Stopping the merger of two of the most disliked mega-corporations in America would be a great thing. Here's how it could happen.
This week brought some good news for internet lovers nationwide. Remember how that Comcast-Time Warner Cable merger seemed inevitable a year ago? Suddenly, it's not so inevitable, as leaders are apparently realizing that giving one giant conglomerate so much power might not be a good idea.
Almost a year after it was first proposed, the Federal Communications Commission and Department of Justice are in the final stages of a set of reviews that will decide the fate of the Comcast-TWC merger—a decision expected in just under two months from now. The power to approve the deal rests in the hands of these two government agencies.
The approval process is a wonktastic shitshow of bureaucracy. But it boils down to the fact that the FCC's job is to determine if the merger is in the consumers' best interest, and the DOJ's tasked with determining if the deal breaks any laws. There is something you can do, too. More on that in a minute.
The FCC could decide the it's not in consumers' best interest
Let's talk about the FCC first. In order to understand how the FCC would stop the merger, you first have to understand how the FCC deals with mergers.
The agency reviews mergers like Comcast-TWC in a specific and ridiculously bureaucratic way. Comcast and TWC don't ask the FCC's permission to merge, per se. The companies have formally applied for the agency's permission to transfer TWC's licenses and authorizations over to Comcast. Once those applications were filed, the agency started the clock on a 180-day-long review period review of the Comcast-TWC deal. When this clock is up—and it will be in a little less than two months—the FCC will either approve the merger or decide to hold a hearing about it.
Holding a hearing would likely kill the deal, since most companies abandon their applications if they get to that stage. If Comcast and TWC stuck around, the hearing would pit the two corporations against the army of detractors who filed official petitions against the merger during the review period. To use a trial analogy, the petitioners would be the plaintiffs, Comcast and TWC would be the defendants, and an administrative law judge would issue a decision at the end of the hearing that the FCC commissioners would then vote to uphold or overturn. But again, it probably won't come to this.
It's hard to tell what the FCC is thinking, since there's no set rubric for how it decides whether or not a merger is in the public's best interest. But if Comcast and TWC want to merge, they're going to transfer those licenses.
The DOJ could decide it's anti-competitive
Meanwhile, the DOJ is looking to see whether the merger would violate antitrust laws. Deciding whether or not a Mega-Comcast would be anti-competitive takes a lot of factors into consideration, though the DOJ's process is confidential. And things aren't looking good for Comcast on this front.
Just look at the numbers. At the time it announced the merger plans, Comcast had about 22 million cable and broadband subscribers, while TWC had about 12 million. A post-merger Comcast-TWC would account for a whopping two-thirds of all broadband subscribers in the United States, giving the resultant Mega-Comcast an obscene amount of leverage in any negotiation and the American people even less of a choice in picking their ISP. This doesn't necessarily give Mega-Comcast a monopoly in the cable and broadband businesses, but pretty it's damn close.
"[Comcast] will have significant market power," John Bergmayer of Public Knowledge told Gizmodo last year. "I think that because the combined company would have control over more than 30 million households, they would be in a position to dictate terms and people would really have no choice than to do business with them."
This situation gets very tricky when you start to look at the future of the internet and cable television, a future that's dominated by streaming video. If it controls the boxes in six out of 10 American homes, Comcast will become the grand gatekeeper of that content, able to make deals that smaller ISPs simply cannot. "The harm of this merger is the gatekeeper problem," Bergmayer told us more recently. "When you have a single provider that has so many customers they're able to dictate terms that a smaller ISP can't—like messing with Netflix, for instance." Comcast already does this, by the way.
Comcast has tried very, very hard to sell the message that the merger wouldn't reduce competition since it doesn't operate in the same areas as TWC, and this is sort of true. But the DOJ might find it a little bit suspect that Comcast listed Time Warner Cable as a competitor when it was trying to skirt around antitrust laws during its 2011 purchase NBCUniversal, less than four years ago. Comcast actually used the nature of that competition as a reason why regulators should approve that merger, and now it's making the exact opposite argument to gobble up another corporate giant. Pretty shady stuff.
The FCC tipped the scales against the possibility of a Mega-Comcast even more this week by deciding to raise the threshold for broadband. Now, to call internet service "broadband," an ISP must offer 25 Mbps download speeds and 1Mbps upload speeds. This means that Comcast's marketshare is suddenly larger than it was before, since it's one of a relatively small number of companies with the infrastructure to support the higher speeds.
So how does the DOJ ultimately decide? It's a bit of a mystery, since all of the proceedings are confidential. We do know that the government consults the Herfindahl-Hirschman Index (HHI) to measure market concentration and, thus, determine whether the merger would violate antitrust laws. The merger would put Comcast at the very upper end of that scale.
Anyways, the DOJ does't fuck around, and it might be better positioned for stopping the mega-merger than the FCC. "The DOJ can issue subpoenas, give depositions," Bergmayer says. "They kind of make up their own rules, and it's done confidentially." He added, "In practical terms, the DOJ is a lot more feared. They're less likely to get overturned."
So what next?
It's possible that the DOJ could give Comcast a set of conditions that would make the merger acceptable, as they did with the company's NBCUniversal acquisition, but the fact that conditions haven't been floated yet this late in the game doesn't bode well for that contingency.
On the FCC side, the government's recent treatment of internet regulation bodes well for it coming down on the side of the consumer in this issue. Next month, the FCC is set to decide on net neutrality rules and Chairman Tom Wheeler expected to side with President Obama and reclassify internet under Title II of the Telecommunications Act, siding with the consumer instead of the cable giants.
As Fight For the Future's Donny Shaw said in an email to Gizmodo, "Obama and Wheeler seem to be recognizing that the vast majority of Americans want to protect the internet from anti-competitive gatekeepers, and that siding with the internet is worth more than making Big Cable happy."
Let's hope that sentiment plays out yet again a couple months from now. In the meantime, there's still time to public comment against the merger over on the FCC's website.
Top image via Shutterstock / Gizmodo / Getty