gatekeeper.

“Cable companies have moved beyond delivering television, adapting their networks to provide broadband. They are now the sole source of this service for millions of Americans,� said Sen. Patrick J. Leahy (D-Vt.), chairman of the Judiciary Committee. “Consumers deserve to know how a merger between two of the largest companies in this industry will impact them.�

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Comcast’s Cohen and Christopher S. Yoo, a University of Pennsylvania Law School professor, stayed on message during most of the hearing that since Comcast and Time Warner Cable do not compete head-to-head, the merger is not going to limit competition or consumer choice.

But the national reach of a combined Comcast - Time Warner Cable — the two companies would have large presences in most major cities in the United States, is of tremendous concern to media watchdogs and consumer activists.

Gene Kimmelman, a former chief counsel at the Justice Department and president of the media reform group Public Knowledge, testified Wednesday that a Comcast - Time Warner Cable pairing would be akin to “a nationwide octopus with massive tentacles� that is capable of squeezing innovation and consumers.

Of particular worry is the Internet, where Comcast could have a 40% nationwide share of the market. Sen. Amy Klobuchar (D-Minn) said that kind of clout has the potential to be abused and harm new entrants into a burgeoning market.

“What will happen to the next Neflix that today is just a dream in a garage?� Klobuchar asked.

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The harshest critic and toughest questioning came from Sen. Al Franken (D-Minn.), who has made no secret of his disdain for Comcast and his opposition to its proposed purchase of Time Warner Cable

“This deal will result in fewer choices and higher prices,� Franken predicted, adding that Comcast wants to control the national market for cable and broadband.

Franken also noted that when Comcast persuaded the government to sign off on its acquisition of NBCUniversal, its Chief Executive Brian Roberts said the company did not have plans to acquire more distributors. Furthermore, it cited Time Warner Cable as another robust distributor that would make it difficult for Comcast to behave in an anti-competitive fashion if it owned NBCUniversal’s programming assets along with its own distribution system.

“Comcast can’t have it both ways,� Franken said. “They can’t say the existence of competition among distributors was a reason to approve the NBC deal in 2010 and turn around and say the absence of competition with Time Warner Cable is a reason to approve this deal.�

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Franken and Cohen also sparred about just how good a job Comcast has done living up to the conditions that the government put on it when approving the NBCUniversal deal.

The fact that Comcast and Time Warner Cable are also major sports programmers was another issue of concern for lawmakers. The two companies combined would own several big regional sports networks including SportsNet in Los Angeles, which carries the Lakers.

Sports is one of the biggest drivers of higher programming bills, and Blumenthal said he feared that Comcast would have the “means and incentive to overcharge your rivals� for sports.

Also testifying was James L. Bosworth, chief executive of the Back9Network, a new channel devoted to the golf lifestyle. Bosworth said that because Comcast owns the Golf Network, his channel will have trouble getting on its systems and needs regulatory help.

“We’re competing directly with a Comcast-owned network — the Golf Channel — that gives Comcast every incentive to keep us off the air,� Bosworth said.

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Comcast’s Cohen countered that the cable giant has had discussions with Bosworth about carrying the network and added that with regards to independent programmers, “if you have compelling content and you can make the consumers want to watch it, we will carry the network.�

Interestingly, no major programmers or distributors appeared before the committee to either support or criticize the proposed transaction.

Comcast’s Cohen did acknowledge that the company needs to do a better job in customer service and is trying to make improvements.

“We are totally open to the fact that sometimes we need a kick in the butt,� Cohen said.

Not everyone beat up on Comcast and Time Warner Cable. Sen. Orrin G. Hatch (R-Utah) said this: “Based on what I heard at today’s hearing and everything I’ve seen so far, the markets for both video services and broadband Internet are dynamic and innovative, with many new entrants and evolving technologies.�

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Follow Joe Flint on Twitter @JBFlint.