Published On: Sat, Jan 31st, 2015

FCC Throws Wrench into Plan for Comcast Takeover of Time Warner

Brian Roberts Comcast

U.S. regulators have rewritten their definition of broadband in a manner that portrays the largest U.S. cable company as a more dominant force in high-speed internet access, thus placing a new hurdle for Comcast’s proposed $45 billion takeover of Time Warner Cable.

The U.S. communications watchdog on Thursday voted 3-2 to define broadband as an internet service with download speeds of at least 25 megabits per second, compared to its previous definition of 4 Mbps.

The Federal Communication Commission split along party lines, with the three Democrats saying the proliferation of mobile devices, video streaming and the “internet of things” meant consumers needed superior internet speeds and Republicans saying 10 Mbps download speeds were sufficient.

Such a decision has big implications for Comcast’s bid for TWC because it dramatically changes the competitive landscape for broadband, a central consideration for regulators deciding whether to approve the deal.

The change means the number of American families reliant on a single provider for true broadband services will climb from 19 per cent to more than half. In most cases, that provider will be one of the big cable companies, which have fiercely resisted the change.

“This redefinition shines a bright light on the reality for most Americans, which is that the only choice of broadband provider is the cable monopoly, ” said Susan Crawford, a co-director of the Berkman internet center at Harvard University.

The National Cable & Telecommunications Association, an industry lobby group, said the decision was “arbitrary” and “a clear effort to justify and expand the bounds of the FCC’s own authority”, according to the Times.

FCC chairman Tom Wheeler said cable companies were “telling us one thing and telling consumers another”, noting that Comcast had told the FCC that a 4 Mbps connection was sufficient to handle streaming high definition video, but its marketing materials encourage consumers to pay for 100Mbps-plus connections.

On Thursday, Comcast extended its merger agreement with TWC by six months to August 12. It had originally hoped to complete the deal by the end of 2014.

An increasing number of investors are betting that the deal will fall apart amid the drawn-out regulatory review and President Barack Obama’s increasingly aggressive stance on digital issues.

Obama’s call for broadband companies to be reclassified as public utilities to preserve “net neutrality” — a free and open internet — took the cable industry by surprise, especially given its lobbying on the issue. David Cohen, the architect of Comcast’s regulatory strategy, has hosted several fundraisers for the president at his home.

The redefinition of broadband will also dramatically increase the number of households which have no access whatsoever to high-speed internet, from 7.3m to 23m, giving ammunition to those concerned about a “digital divide” who argue that the government should play a role in building new networks.

A new FCC report found that 17 per cent of all Americans lack access to internet connections with 25 Mbps download speeds. In rural areas, 53 per cent of people lack such access.

 

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