Comcast and Time Warner Cable defend deal before Congress

Comcast is grilled on cable prices during House hearing on Time Warner Cable deal.

Rising cable bills and programming diversity were focal points of a congressional hearing on Comcast Corp.'s proposed acquisition of Time Warner Cable.

If approved, the more than $40-billion deal would combine the nation's top two cable providers and create a pay-TV and Internet behemoth. The Federal Communications Commission and Justice Department are reviewing the sale to determine if it serves the public interest and doesn't violate antitrust law.

Concerns were raised Thursday by some members of the House Judiciary Committee's Subcommittee on Regulatory Reform, Commercial and Antitrust Law that while a marriage of Comcast and Time Warner Cable could be good for shareholders and executives of the two companies, customers may not benefit from the marriage of the nation's two biggest cable operators.

Comcast and Time Warner Cable said they need to be bigger to compete in the 21st century.

"The decision of the companies to combine reflects the increasing rivalry and experimentation among national and global companies, including such powerful companies as AT&T, Verizon, DirecTV, Dish, Amazon, Apple, Samsung, Sony, Google, Netflix and Facebook in competing for consumer attention and loyalty across the broadband ecosystem," the companies said in written testimony.

If approved, Comcast and Time Warner Cable promised to "invest the billions of dollars required for next-generation technologies, greater service reliability, secure networks and faster Internet speeds" that will result in bringing "more innovative products and services in to the marketplace."

Media watchdogs and consumer activists argue that the pairing would put too much power in the hands of one company. A Comcast-Time Warner Cable combination would have a 30% share of pay-TV homes and 40% of Internet broadband homes.

Netflix and some small programmers have also raised red flags about the sale. Netflix said last month that it fears Comcast will use its leverage to demand "unprecedented fees" for access to its customers. Small programmers fear Comcast will favor its own content over that of independent networks.

Comcast has steadfastly dismissed the worries and did so again Thursday.

"Comcast keeps its promises and plays fair," said David Cohen, the Comcast executive vice president charged with guiding the Time Warner Cable deal through lawmakers and regulators.

Asked repeatedly about rising cable costs, Cohen acknowledged that Comcast's deal to acquire Time Warner Cable won't guarantee lower bills for subscribers.

But, he added, "there is nothing in this transaction that will result in an increase of prices for Time Warner Cable customers." He added, "there is more to making customers happy than just the price we charge them" and said Comcast will be able to deliver better customer service to Time Warner Cable subscribers.

Cohen noted that much of the reason for rising cable costs has to do with fees that programmers charge distributors to carry their channels. He said combining with Time Warner Cable could help Comcast move the needle a little on that front.

Comcast, of course, is also one of the largest programmers in the media industry. It owns the NBC broadcast network as well as many cable channels, including USA, MSNBC and Bravo. It also owns several regional sports networks, as does Time Warner Cable, and sports is the biggest driver of rising programming costs. Earlier this week, Comcast's NBC unit shelled out $7.75 billion to extend its deal to carry the Olympics through 2032.

Smaller cable operators worry that whatever costs Comcast is able to save on programming will be passed on to them.

Matt Polka, president of the American Cable Assn., which represents small and mid-sized cable operators, told the subcommittee that his members already pay more for programming than the big distributors and that the situation will only get worse with a Comcast-Time Warner Cable deal.

A good chunk of the hearing was spent discussing the fate of RFD-TV, a small cable channel aimed at rural America that was recently dropped by Comcast in about 500,000 homes serving Colorado and New Mexico.

Clad in western attire, Patrick Gottsch, chairman of RFD-TV parent Rural Media Group Inc., testified that "Comcast’s decision to drop RFD-TV is supported neither by RFD-TV’s ratings nor by cost concerns." He speculated that Comcast decided to no longer distribute the channel because it was chasing after the same audience as RLTV, a small cable network aimed at viewers over the age of 50 that the cable giant has a stake in.

In response, Comcast's Cohen said RFD-TV was dropped in those markets only because the cable operator wanted to add high-definition feeds of more popular channels. He noted that Comcast still carried RFD-TV on other systems and that the channel was available to customers in New Mexico and Colorado on other pay-TV providers, including Dish Network.

Netflix was also a major topic at the hearing. Netflix this year reached a deal to pay Comcast in return for a direct connection to the cable giant's broadband network. Previously, Netflix paid third-party providers for such access to Comcast's network.

Since then, Netflix has struck similar deals with other broadband providers, but it also has complained about Comcast having too much leverage.

Cohen responded that Comcast did not force Netflix into a deal. He added that while he could not disclose terms of the pact, "it has been publicly reported that Netflix is paying not more to us under this agreement, but less" than what it had paid its third-party provider.

Comcast has said it hopes to have approval of the Time Warner Cable deal in place by the end of the year.

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