Comcast Corp. CMCSA -0.67% and Time Warner Cable Inc. TWC -0.70% fired back at critics of their $45 billion proposed merger, defending the transaction against concerns it would make Comcast the gatekeeper of the online and pay TV world.
The companies' comments, filed with the Federal Communications Commission late Tuesday night, were in reply to a first round of comments about the proposed merger, which was announced in February and must be approved by the FCC and Justice Department. Combining the nation's two largest cable and broadband providers would create a company that would control roughly 30% of the cable market, after divesting almost four million Time Warner Cable subscribers, which they have agreed to as part of the deal.
Comcast and Time Warner Cable have presented the deal to regulators as a straightforward cable merger that wouldn't reduce the number of choices for consumers in any market. But regulators have zeroed in on the broadband side of the deal, and are applying intense scrutiny, according to people familiar with the reviews, out of concern that Comcast would become the dominant high-speed broadband provider in almost all of the major urban areas of the U.S.
FCC Chairman Tom Wheeler argued in a speech earlier this month that the broadband market isn't competitive, especially at the higher speeds needed for online video, which is the source of most peak Web traffic. Mr. Wheeler noted most Americans have only one or two choices for high-speed home broadband access, typically their local cable provider, and said 10 megabits per second is the minimum level of speed to stream HD video. That rules out most DSL and wireless providers, which typically offer speeds below 5 megabits per second.
The companies argue that the FCC shouldn't discount competition from slower forms of broadband for the purpose of the merger review. They say 4 megabits per second is fast enough to stream HD video, and that most households have only one or two members, and therefore don't require the 25 megabits per second speeds that Mr. Wheeler has targeted as a goal.
"[I]t makes no sense, when defining a 'market' for competitive purposes, to exclude either technologies or speeds that tens of millions of broadband customers use today and will still use tomorrow," the comments state.
Comcast and Time Warner Cable also say their critics are opportunistically leveraging the merger to try to extract concessions for their own benefit. One company singled out is Netflix Inc., NFLX +1.03% which struck a paid interconnection deal with Comcast earlier this year to speed the delivery of traffic on the back end between their respective networks. The comments note Netflix CEO Reed Hastings initially expressed satisfaction with the arrangement, before later criticizing Comcast and opposing the merger. Netflix has argued that the FCC should mandate that such interconnection deals should be free of charge.
Many programmers also have expressed concern in private over the leverage the combined company would have in negotiations, particularly in areas such as online programming and retransmission consent.
In its comments, Comcast said one of the deal's most vocal critics, Discovery Communications Inc., DISCA -0.89% has demanded "unwarranted business concessions from Comcast as a condition of Discovery's nonopposition to the Transaction."
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Watch the entire merger hearing on CSPAN below: