No Reason To Cheer Comcast-TWC Collapse

When Comcast announced its $45.2 billion bid for Time Warner Cable in February 2014, the smart money was that Comcast would slip the deal pass the Justice Department and the FCC with the same aplomb it had its takeover of NBCUniversal in 2011.

Well, the smart money turned out to be not so smart.

Comcast said last Friday that it is was abandoning the merger after it became clear that the regulators weren’t about to approve a deal that would allow it to control nearly one third of all cable subs and nearly three-fifths of all broadband subs.

FCC Chairman Tom Wheeler portrayed the collapse of the merger as a win for consumers. “Today, an online video market is emerging that offers new business models and greater consumer choice. The proposed merger would have posed an unacceptable risk to competition and innovation given the growing importance of high-speed broadband to online video and innovative new services.”

I’m not so sure about all that. Wireless is a broadband alternative to cable just about everywhere in the country. And didn’t the FCC just adopt net neutrality rules aimed at keeping any broadband distributors like Comcast from misbehaving?

Nonetheless, many are cheering the demise of the merger, including cable programmers, consumer groups and, I presume, all those “innovative” online video services that the government seems determined to nurture and protect.

But broadcasters should not join the celebration. In fact, they may have reasons to regret the collapse of the deal.

Comcast is the broadcast-friendly cable operator.

Among other things, it has been more willing than most to meet broadcasters’ demands for retransmission consent fees, thereby avoiding blackouts and the nasty PR wars that attend them; it has steadfastly refused to join the rest of the cable industry in lobbying to diminish broadcasters’ retrans rights; and NBC, its broadcast network, has been less aggressive in its reverse comp demands.

There are reasons for Comcast’s amiability.

First, Comcast is a broadcaster through it ownership of NBC and its stations, and thus has a greater appreciation for the medium. It reaps retrans fees as well as paying them out.

For the past 15 months, Comcast has had to be on its best behavior. While trying to convince regulators and policymakers that it’s a good citizen, Comcast didn’t need any stations threatening to yank signals over retrans or have NBC affiliates squawking that they are being driven to the brink by excessive reverse comp demands.

Most of all, Comcast is obligated, virtually by law, to treat affiliates well. In 2010, when Comcast was trying to win approval of its takeover of NBCUniversal, the affiliates extracted a slew of promises from Comcast. Those promises became binding conditions to the FCC’s approval in 2011.

The ABC, CBS and Fox affiliates won guarantees that Comcast would act in good faith and not discriminate in favor of its own stations or affiliates in retrans negotiations.

NBC affiliates got commitments that NBC would maintain its network at a competitive level, not bypass them, not move NFL games or other major sporting events to cable and not lobby against retransmission consent in Washington.

Over the past four years, Comcast has held up its side of the agreements and then some.

However, all the provisions expire in 2018. The Comcast-Time Warner merger was a chance for the affiliates to review and update the provisions and to extend them. And they seized the opportunity.

The renegotiated deals would have stayed in effect until 2024, assuming that the merger had closed this year. But no merger means no extension.

No merger may also mean the campaign to gut broadcasters’ retrans rights in Washington will be reenergized. With the exception of the incentive auction and all that goes with it, it’s the greatest challenge broadcasters face in Washington.

Honoring its agreement with the NBC affiliates, Comcast has stayed out of the battle over retrans. And for the most part, it has kept the National Cable & Telecommunications Association out of the fray as well.

By contrast, Time Warner had been a leader in the war of retrans. Along with Dish, it has been a big funder of the American Television Alliance, the cable/satellite PR coalition that has taken dead aim at retrans.

I don’t think I need to tell any broadcaster that Time Warner has also been one of the most combative retrans negotiators. It doesn’t get any nastier than the battle it fought (and ultimately lost) with CBS in the fall of 2013.

With the Comcast merger undone, Time Warner is free to resume its hard-line retrans negotiating and amp up its anti-retrans efforts.

Speculation on Friday had Charter Communications stepping in to gobble up Time Warner. A merger between the two would yield a cable behemoth second only to Comcast, with 15.6 million video subs and 16.4 million broadband subs.

Broadcasters should not expect much quarter from such a company either at the negotiating table or in Washington. Charter is controlled by John Malone, whom longtime broadcasters will remember as the executive who led the cable industry’s stubborn refusal to pay retrans fees after broadcasters won their retrans rights from Congress in 1992.

Like Time Warner, Charter is a charter member of the ATVA.

When I said that “broadcasters” should not be cheering the merger collapse, I didn’t mean to include ABC, CBS and Fox. They are owned by big multimedia companies with programming interests that go way beyond broadcasting. Disney-ABC and 21th Century Fox, in particular, have long rosters of cable networks. A smaller Comcast is easier for them to deal with.

But the pure-play broadcasters, those without cable networks or OTT bundles to pitch, should hope that Comcast’s appetite for assets that trigger antitrust review is unsated. Under the close government scrutiny of an merger approval process, Comcast has proved to be an amiable and obliging business partner.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.