April 9 (Bloomberg) -- Comcast Corp. defended its $45.2 billion bid for Time Warner Cable Inc. as lawmakers questioned whether combining the two largest U.S. cable companies would raise prices on customers.
“I’m against this deal,” Senator Al Franken, the Minnesota Democrat, said at a Judiciary Committee hearing today. “My concern is that as Comcast continues to get bigger, you’ll have even more power to exercise that leverage -- to squeeze consumers.”
While the deal has come under fire from public-interest groups for giving Comcast “unprecedented” power to stifle competition and increase costs, Comcast Executive Vice President David Cohen told lawmakers today size will help the company improve its offerings.
“This will lead to new technologies, better services and more choices for consumers and businesses -- keeping America at the forefront of the digital revolution,” Cohen said.
Cohen said he couldn’t promise that consumer bills will drop if the merger is approved. “The No. 1 driver of our cost structure is programming costs,” he said.
The Senate hearing comes after Comcast told the Federal Communications Commission yesterday that it can offer advanced video services and spread high-speed Internet service without harming competition if it’s allowed to buy No. 2 Time Warner Cable, based in New York. Under the deal, Philadelphia-based Comcast would have 30 million video subscribers, including customers in 19 of the 20 largest U.S. cities.
The combined company will have the means and incentive to overcharge for local sports programming it controls, Connecticut Senator Richard Blumenthal said.
“The case has yet to be made that consumers will really benefit,” the Democrat said. “These markets are plagued by anticompetitive conduct.”
The merger raises “critical questions” about the public benefit, said Senator Amy Klobuchar, a Minnesota Democrat. She asked whether a larger Comcast will have market power to affect content and online video competition, she said.
“Consumers should know whether this merger enhances or limits the diversity of programming,” she said. “What will happen to the next Netflix that today is just a dream in a garage?”
Congress, which doesn’t vote on the deal, has influence over the FCC and the Justice Department. Justice’s antitrust division will consider whether the combination could harm competition, while the FCC assesses deals against a broader standard of whether they are in the public interest.
The deal “may make a bad situation even worse” for independent programmers that need to appear in Comcast’s channel lineup in order to attract advertisers, James Bosworth, chief executive officer of the nascent golf-lifestyle network Back9Network told lawmakers. Comcast, owner of the Golf Channel, has an incentive to keep competitors off the air, Bosworth said.
Cohen, the Comcast executive, said his company is “probably the most independent-programmer-friendly” video provider and carries 160 independent channels.
“While this transaction will make us bigger, that’s a good thing not a problem,” Cohen told lawmakers.
Senator Mike Lee, a Republican from Utah, said the deal raises “potentially very serious concerns,” including whether Comcast would discriminate against conservative content because of the “well-known political leanings” of NBC.
Public Knowledge, a Washington-based nonprofit group, argues the merger should be blocked. The deal would give Comcast “unprecedented” market power to thwart competition from Netflix Inc., raise subscriber costs, and artificially raise prices for Comcast-owned programming, Public Knowledge President Gene Kimmelman said in his prepared testimony.
“Comcast would position itself to dictate how much consumers must pay, determine what packages of services customers must buy, and influence what devices people can use to receive the type of video content they want,” Kimmelman said.
Time Warner Cable Chief Financial Officer Arthur Minson Jr. also testified as did Richard Sherwin, chief executive of wireless provider Spot On Networks. Missing from the hearing were representatives of other cable companies or large content providers.
The American Cable Association and NTCA–The Rural Broadband Association today sent letters to Senate Judiciary Chairman Patrick Leahy, the Vermont Democrat, as well as the Justice Department and the FCC criticizing the deal.
The trade groups, which represent about 850 small and mid-sized video programming distributors, said it is “concerned about the competitive effects of the transaction” in video programming to consumers and to distributors. “Comcast is a behemoth in both industries,” the groups said.
Some lawmakers urged caution in constraining the deal.
“Government regulators should be very careful not to intervene unwisely in a transaction like this one,” Senator Orrin Hatch, a Utah Republican, said in an e-mailed statement. “Although some critics have never met a merger they liked, too often government intervention risks harming consumer welfare and innovation by displacing market forces.”
Franken has questioned whether Comcast has followed commitments to treat Web traffic fairly.
Franken pointed out a 2012 settlement between Comcast and the FCC, which said it was concerned the company hadn’t complied with an obligation to offer reasonably priced broadband to customers who don’t take its cable service. Comcast paid $800,000 as part of a consent decree.
The FCC in September said Comcast must carry Bloomberg Television, a competitor to the cable company’s CNBC, near other news channels. The agency acted on a complaint by New York-based Bloomberg LP, parent of Bloomberg TV and Bloomberg News.