by Tony Romm
For Comcast, the future of its $45 billion bid to buy Time Warner Cable hinges on more than just the federal government’s green light.
The telecom giant is rushing to battle back states like California and New York, where powerful public utility commissions appear likely to flex their regulatory muscle and attach a raft of conditions to the merger requiring changes to how the company offers and prices services — demands that Comcast may find burdensome to fulfill.
The headaches illustrate the complexity of Comcast’s mega-deal for Time Warner Cable, which would combine the nation’s No. 1 and No. 2 cable providers. While the Justice Department and Federal Communications Commission move ahead on their own review, with a decision expected as early as next month, the company must still lobby from coast to coast — and win approval from local officials in some of its biggest markets — if it hopes to emerge victorious.
“We’re a huge part of any telecom market,” said Paul Goodman, a staff attorney at the Greenlining Institute, a Berkeley-based advocacy group that opposes the Comcast deal. “If California is the first state to speak out … we need to send a strong message this merger is horrible for consumers.”
State regulators across the country have taken a great interest in Comcast’s move to grow its broadband and cable footprint. In some cases, the local reviews are mere formalities to transfer Time Warner Cable’s licenses, and Comcast has secured those approvals. Attorneys general in states like Connecticut and Florida, meanwhile, have indicated they’re joining the DOJ’s merger review.
But regulators in California and New York in particular have seized on the transaction, aiming to send a message that they will not simply rubber stamp a deal that has a major impact in their backyards.
For almost a year, the California Public Utilities Commission has heavily scrutinized the proposed merger. The Golden State is a critical piece of the puzzle for Comcast: It would gain a significant foothold in major cities like Los Angeles if it’s allowed to acquire Time Warner Cable and pursue a related side deal with Charter Communications.
A judge advising California in its review last month recommended the state approve Comcast’s plans, provided the company adhere to a set of proposed conditions, including the expansion of its discounted broadband service for low-income families so it serves 45 percent of eligible households in the state within two years. The proposal also would require Comcast to provide backup batteries for subscribers who sign up for its voice service. And it bans the company from lobbying against local community-run broadband networks for five years.
Comcast Executive Vice President David Cohen, who’s leading the company’s campaign to sell the merger, heralded the judge’s report in a February blog post, describing it as an “important step” to closing the deal. But the cable giant had plenty of concerns. It fired off a scathing, 46-page filing with the Public Utilities Commission in March, charging that many of the suggested conditions are “unnecessary and inappropriate and should not be adopted.” It called the judge’s proposal factually flawed, argued the PUC lacks authority to regulate broadband and decried limits on its advocacy as “unconstitutional.”
While Comcast previously promised to expand its low-income broadband offerings as part of the deal — one of several concessions meant to woo regulators — the company essentially said California’s target would be difficult to achieve.
In the end, the five-member commission can adopt the judge’s ideas, each commissioner can put his or her own plan up for a vote, or the panel could reject the merger entirely. Previous public meetings suggest the commission is torn — meaning the fight might well surpass a planned March 26 vote.
Comcast spokeswoman Sena Fitzmaurice said the two companies are “confident that the record demonstrates the many strong and indisputable public interest benefits” of the deal. “While there are a number of conditions which we can support in concept, other conditions are unnecessary or exceed the Commission’s jurisdiction,” she added.
As the debate plays out in California, the cable giant has dispatched its lawyers to meet frequently with commissioners. The company ramped up its lobbying in Sacramento last year, spending $1.4 million to talk about issues including the merger, according to state records.
It’s a similar slog more than 3,000 miles away.
New York Gov. Andrew Cuomo’s budget, advanced by the legislature in 2014, included a requirement that merging cable companies prove their deal benefits the public. The Comcast-Time Warner Cable transaction marks the first time that New York’s Public Service Commission can test those new powers — and Cuomo has urged regulators to dig deep.
The deal is of particular interest in New York: Time Warner Cable has deep roots in the state, with roughly 2.5 million customers, according to New York’s own estimates. Comcast is also a visible presence in New York City as owner of 30 Rockefeller Plaza, the home of NBCUniversal, which it bought in 2011.
The state’s public service commission, like its California counterpart, has held multiple public hearings on the merger. A staff report from the Department of Public Service, issued in August, said the deal should be approved only with tough conditions — otherwise, the merger would provide “no net positive benefit” to the state. The report recommends the state seek Comcast commitments to improve customer service, preserve local jobs, expand its low-income broadband offerings and invest $50 million into boosting its infrastructure in the state.
The utilities commission has delayed its decision five times, and it’s expected to punt again on its next deadline, set for March 19. Recognizing the stakes, Comcast tripled its lobbying activity in the Empire State last year, spending nearly $160,000 to lobby on issues including the Time Warner Cable deal, according to state records.
“We believe we have successfully demonstrated the benefits our investment will bring to residential and commercial customers across New York,” said Comcast’s Fitzmaurice. She cited factors including faster Internet speeds, “next-generation TV,” more robust Wi-Fi, and the company’s low-income Internet program.
New York may be waiting to see what regulators in Washington do first, because the federal agencies could impose far more sweeping conditions on the Comcast-Time Warner Cable deal. But both New York and California still could throw a wrench in Comcast’s plans by subjecting it to strong local requirements.
“It is certainly possible for both public service commissions to impose conditions on the merger to make it consistent with the public interest,” said Harry First, an antitrust professor at the NYU School of Law. In most cases, he said, “if the states get involved, it’ll be to do something the feds do not.”