What Doomed The Comcast—Time Warner Cable Merger

Federal Communications Commission Chairman Tom Wheeler listens to testimony - Mark Wilson/Getty Images
Federal Communications Commission Chairman Tom Wheeler listens to testimony – Mark Wilson/Getty Images

Proponents of a free and open Internet were able to taste their first victory earlier this year when the FCC ruled in favor of net neutrality. Without a doubt, that decision was monumental in keeping the Internet as we know it intact, and was a huge win for almost all Internet users. Though it was a big deal, there has been another big victory just handed down from on high to consumers.

The proposed $45 billion merger between telecom giants Comcast and Time Warner Cable has officially been scrapped.

For a long time, it was assumed by many that the merger would go off without a hitch. After all, the government has been fairly lenient on letting huge corporations acquire one another, creating possible competition and antitrust conflicts. They’ve let them slide in the airline industry, the food industry, and others, but in a rather incredible twist of events, it looked like the Comcast deal may not actually go through.

Facing pressure from regulators, Comcast called the whole thing off.

What basically happened is that the Federal Communications Commission, one of the legislative bodies in charge of giving the deal the go-ahead, decided to haul Comcast in front of an administrative hearing, as The Wall Street Journal reported. That sent the message that regulators thought the merger between two of America’s biggest cable and Internet providers may not be in the best interest of consumers, and would have liked to hear the companies involved explain themselves. Rather than doing that, Comcast pulled the plug.

What that means is that the FCC, rather than just giving the merger the go-ahead, listened to what many consumer groups and Internet users had been saying for months: the merger is a terrible deal for everyone who isn’t Comcast or Time Warner Cable.

“Comcast and Time Warner Cable’s decision to end Comcast’s proposed acquisition of Time Warner Cable is in the best interests of consumers,” said FCC commissioner Tom Wheeler, in a statement. “The proposed transaction would have created a company with the most broadband and video subscribers in the nation alongside the ownership of significant programming interests.”

Had Comcast decided to pursue the merger, the hearing called by the FCC would have been the first step in what likely would have become an incredibly long and complicated process. CNN says that the two companies had been engaged in meetings with each other and regulators for some time, and that even though there was some fight left in them, things didn’t look too promising for those hoping to see the merger happen.

The key, CNN says, is that FCC staff members were not convinced that the merger would have done anything positive for consumers. Comcast and Time Warner Cable have clung to the story that because they don’t currently compete, little would change for customers. But it became more and more clear that their claims didn’t really matter, and the combined company would have had a stranglehold on the entire telecom industry.

But what’s really interesting is that the current makeup of the FCC — three Democrats and two Republicans — probably determined the outcome of the proposed merger. In late 2013, FCC commissioner Ajit Pai, a Republican, said “precedents like this suggest an outright acquisition by Comcast of Time Warner Cable could face a number of hurdles in the Obama administration. A Republican administration likely would be more inclined to approve a deal.”

So, was this more of a political fight than anything? Probably to some extent, but it’s still pretty obvious that the merger didn’t hold up to the test of whether or not it would be good for consumers.

Previous to Comcast’s decision, Quartz reported that if the deal did indeed fall through (as it has), there could be some interesting developments as a result. There are a number of other proposed mergers and deals that are still awaiting government clearance that could be impacted in a similar fashion to the Comcast merger. Chief among them is the merger between AT&T and DirecTV, which came in response to Comcast and Time Warner Cable announcing their proposed partnership.

If that deal is scrapped as well, we’d be left with a handful of companies still competing, rather than two. The FCC’s skepticism was a good thing for consumers, and Comcast’s next move is anyone’s guess.

Follow Sam on Twitter @Sliceofginger

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