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Questions surround deal between Comcast and Time Warner Cable

Updated: 2014-02-14T02:29:45Z

By STEVE EVERLY

The Kansas City Star

The future for Time Warner Cable customers turned a little blurry Thursday when the company agreed to be acquired by Comcast.

If regulators approve the $45.2 billion deal, Time Warner Cable’s shareholders will get richer, but the benefits for consumers are decidedly unclear. Some critics say the deal will be flat out bad for users of Time Warner Cable’s TV service and broadband Internet.

“Comcast cannot be allowed to purchase Time Warner Cable,” John Bergmayer, a staff attorney for the digital rights group Public Knowledge, said in a statement.

He added that the deal would make Comcast, which also owns NBC Universal, too big and powerful.

But Brian Roberts, CEO of Comcast, said the merger would be “pro-consumer” and “in the public’s interest.”

“We are indeed very excited,” he said in a conference call with analysts. “Significantly, it will not reduce competition in any relevant market because our companies do not overlap or compete with each other.”

Comcast executive vice president David Cohen added that the deal would benefit consumers because Comcast offers faster broadband access and more advanced video offerings.

Some things are clear about the deal, which would give Comcast a major presence in 19 of the top 20 cities in the U.S.

Comcast, the nation’s No. 1 cable TV and Internet provider, has 22 million cable TV and Internet subscribers. Time Warner Cable, the nation’s No. 4 provider, after DirecTV and Dish Network, has 11 million.

In the Kansas City area, according to the most recent market share figures available, Time Warner Cable had 33 percent of the market and Comcast, which serves Olathe, had 10 percent. Consolidated Communications, formerly SureWest, had 8 percent. AT&T’s U-verse had 9 percent.

To ease regulators’ antitrust fears, Comcast said it would divest systems with about 3 million subscribers. That would leave a combined 30 million customers. That’s not quite a third of the U.S. market.

Time Warner Cable customers would become Comcast customers and get new set-top boxes that analysts point out offer a more advanced entertainment system than Time Warner Cable’s.

Comcast said customers would get the company’s “cloud-based X1 Entertainment Operating System, plus 50,000 video on demand choices on television, 300,000-plus streaming choices on XfinityTV.com, Xfinity TV mobile apps that offer 35 live streaming channels plus the ability to download to watch offline later, and the newly launched X1 cloud DVR.”

For their part, Comcast customers will be able to access features offered by Time Warner Cable, including StartOver, which allows customers to restart a live program, and LookBack, which lets customers watch programs up to three days after they air live without a DVR.

Comcast subscribers will also be able to gain access to the 30,000 Wi-Fi hot spots Time Warner Cable has set up around the country. Time Warner Cable’s home security service is also staying, the companies said.

But other things are murkier, including what will happen to cable TV and Internet prices.

“We’re certainly not promising that customer bills will go down or increase less rapidly,” said David Cohen, an executive vice president for Comcast.

Skeptical consumers believe they know the answer to that one.

“I personally don’t like it,” Chris Cobb, a Time Warner Cable subscriber in Grandview, said in an email.

He fears prices will jump after the merger but hopes the Kansas City area will escape the brunt of any increases because Google Fiber is now a competitor — as is Consolidated Communications in some areas. In addition, AT&T’s U-verse has been growing rapidly, announcing recently it had more than 100,000 customers in the area.

It is also unclear what will happen to Time Warner Cable’s unlimited Internet data service. Comcast is introducing plans that have capped data usage and require additional fees to use more.

Neither Comcast nor Time Warner Cable fared well in the most recent American Customer Satisfaction Index founded by the University of Michigan. Comcast and Time Warner Cable occupied the bottom, with Time Warner Cable hitting a pay TV industry low in the index’s history.

Among other potential changes is another identity switch for the Kansas City sports programming station originally known as Metro Sports.

Last summer, the name changed to Time Warner Cable Sports Channel. What’s next?

“It’s too early to know the specifics,” said Time Warner Cable spokesman Mike Pedelty. “But we know Comcast is committed to enhancing the communities they serve.”

This is the first of Time Warner Cable’s five-year deal with University of Kansas sports. The company gained exclusive rights to show one football game and four basketball games, which caused unrest among some fans who were not subscribers.

But those games and programming were on Comcast in Olathe, as well as WOW In Lawrence and Cox in Wichita.

“It shouldn’t affect our contract at all,” said Kansas associate athletic director Jim Marchiony.

Of course, the Comcast deal could end up not getting regulatory approval, and for some that would be the best outcome.

The digital rights group Public Knowledge said Comcast is getting too big.

The company’s NBCUniversal division includes a broadcast arm, more than a dozen cable networks, digital, film and other businesses.

Founded in 1926, NBC was the first U.S. national broadcast network. It now provides national and local programing through more than 200 affiliated stations. The broadcast division includes entertainment, news and sports divisions, along with Spanish language content producer Telemundo.

The company also owns cable networks, including E, Sprout, MSNBC, Syfy, USA Network and CNBC.

Public Knowledge and other watchdogs fear that Comcast could dictate terms to content creators, Internet companies, other communications networks that must interconnect with it and distributors who must access its content. It could increase the costs of its rivals and business partners, and ultimately for consumers who will pay the bills.

“An enlarged Comcast would be the bully in the schoolyard,” said Bergmayer of Public Knowledge.

The deal

Comcast’s $45.2 billion purchase offer for Time Warner Cable would be all stock and amount to $158.82 per share for Time Warner Cable.

That is about 17 percent above that stock’s Wednesday closing price of $135.31 and was approved by the boards of both companies. It tops a Charter Communications proposal to buy Time Warner Cable for about $132.50 per share, which Time Warner Cable CEO Rob Marcus consistently rejected as too low.

It still needs approval from shareholders and regulators. Analysts said chances are regulators will accept the deal, in part because cable companies rarely compete head to head. But they expect the Federal Communications Commission to use its review of the deal to extract concessions such as an extended promise to treat all Internet traffic fairly after the commission’s rules on the subject were struck down last month by a federal appeals court.

The Associated Press and The Star’s Blair Kerkhoff contributed to this report. To reach Steve Everly, call 816-234-4455 or send email to severly@kcstar.com.

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