News has been spreading in the cable industry about a potential merger or buyout of Time Warner Cable (TWC). Speculation surrounding the possible buyout has been fueled by interest from companies like Comcast, Charter Communications, and Cox.
This major consolidation of the cable industry could pose problems for the Federal Communications Commission (FCC), and Comcast is seeking advice on potential regulatory issues that may arise if they successfully bid and acquire TWC. An acquisition of TWC, the second largest company in the cable industry, by Comcast, the largest cable company, would mean one cable provider would deliver programming for “60% of subscribers nationwide.”
One would assume that a corporation that serves 60% cable subscribers nationwide would be faced with antitrust regulations, particularly since the FCC has previously blocked consolidations on such a wide scale. In 2009, however, the Court of Appeals for the D.C. Circuit rejected an FCC rule that intended to limit cable providers from owning more than 30% of the cable industry.
Nevertheless, the D.C. Circuit’s holding in Comcast Corporation v. Federal Communications Commission (2009) did not give corporations full confidence in moving forward with such a deal. In light of this decision, Comcast has been seeking advice for these “potential antitrust and telecommunications-related issues.” Furthermore, Comcast has yet to officially make an offer for TWC in light of these issues, but Charter Communications has been moving forward rapidly. Charter Communications is close to making an agreement with banks to fund the offer, and once their funding is finalized, they will present their bid.
In addition to the antitrust issues that potential acquirers may face from the FCC and Department of Justice (DOJ), the potential consolidation of the cable industry could pose problems for companies like Netflix, who hope to make agreements with cable providers to offer “content [through] their hardware.”
Finally, in order to avoid regulatory issues, Comcast and Charter are discussing a breakup of TWC in the hopes of making the “deal more palatable to regulators.” A breakup would follow the example of the joint purchase and breakup of Adelphia Communications Corp. (ACC) in 2006 by Comcast and TWC.
If Comcast or any of the other prospective buyers make a bid and acquire TWC, only time will tell whether Washington regulators will allow such a megamerger move forward.