L.A. weighs in on big ca­ble merger

PUC ex­am­ines pro­posed Com­cast-TWC deal

Los Angeles Times - - BUSINESS - By Meg James and Saba Hamedy

The battle over Com­cast Corp.’s pro­posed takeover of Time Warner Ca­ble shifted Tues­day to down­town Los An­ge­les, where Cal­i­for­nia util­ity reg­u­la­tors weighed whether to block the block­buster merger.

The state Public Util­i­ties Com­mis­sion heard from more than 140 out­spo­ken ad­vo­cates, many ar­gu­ing the com­bi­na­tion of the na­tion’s two largest ca­ble com­pa­nies would hurt Cal­i­for­nia con­sumers.

The hear­ing un­der­scored the un­usual clout state of­fi­cials are ex­ert­ing over a na­tional merger that must also clear in­tense scru­tiny from the Fed­eral Com­mu­ni­ca­tions Com­mis­sion and the U.S. Depart­ment of Jus­tice.

The PUC must ap­prove the trans­fer of Cal­i­for­nia phone li­censes to Com­cast from Time Warner Ca­ble and Char­ter Com­mu­ni­ca­tions. Phone ser­vice is one of three key of­fer­ings that the com­pa­nies pro­vide. Be­cause the com­pa­nies bun­dle their phone, ca­ble TV and high-speed In­ter­net ser­vices to­gether, the PUC is weigh­ing the ef­fect on con­sumers.

The deal would give Com­cast nearly 30 mil­lion cus­tomers na­tion­wide — in­clud­ing 4 mil­lion in Cal­i­for­nia.

Un­der one sce­nario, Com­cast could clear reg­u­la­tory hur­dles on the fed­eral level to win ap­proval for its $45-bil­lion takeover of Time Warner Ca­ble but still strike out in Cal­i­for­nia. If that hap­pens, Com­cast then might have to drop South­ern Cal­i­for­nia from its takeover plans.

That would leave Time Warner Ca­ble sub­scribers in South­ern Cal­i­for­nia in limbo and sub­ject to a scram­ble by other pay-TV providers who would be in­ter­ested in lay­ing claim to one of the most lu­cra­tive ca­ble TV and In­ter­net ser­vice mar­kets in the U.S.

Two months ago, an ad­min­is­tra­tive law judge rec­om­mended that the PUC ap­prove the merger — and at­tached a list of con­di­tions. Then, in a sur­prise

move late last week, PUC Com­mis­sioner Mike Flo­rio raised the stakes for state reg­u­la­tors when he filed an al­ter­na­tive pro­posal to deny the merger.

Flo­rio con­tended that a bulked-up Com­cast, which cur­rently pro­vides ser­vice in North­ern Cal­i­for­nia, would end up hav­ing too much con­trol over the In­ter­net ser­vice mar­ket in Cal­i­for­nia be­cause it would serve more than 80% of the state.

On Tues­day, rep­re­sen­ta­tives of dozens of com­mu­nity groups voiced sup­port for Com­cast’s deal. But nearly as many op­po­nents urged the PUC to block the merger.

“This merger is not about the con­sumers,” said Joe Stringer, a re­tiree from South Los An­ge­les who op­poses the deal. “Th­ese two com­pa­nies want to merge so they can get more money. That’s what this is about.”

If the merger is ap­proved, Com­cast would sup­ply ca­ble TV and high-speed In­ter­net ser­vice for nearly 2 mil­lion homes in South­ern Cal­i­for­nia.

Char­ter Com­mu­ni­ca­tions, which has nearly 300,000 sub­scribers in the Los An­ge­les re­gion, also is in­volved in the merger be­cause of a sep­a­rate agree­ment with Com­cast. The two com­pa­nies agreed to swap some of the mar­kets they cur­rently serve.

Com­cast needs the sup­port of at least three of the five PUC com­mis­sion­ers. The two PUC com­mis­sion­ers who trav­eled to Los An­ge­les for Tues­day’s hear­ing, Carla J. Peter­man and Catherine J.K. San­doval, de­clined to dis­close their po­si­tions. Both com­mis­sion­ers are ex­pected to play a piv­otal role in the panel’s de­ci­sion.

“It’s far from over,” Wells Fargo Se­cu­ri­ties me­dia an­a­lyst Marci Ryvicker said in a re­port as­sess­ing Com­cast’s chal­lenges deal­ing with the PUC.

The PUC is ex­pected to vote in late May or June.

This week, Com­cast, the Philadel­phia ca­ble gi­ant, re­it­er­ated its po­si­tion that the merger would serve the public in­ter­est. It ar­gued that it would pro­vide con­sumers with higher-speed In­ter­net ser­vice than Time Warner Ca­ble. It also said that it has a more am­bi­tious pro­gram of in­tro­duc­ing high-speed In­ter­net ser­vice to low-in­come res­i­dents.

On Tues­day, Com­cast also em­pha­sized its role in the lo­cal econ­omy. Its sub­sidiary NBCUniver­sal em­ploys nearly 15,000 peo­ple in the Los An­ge­les area.

Many peo­ple still see Com­cast as only a provider of boxes and wires for ca­ble TV, broad­band and phone, but the com­pany is mov­ing ag­gres­sively into en­ter­tain­ment, Com­cast Ex­ec­u­tive Vice Pres­i­dent David Co­hen wrote Tues­day in a Com­cast blog post.

“En­ter­tain­ment is a big and grow­ing part of our busi­ness,” he wrote.

Co­hen noted that Com­cast owns the Uni­ver­sal Stu­dios theme park, Uni­ver­sal Pic­tures movie stu­dio and NBC En­ter­tain­ment op­er­a­tions in Los An­ge­les County.

“Our pro­posed trans­ac­tion with Time Warner Ca­ble will al­low us to in­crease our im­pact, dis­tribut­ing more con­tent, in­clud­ing more di­verse and in­de­pen­dent con­tent, for con­sumers,” Co­hen said.

Some peo­ple at the hear­ing were not per­suaded.

“We in Cal­i­for­nia are in need of more of a choice,” said Betty Jo Toc­coli of Los An­ge­les, one of the op­po­nents. “And past ex­pe­ri­ence has shown that big­ger is not nec­es­sar­ily bet­ter.”

At the hear­ing, sev­eral lo­cal gov­ern­ment of­fi­cials, in­clud­ing city of­fi­cials from Downey, South Gate and Hunt­ing­ton Park, voiced sup­port for the deal.

Com­cast hopes to gain both state and fed­eral ap­proval and com­plete the merger this sum­mer. Mean­while, Com­cast and its al­lies ques­tioned whether the PUC has any real author­ity to block the deal.

For­mer Cal­i­for­nia State As­sem­bly Speaker John A. Perez warned com­mis­sion­ers that their author­ity may be nar­row. “The Leg­is­la­ture limited the PUC’s author­ity in this area,” he said out­side the PUC hear­ing room.

This was the sec­ond public hear­ing that the PUC has held on the pro­posed merger. At a Fe­bru­ary ses­sion in San Fran­cisco, the PUC came un­der fire for not hold­ing a hear­ing in Los An­ge­les.

“We thought it was crit­i­cal to hear from the peo­ple who were most af­fected by this merger,” Com­mis­sioner San­doval ex­plained.

The com­mis­sion­ers spent 21⁄2 hours lis­ten­ing to dozens of speak­ers.

Be­fore the meet­ing, about 80 pro­test­ers, in­clud­ing mem­bers of the Writ­ers Guild of Amer­ica, West; Con­sumers Union; Los An­ge­les Latino Cham­ber of Com­merce; and Pre­sente.org, a Latino ad­vo­cacy group, ral­lied out­side the state build­ing in down­town L.A.

Some held signs with slo­gans such as “Com­cast Mega Merger = worst cus­tomer ser­vice = fewer choices = higher prices” and sported but­tons em­bla­zoned with the slo­gan “No Com­cast Mega Merger!”

The Writ­ers Guild has been par­tic­u­larly out­spo­ken. The guild be­lieves that me­dia con­sol­i­da­tion is largely re­spon­si­ble for fewer jobs in the in­dus­try.

“Los An­ge­les is al­ready suf­fer­ing from a loss of pro­duc­tion over the last 10 years — me­dia con­sol­i­da­tion like this will only make that tougher,” said Shawn Ryan, a prom­i­nent tele­vi­sion writer and pro­ducer who cre­ated the TV show “The Shield.” He cur­rently is a mem­ber of the Writ­ers Guild of Amer­ica’s board of di­rec­tors.

The merger, Ryan ar­gued, “will put things in fewer hands and fewer pro­duc­tions will get made.”

Don Bartletti Los An­ge­les Times

PRO­TEST­ERS RALLY out­side the state build­ing in down­town Los An­ge­les ahead of a Cal­i­for­nia Public Util­i­ties Com­mis­sion hear­ing on the pro­posed Com­cast-Time Warner Ca­ble merger.

Don Bartletti Los An­ge­les Times

PUC COM­MIS­SION­ERS Carla J. Peter­man, left, and Catherine J.K. San­doval con­fer at the hear­ing on the pro­posed Com­cast-Time Warner Ca­ble merger.

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