April 23, 2002
U.S. senators on Tuesday raised concerns about the possible negative impact that Comcast's proposed purchase of AT&T's cable assets could have on diverse programming and Internet access.
Sen. Herb Kohl, chairman of the Senate Judiciary subcommittee on antitrust and a Wisconsin Democrat, said the deal should have "meaningful conditions" attached to protect consumers."Big is not bad, but we can't ignore the potential for a cable company as big as AT&T-Comcast to throw its weight around," he said at a hearing on the proposed deal. "We know it's good for the companies -- but what does it do for the average consumer?"
The combination would bring 22 million cable subscribers under one company to be named AT&T Comcast, if the required regulatory approvals are received. Under its terms, Comcast will pay about $33.5 billion in stock based on the latest share price, plus the assumption of about $20 billion in debt.
While admitting the deal did not present traditional antitrust concerns since the companies do not directly compete, several senators said they were worried that the sheer size of the company could discriminate against unaffiliated programming and limit consumer choices for Internet service."This customer base would become an extremely important outlet for programmers, increasing the pressure to obtain a spot on the AT&T-Comcast cable systems," said Sen. Mike DeWine, an Ohio Republican and the ranking Republican on the panel. "This would pose a challenge for those who offer new, independent programming."
Antitrust enforcers must determine whether the deal would harm competition while the Federal Communications Commission must consider if the deal will benefit the public. Analysts have said they expect the deal to win approval though consumer groups vowed Tuesday to fight it.
Congress has no direct say on whether the combination should be approved; issues raised by the lawmakers are often heard by the two agencies that do make the decisions.
Comcast and AT&T have argued that their combination will speed the deployment of high-speed Internet service and digital television as well as add competition to the local telephone market with its own service offering.They have also said the combined company will be able to upgrade cable systems more quickly because of economies of scale and scope as well as cost savings from the merger."I would hope that this merger will not raise issues regarding content discrimination that leads to fewer choices of diverse content which I have found to be of great concern in past media mergers," said Sen. Orrin Hatch, a Utah Republican.
Brian Roberts, the president of current No. 3 cable operator Comcast, defended the deal and said the new company would risk losing customers if it did not carry programming desired."If we don't carry the best programming, we're going to lose our customers," he told the subcommittee.
On another issue, Roberts said he opposed conditioning the merger to require the combined company to provide a choice of Internet service providers (ISPs) for high-speed Web access.
Yet, AT&T and Comcast have told federal regulators that they would offer consumers a choice of Internet service providers for high speed Web service, though ISPs and consumer groups want a binding condition."Given the need to compete with digital subscriber line (DSL offered by local telephone carriers) and others, both AT&T Broadband and Comcast have strong incentives to make competitively and commercially reasonable, customer-friendly arrangements with unaffiliated ISPs," said AT&T CEO Michael Armstrong.
Earlier Tuesday, AT&T said it had reached a deal to offer NET1Plus Internet service, which serves the New England region, on the cable pipeline. Armstrong said discussions continue with other ISPs.
Leading consumer groups said Tuesday they opposed the deal because it would threaten competition and consumer choice as well as potentially limit available programming and Internet access."Sheer size benefits those who want to block competition," said Gene Kimmelman, director of the Washington office of Consumers Union. "It is through that combined power of size that this is so dangerous to consumers."
"We believe the AT&T-Comcast merger represents another major anti-competitive, anti-consumer step in the consolidation of the most important industry for our 21st Century digital economy," said Mark Cooper, research director for the Consumer Federation of America.
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