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Kimmelman: Charter/TWC Lacks Same Problems of Comcast/TWC

Gene Kimmelman, president of Public Knowledge, says he does not think the proposed Charter/Time Warner Cable merger has "the same problems" that the Comcast/TWC proposed merger had in terms of competition issues, but says it has some that will need inspecting.

Kimmelman and former FCC commissioner Harold Furchtgott-Roth weighed in on the prospect of a Charter/Time Warner Cable deal in an interview for C-SPAN's Communicators series.

A former antitrust official with Justice in the Obama Administration, Kimmelman emphasized that the merger would almost double the size of Time Warner Cable, and said for that reason it was going to get a "very serious review" by law enforcement officials. "They are a pure transmission play, so it will be a very different transaction under review."

But he said a big difference between this deal and Comcast/TWC was that it was a combination of companies that don't own content (outside of a few regional sports nets).

Kimmelman said the big question in the deal is the impact on cable bills and whether the result of the deal will be better speeds and new services. Charter is arguing it will do just that.

He also talked about over-the-top video, another key issue. "Will the new online-delivered video products be more available, or will this combined entity try to cut off my options." He said he thought Internet-delivered video is his biggest concern. It is certainly one of the FCC's, which has been probing that issue in regards to the AT&T/DirecTV deal.

Given that the video competition is coming over the same wire controlled by ISPs, those ISPs have incentive to favor its own bundled service, so Washington will have to make sure there are no unfair benefits to cable.

Furchtgott-Roth laughed off the over-the-top concerns. He said every consumer has multiple paths to broadband. While Kimmelman argued, as has the FCC, that a single ISP generally controls that key wire into the home, Furchtgott-Roth said there are actually three wires. He said he was not saying people were getting video over all three wires, but did say they had that option over at least two, the cable and telephone company.

In addition, he said, there are wireless options, with increasing speeds. Kimmelman said that wireless was not yet a competitor for video streaming.

Furchtgott-Roth said that the idea that ISPs have monopoly power is difficult to understand.

Asked by Gautham Nagesh of the Wall Street Journal whether traditional TV would play much of a role in the review, Kimmelman said he thought it would be heavily weighted toward broadband.

Kimmelman said the government has already found market power in the broadband and cable side of the business, which he said was the takeaway from the Comcast/NBCU deal and others. He said he thought the entire focus of the government’s competitive concerns will be on the broadband market.

Furchtgott-Roth agreed broadband will be the primary focus. But he said he thought a lot of the analysis will be on the geography of the companies and the combination of geographically distinct markets. He said he is not convinced they have more market power collectively than they do individually because their markets don't overlap.

Kimmelman said he thought Justice and the FCC would be looking at the national market for broadband and whether a combined company could do anything to squelch over-the-top video competition.

Asked what conditions could be on the deal, Kimmelman said they should not be conditions, like precise pricing, that lock in a business model that does not apply in the future. He said he expected to see structural conditions that limit incentive to discriminate unfairly, again most likely focused on broadband and not favoring cable video over broadband.

Furchtgott-Roth said there would almost certainly be conditions, and of the type Kimmelman suggested.

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.