Comcast planning to drop offer for Time Warner Cable, sources say

Justice Department officials had raised concerns about the Comcast-Time Warner Cable merger and were leaning toward recommending against it, sources said.
Justice Department officials had raised concerns about the Comcast-Time Warner Cable merger and were leaning toward recommending against it, sources said. AP

Comcast is planning to abandon its $45 billion takeover of Time Warner Cable after the deal encountered intense regulatory scrutiny over whether it was anti-competitive and in the public interest, people briefed on the matter said Thursday.

The merger would have united the country’s two largest cable operators and reshaped video and broadband markets.

Some lawmakers, public advocacy groups and media and technology companies had rallied against the merger, saying it would invest too much power and market share in one company. The combined company would have controlled just under 30 percent of the pay television subscribers and 35 to 50 percent of the nation’s broadband Internet service, depending on how regulators define the market.

A Comcast spokeswoman declined to comment, as did a spokesman for Time Warner Cable. An announcement is expected on Friday.

The collapse of the deal is a major blow for Brian Roberts, the chief executive of Comcast who has steadily built his company into one of the country’s largest media conglomerates through a series of acquisitions in recent years. That includes the prominent 2011 acquisition of NBCUniversal, which also drew intense regulatory scrutiny but was ultimately approved.

The implosion also is a major setback for David Cohen, the Comcast executive who was in charge of navigating the deals past regulators. The well-connected executive is known for his lobbying skills in Washington.

On Wednesday, Comcast officials met with the Justice Department and the Federal Communications Commission, facing signs of stiff resistance from the regulatory agencies. Justice officials were considering whether the deal would harm competition, while the FCC was evaluating whether the deal was in the public interest.

Last week, staff lawyers at the Justice Department raised concerns about the merger and were leaning toward recommending that it be blocked, people familiar with their thinking said. While the development was preliminary, it signaled that the tide had turned against the deal.

The death knell for the deal came on Wednesday when Jonathan Sallet, general counsel of the FCC, met with staff members. He told them that he was going to recommend that the transaction be referred to a hearing before an administrative law judge, one lawyer involved in the transaction said, an account confirmed by a former FCC commissioner.

That results in a drawn-out process that essentially is a way of saying the deal would be blocked, said Robert McDowell, who until last year served on the commission and is now in private practice. He said that in his 25 years of observing actions by the FCC, he cannot recall a transaction being approved after such a referral took place.

“That is a fatal bullet to the heart of the deal,” he said.

Time Warner Cable is the dominant cable provide in the Charlotte region, and the company’s name adorns the city’s uptown arena.

The company recently announced it would roll out faster Internet speeds and improved television services in the region this summer. But broadband consultants like Glen Friedman said Time Warner Cable customers likely would have gained faster video on demand and other service offerings sooner through the merger.

The proposed merger concerned Harry Hoover, a 62-year-old owner of a Charlotte-based advertising company. Hoover, who lives in Huntersville, wonders whether the Comcast deal would have eventually limited his ability to watch what he wants and when he wants.

“If you cut the cable from the TV part of the equation, they’ll still control the broadband so you got a problem getting away from them altogether,” he said. “It just limits choices. And I’m big on choices.”

‘Too powerful’

The FCC staff had concluded that Comcast had failed to honor the conditions of the NBC merger, McDowell said, and it had little confidence that the company would comply with new agreements.

The FCC proposal to follow that course for Comcast was only a preliminary one; no formal order was circulated among the agency’s commissioners. Nonetheless, the message from the general counsel’s office this week was strong, according to people familiar with its content, and it deterred Comcast from proposing further, seemingly futile, concessions.

Neil Grace, a spokesman for the FCC, declined to comment.

Christopher Jon Sprigman, a former Justice Department antitrust official who is now a professor at the New York University School of Law, said that Justice Department officials he had spoken with in recent days who were involved in reviewing the transaction had concluded that the deal could not be fixed simply by asking Comcast to make changes.

The Justice Department “is not confident in its ability to restrain Comcast with conduct remedies,” he said, referring to potential concessions Comcast might offer to win approval. “They are too powerful and they had shown before they don’t respect them very much.” Franco Ordoñez of the McClatchy Washington bureau contributed.

Time Warner Cable in Charlotte

Customers: 480,000 customers in the Charlotte area.

Area employees: 3,200.

Upgrades: Plans faster Internet speeds, improved TV services in the area this summer.