Comcast's $45 million bid for Time-Warner Cable, which is pending regulatory approval, turns dirty as America's largest cable provider accuses its rivals and partners of extortion.
In a 324-page document filed before the Federal Communications Commission (FCC) on Tuesday in response to the host of submitted comments opposing the acquisition of the two biggest American cable companies, Comcast claimed that Discovery Communications, "like many other programmers," have demanded business concessions in exchange for silence on the issue of the acquisition.
"Discovery demanded unwarranted business concessions from Comcast as a condition of Discovery's non-opposition to the transaction," Comcast says [pdf] in its filing. "Such extortionate demands are patently improper. As the self-proclaimed '#1 Pay-TV Programmer in the World,' Discovery does not need additional regulatory help to succeed in the marketplace."
The requests, Comcast claims, vary, including requests for free backbone interconnection, participation in advertising "interconnects," and wholesale service agreements. Unnamed programmers were also said to have asked for sharing in any advanced advertising technology developed by Comcast and tried to renegotiate their program arrangements even with contracts not yet due to expire.
Discovery, which owns channels such as Discovery Channel, Animal Health and TLC, is one of many critics who pointed out to the FCC that the merger of Comcast and Time-Warner Cable "could result in lower quality, less diverse programming and fewer independent voices among programmers."
In a statement posted on the Discovery website, Discovery spokesperson David Leavy says the programmer remains firm on its stance that approval of the acquisition in question could create an anti-competitive environment for the cable industry where the industry behemoth that is the combined Comcast and Time-Warner Cable could easily impose unfavorable terms upon consumers and what is left of its rivals. Leavy further says that Comcast's "silence on the details of key issues like program discounts" and its "strategy of intimidating voices that are not fully supportive of its position" is "troubling."
Comcast also hit at other companies vocally opposing the acquisition, including Netflix, Dish and Cogent Communications, which the cable company has also accused of trying to "leverage their individual interests" without being able to provide a "fact-based, compelling argument" that merging Comcast and Time-Warner Cable would be detrimental to public interest.
"The significance of this extortion lies in not just the sheer audacity of some of the demands," says Comcast, "but also the fact that each of the entities making the 'ask' has all but conceded that if its individual business interests are met, then it has no concern whatsoever about the state of the industry, supposed market power going forward, or harm to consumers, competitors, or new entrants."
If approved, the acquisition would give Comcast 35 percent of the American broadband industry and give it a major presence in 16 out of 20 cable markets. Analysts believe regulators will eventually approve the acquisition after certain conditions, but say Comcast's accusations will most likely have no impact on these conditions.
"Regulators are a sophisticated audience," media analyst Craig Moffett of Moffett Nathanson Research says. "They can assess the merits of the various arguments without having to be coached on what incentives might be behind why someone did or didn't say what they did."