What killed Comcast’s $45 billion bid for Time Warner Cable? Regulators’ desire to protect the Internet video industry that is reshaping TV.
A combination of the No. 1 and No. 2 U.S. cable companies would have put nearly 30 percent of TV and about 55 percent of broadband subscribers under one roof, along with NBCUniversal, giving the resulting behemoth unprecedented power over what Americans watch and download.
Competitors, consumer groups and politicians criticized the deal, saying it would lead to higher prices and less choice.
“The proposed merger would have posed an unacceptable risk to competition and innovation, including to the ability of online video providers to reach and serve consumers,” Federal Communications Commission Chairman Tom Wheeler said in a statement.
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The Justice Department said Comcast dropped its bid because of regulators’ concerns that the Philadelphia-based cable giant would become an “unavoidable gatekeeper” for Internet services.
One concern of consumer advocates and competitors was that the deal could undermine the streaming-video industry that is reshaping TV. Comcast could, for example, require onerous payments from new online-only video providers for connecting to its network. Dish, the satellite TV company behind the new Web video service Sling TV, and Netflix opposed the deal.
“It goes to show you how important broadband is,” said Amy Yong, a Macquarie analyst.
Regulators have taken other steps that signal how important they consider Internet access. In February, the FCC released “net neutrality” rules meant to keep broadband providers from charging Internet companies for “fast lane” access or favoring some content. The broadband industry has sued to stop the rules.
“We have to live with it and respect that and move on,” Comcast Chairman and CEO Brian Roberts said in an interview on CNBC, referring to the government’s opposition. “We always structured this deal in a way that would enable us to walk away.”
Comcast doesn’t owe Time Warner Cable a breakup fee because the deal didn’t work out.
With the merger called off, a transaction between Comcast and Charter Communications aimed at smoothing the way for regulatory approval also falls apart.
Many analysts now expect Charter Communications to resurrect its own effort to acquire Time Warner Cable.
Shares of Time Warner Cable (ticker: TWC) rose $6.50 to $155.26 while Comcast shares (ticker: CMCSA) gained 41 cents to $59.64.