In Comcast’s Failed Merger, a Victory for Al Franken

Posted April 25, 2015 at 5:00am

Lawmakers use congressional hearings and letters to wield influence over corporate mergers – and that was  certainly the case with Sen. Al Franken and the now-failed Comcast-Time Warner Cable deal.

In attacking the proposal, no lawmaker was a bigger player than Franken, the Minnesota Democrat who sent three letters to regulators and caught a Comcast executive in embarrassing obfuscation at a Judiciary Committee hearing.

Comcast is the dominant cable provider in Minneapolis, but Franken says his interest in the issue stems from his own past in the entertainment business as an actor on NBC’s “Saturday Night Live.” He argues that media consolidation, and in particular combinations of content providers and content creators, disserve consumers by raising prices and diminishing the quality of the content.

Franken says he’s an advocate of net neutrality for a similar reason. It prevents Internet providers from favoring some content over others.

When the merger was announced in February 2014, conventional wisdom had it that Comcast’s lobbying, along with its generosity to members of Congress, would ease the path to completion. Comcast’s nearly $5 million in contributions to candidates in the last election cycle placed it among the top corporate donors. Its political action committee was more generous than those of all but five other firms. Its $17 million in lobbying expenditures in 2014 were No. 1 among corporations.

But the company’s political spending did not translate into congressional support. Besides members of the Pennsylvania delegation — where Comcast is based — only Utah Republican Sen. Orrin G. Hatch wrote to regulators in support of the deal.

And then there was Franken. The issues he raised turned out to be prescient. In a February 2014 letter to Federal Communications Commission Chairman Tom Wheeler, Franken said that the FCC — which must approve media mergers — should look closely at the issue of net neutrality and Comcast’s adherence to it. That’s the principle that Internet service providers should not be allowed to slow down or block web pages of content companies.

He also argued that regulators should scrutinize Comcast’s compliance with the conditions it accepted when it was allowed to merge with NBC Universal in 2011.

Franken said he was confident that regulators would find that “Comcast has a history of breaching its legal obligations to consumers.”

According to reports this week, the proposed merger fell apart after the Justice Department raised questions about Comcast’s merger with NBC, and over concerns that it would control too big a piece of the Internet service market — as much as 40 percent.

Comcast officially announced the deal was off on Friday morning. “Of course, we would have liked to bring our great products to new cities, but we structured this deal so that if the government didn’t agree, we could walk away,” said Comcast CEO Brian L. Roberts in announcing the decision.

Franken’s net neutrality argument played a role. The idea that one firm would control so much of the Internet service market didn’t sit well when the Obama administration is trying to get a better handle on the power exerted by Internet service providers. The administration supported the FCC’s decision in February to assume regulatory powers over them.

Comcast and Time Warner responded that the two firms operate in different markets and said that there would be no net loss of competition if they were allowed to merge. And they said that, in merging, Comcast would invest in Time Warner’s inferior infrastructure to provide better Internet service to its consumers. They also said they’d never violate the net neutrality principle.

But Franken noted that it was a 2007 move by Comcast to slow down content produced by a prospective competitor that had helped to create the groundswell of grassroots support for net neutrality.

He also pointed out that when Comcast’s merger with NBC was approved, Comcast had used the existence of a big competitor, Time Warner, as evidence that it would not be able to charge other cable operators more to carry NBC and its 20 cable networks.

“We can’t say that the existence of competition among distributors, including Time Warner Cable was a reason to approve the NBC deal in 2010, and then turn around a few years later and say that the absence of competition with Time Warner Cable is a reason to approve this deal,” Franken said at the Judiciary hearing in 2014.

As for compliance with the terms of the NBC deal, Franken noted that Comcast had gotten into trouble with the FCC for failing to market a stand-alone broadband cable service as it had promised — one that wasn’t bundled with a cable TV package — and for favoring the business news channel CNBC over Bloomberg’s television channel in its cable packages.

Comcast couldn’t find support in Congress. A coalition of groups opposed to the deal ginned up grassroots support. Franken said last year that he had heard from 100,000 people who opposed the deal.

The Stop Mega Comcast coalition, which included groups like Common Cause and Consumers Union but also rival businesses such as the Dish Network, hired its own lobbyists at the Glover Park Group, a well-connected Washington firm, and cultivated support for its position among members of Congress. Congressional letters opposing the deal outstripped those in favor.

Franken said the grassroots opposition made the difference. Comcast “hired an army of more than 100 lobbyists and spent millions of dollars on advertising to sell the deal,” he said in a statement Friday. “But more and more people came to see it the way I did and joined the fight.”