UPDATED: The Senate Judiciary Committee hearing into Comcast’s $45.2B acquisition of Time Warner Cable wrapped after three hours today. And Comcast EVP David Cohen upheld his reputation as a lobbying Jedi Master, although critics of the deal scored by pointing out how it could lead to higher prices and problems for independent programmers. Cohen started off strong in his opening statement: He cast his company as the embodiment of the American Dream — and announced that it has more than 1M WiFi hot spots with plans to boost their transmission speeds. “This is the 13th time we’ve increased Internet speeds in 12 years,” he says. Public Knowledge’s Gene Kimmelman — a former Justice Department antitrust lawyer — hit back. He charged that it would be “anathema to Comcast” if programmers want to offer content directly to consumers via the Internet for a low cost. The cable giant is committed to “charging top dollar” and, as owner of NBCUniversal, would be like an octopus with tentacles “each capable of squeezing innovation.”
In regard to pricing, Cohen said, in response to a question from committee Chairman Patrick Leahy (D-Vt.), that “there is nothing in this transaction that will make anyone’s bills go up….Consumers today are in the driver’s seat.” He added later that programming costs have appreciated 98% over the last decade. Later he told Sen. Al Franken (D-Minn.) — who wanted to know whether shareholders would demand higher prices — that “we have made it a point of significant discussion about our need to continue to invest to compete better with national and global competitors.” Kimmelman responded that Comcast is in the driver’s seat in the highly concentrated video and broadband markets. “The squeeze will come from Comcast,” he says. “It’s logical. They want to save money….and it could lead to significant price increases for others.”
Franken had Cohen against the ropes in a discussion about Comcast’s efforts to push customers to buy multiple or upgraded products. “When you train [sales]people to upsell, you’re not training them to sell the stand-alone product.” Cohen said that “we are allowed to train people to upsell,” but sales reps also “have to be aware of the stand-alone product” and provide it on request.
On programming concerns: Sen. Mike Lee (R-Utah) wondered whether “considering the well known political leanings of NBC” Comcast “might discriminate against conservative political content.” (Has he ever watched CNBC?) Cohen says that it wouldn’t have great power over speech; even though courts have overturned ownership caps limiting a cable company to serving no more than 30% of the market, it will still be under that threshold. Kimmelman responded that the 30% limit was set pre-Internet and, with TWC, Comcast would serve “as many as 50% of really high speed customers.”
Sen. Richard Blumenthal (D-Conn.) says he fears Comcast would have the “means and incentive” to overcharge for regional sports networks. With TWC it would have “more economic power” and the ability to “withstand potentially hostile negotiations.” Cohen says that RSNs “are not national networks, so there’s nothing in this transaction that changes the dynamic in any market.” That includes LA, where TWC is negotiating deals for channels that carry the Dodgers and the Lakers. What’s more, RSNs have the right to demand arbitration if they feel that Comcast is treating them unfairly — it was a concession the company made when it bought NBCUniversal. And so far, “no one has availed themselves of the arbitration rights.”
Franken hit Comcast on its dispute with Bloomberg TV at the FCC. The business news channel charged that Comcast — which owns CNBC — put Bloomberg high on the dial instead of in a news “neighborhood,” in violation of Comcast’s promise when it bought NBCU not to discriminate against competitors. Cohen said that was “not a compliance issue, it was an interpretation issue.”
Sen. Amy Klobuchar (D-Minn.) questioned Comcast’s recent so called peering deal with Netflix, which has the streaming video provider paying directly to access the cable company’s broadband lines. Netflix CEO Reed Hastings recently said that this was an “indirect tax.” But Cohen says that Netflix “has always paid for connection to our Internet backbone” adding: “I hate to say this. It was Netflix’s idea….They said, why don’t we cut out the middleman?” Kimmelman noted that Netflix doesn’t “seem to be too happy.….These are the kinds of competitive concerns that oversight officials should be aware of.”
Sen. Lindsey Graham (R-SC) probably has PR folk at DirecTV scrambling. “I have problems with DirecTV when the weather’s bad,” he said in a pointless discussion with Cohen. He added that “I’m thinking about changing because I’ve had the signal knocked out twice (including) in the 4th quarter of a ball game.” Then he asked Cohen to give him a sales pitch for cable, which the Comcast exec gamely did.
TWC CFO Arthur Minson had to tap dance when asked whether the $80M golden parachute for CEO Rob Marcus and similar arrangements with other execs will help shareholders. “For transactions this size and this complex, I think you’ll find that they’re in line,” he says.
Oh, and in case there was any question: Franken — who worked for years at NBC’s Saturday Night Live — says he opposes the merger.