Comcast Set to Buy Time Warner Cable for $45 Billion

A merger between the two largest U.S. cable companies faces an uphill regulatory battle

  • Share
  • Read Later
William Thomas Cain / Getty Images

The Comcast Center, home to Comcast's corporate headquarters, in Philadelphia

Comcast, the nation’s largest cable company, announced a deal Thursday to buy Time Warner Cable in a blockbuster merger worth about $45 billion. The proposed deal will be intensely scrutinized by the U.S. government, including the Justice Department, which will address antitrust concerns, and the Federal Communications Commission, which is charged with ensuring that the deal serves the public interest. The federal government review will take about one year.

Combining the No. 1 and No. 2 cable companies in the country would create a corporate behemoth with approximately 33 million customers. Comcast already owns NBCUniversal, one of the crown jewels of the media industry, after buying the company from industrial conglomerate General Electric in a highly controversial deal made complete last year.

As part of the deal, Comcast will extend its commitment to follow the FCC’s open-Internet rules in the Time Warner Cable acquisition. Last month, a federal court struck down the FCC’s open-Internet rule — serving a major blow to Net neutrality — but Comcast had previously agreed to abide by the rules until 2018 as part of its acquisition of NBCUniversal. Net neutrality is the principle that Comcast, Verizon and AT&T shouldn’t be able to favor certain Internet services at the expense of rivals.

If successful, the deal — first reported by CNBC — will end efforts by Charter Communications to buy Time Warner Cable. Last month, Time Warner Cable refused Charter’s $132.50 per share proposal as a “nonstarter,” because the price was too low. For months, Liberty Media, the broadband giant led by billionaire mogul John Malone, had made no secret of its interest in buying Time Warner Cable, but its efforts were spurned. Malone, the legendary cable-industry pioneer, is the largest Charter shareholder, with about 27% of the company’s shares. Comcast is offering Time Warner Cable about $160 per share.

(MORE: The 6 Most Important Tech Bombshells Coming This Year)

For the combined Comcast–Time Warner Cable, this deal will have substantial business benefits. In particular, the combined company would have increased leverage in contentious negotiations with the TV broadcasters over “retransmission consent fees,” which the cable and satellite companies must pay for the right to carry popular programming like prime-time shows and sports. These fees were at the heart of a recent dispute between CBS and Time Warner Cable, which led to an unprecedented, monthlong CBS blackout for more than 3 million Time Warner Cable subscribers in New York City, Los Angeles and Dallas.

Navigating the regulatory hurdles will be a tough undertaking for Comcast, but the company showed a willingness to do so when it purchased NBCUniversal, a deal that was subject to numerous conditions imposed by the Justice Department. Comcast does have a few legal precedents working in its favor. The D.C. Circuit Court of Appeals has twice thrown out an FCC cap limiting cable ownership to 30% of the pay-TV market — the most recent decision was in 2009.

From an industry perspective, Time Warner Cable is an attractive takeover target because of its major presence in several important markets, including New York City, Los Angeles and Dallas, as well as large swaths of Ohio, North Carolina and Maine. (Time Warner Cable was spun off from TIME parent Time Warner in 2009.)

Comcast does not expect that the proposed merger would result in the combined entity having more than 30% of the market. But in order to help assuage regulators, Comcast said it’s willing to jettison as many as 3 million subscribers in order to make sure the new company falls below the 30% threshold. That means that Comcast could sell off a chunk of Time Warner Cable’s business to another cable company.

Public-interest groups reacted swiftly to condemn the proposed merger. “In an already uncompetitive market with high prices that keep going up and up, a merger of the two biggest cable companies should be unthinkable,” Craig Aaron, president and CEO of Free Press, said in a statement. “This deal would be a disaster for consumers and must be stopped.” John Bergmayer, senior staff attorney at Public Knowledge, said, “Comcast cannot be allowed to purchase Time Warner Cable. Antitrust authorities and the FCC must stop it.”

13 comments
melissabrittany
melissabrittany

I think this deal will help Time Warner regain its subscriber base as it will work with Comcast on multiple aspects that need to be improved. It will also help the company to cut its costs and work on capital expenditure and development projects so that the number of people it caters to, Increase.


badmikiev
badmikiev

I didn’t think people still bought a ‘television’ package anymore.So I can only think this acquisition is for peoples internet connection, which is the ‘pipe’ that drives everything.So it seems logical, at first.  But,Google has a super-fast fiber pipe going cross country.So WHY, oh WHY, did Comcast just go double down, and bet $45 billion dollars, on the premise that they will WIN the end user over a super-fast Google.


AdamOrton
AdamOrton

TV sucks nowadays anyways and only fools watch it

wulfdjservice
wulfdjservice

Weren't monopolies supposed to be broken up decades ago. Oh wait, as long the right people get paid, then the rest of us suffer as usual. Comcast totally blows. Now it will be either their absolutely awful cable or over priced dish. Things really suck  around here anymore.

kegyud
kegyud

"The federal government review will take about one year." -  It should take about 5 min. Doesn't take a genius to see what's coming here.

" Charged with ensuring that the deal serves the public interest. " - Are they kidding? 

Bend over America, we're about to get screwed again

Want to see how well we're being served by Comcast and how well we're protected by our government? Check out Susan Crawford's book, "Captive Audience: The Telecom Industry and Monopoly Power in the Gilded Age" 



ekadasia
ekadasia

We're writing on others and suggesting ways & means. Let us come back to us. After Barclays decline in profit , another Giant Llyod has incurred whopping loss of £ 838 millions and recording net loss if £ 519 million making it red.

Do we expect Bonus & job cut both ?

jrwells5
jrwells5

Virtually guarantees that consumers will pay more for increasingly poorer service.

puerto1986
puerto1986

Oh I don't know why Thunderclap thinks COX is so great. I have them right now and they suck big time! Terrible pricing few good channels are included in their packages and their internet speed is slow as hell!

Thunderclap
Thunderclap

Well my only hope is that in markets where only Comcast will be left they (FCC) can open the door to Cox.

ronaldkaiello
ronaldkaiello

Great all of us Time Warner Customers can now get capped at 250gb a month. My family burns through that in a week.

OrangeSunshine
OrangeSunshine

Oh, isn't that wonderful.  Bring on the reduced choices, even poorer service and higher prices. Yay! /snark/

mary.waterton
mary.waterton

@jrwells5  

It's still possible to stop the merger by contacting your Congressmen and writing the Federal Trade Commission (FTC) directly. After all, the purpose of the FTC is prevent mergers that decrease competition and this certainly fits the description.