NY Wants Concessions Before Approving Comcast, Time Warner Merger

Source: courtesy of Comcast

The state of New York is letting Comcast Corp. (NASDAQ: CMCSA) and Time Warner Cable Inc. (NYSE: TWC) know exactly what it thinks about the proposed $45 billion acquisition of Time Warner by Comcast. The staff of New York state’s Public Service Commission has recommended that the regulatory body approve Comcast’s acquisition of Time Warner only if Comcast makes some concessions that would cost the company an estimated $300 million.

The staff recommendations include keeping jobs in the state, offering faster broadband, improving customer service, offering expanding service in rural areas and making it easier for low-income families to enroll in the company’s cheap broadband program.

Now that’s just 0.67% of the value of the acquisition, so it doesn’t seem like that big a deal. But if New York insists, what’s to stop California, Florida, Illinois or any of the 40 states where Comcast already offers cable and broadband service from insisting on some concessions as well. The $45 billion price tag could jump by 10%.

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There are currently 18 states where Comcast is the leading Internet service provider (ISP) and eight states where Time Warner Cable sits at the top of the ISP list. In two others, Comcast is the co-owner of the state’s leading ISP. The combined company will be the top ISP in 26 states. And the company plans to keep it that way by fighting any effort from any other entity that has the temerity to try to compete.

Cable operators enjoy virtual monopolies in the cities where they operate. Independent ISPs and cable operators do not have the same monopoly power over broadband, but that’s what the cable operators are angling for. The cities of Chattanooga, Tenn., and Wilson, N.C., for example, have petitioned the FCC to invalidate state laws that prohibit municipalities from creating their own broadband networks. Both cities have established 1 gigabit per second networks through community-owned companies that the telecom giants want to have the FCC shut down.

The FCC has said it would accommodate the cities, but an outfit called USTelecom, an association of broadband providers, has filed a petition with the FCC stating its position that the agency does not have the authority to overturn state laws. The National Governors Association has also come down on the side of the cable operators and asked the FCC to reject the petitions from Chattanooga and Wilson. While it is obvious why the cable guys oppose the petitions, figuring out the reason for the nation’s governors’ opposition is left as an exercise for the reader.

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