Forecast mixed on Comcast merger as AT&T merger moves along

Eleven months after AT&T Inc. announced its $48.5 billion deal for DirecTV that would create a substantially bigger pay-TV company than Comcast Corp., the deal seems to be cruising smoothly through Washington, while Comcast's $45 billion deal for Time Warner Cable Inc. has faced a public backlash.

The deals - Comcast announced its in February and AT&T disclosed its in May - have been a surprising tale of two giant telecom mergers.

AT&T/DirecTV seemed initially to have the harder climb to federal approvals because of classic anticompetitive elements of the transaction.

By acquiring DirecTV, AT&T would eliminate a pay-TV competitor in many parts of the nation. DirecTV offers TV services nationally to 20 million subscribers, and AT&T sells similar TV bundles to about 6 million subscribers in 22 states - a significant market overlap.

Comcast, the nation's largest cable-TV company, wouldn't knock out a pay-TV or broadband competitor by acquiring Time Warner Cable. Instead, it would simply expand into TWC markets in New York and Los Angeles and concentrate cable holdings in other regions.

But regulators now seem willing to overlook the pay-TV market overlap, believing satellite-TV has peaked as a consumer technology, industry observers believe.

The consensus is that the era of legacy TV with hundreds of linear channels offered by satellite- and cable-TV is passing with time-shifted viewing, Internet streaming, and WiFi mobility.

The nation's communications future will entail high-speed Internet services, and critics have focused attention on the potential broadband market share of Comcast/Time Warner Cable; some estimates say the combined company would have more than 50 percent of the U.S. broadband market at speeds of 25 megabits per second or higher.

Comcast officials say that is an irrelevant statistic, as neither the Justice Department nor the FCC has looked at the national broadband market share in previous merger reviews.

AT&T/DirecTV "will sail through and eliminate competition for a material part of the country," said Jeff Wlodarczak, chief executive officer of the Pivotal Research Group in New York. "If you had asked me at the start of this, I would have thought that there would have been a concern with AT&T and DirecTV," not Comcast/Time Warner.

Wlodarczak believes there is an 80 percent likelihood the Justice Department and Federal Communications Commission will approve Comcast/Time Warner. Telecom analyst Craig Moffett recently gave that deal a 60 percent likelihood of approval.

Beyond the different economic arguments, Comcast has battled through the regulatory review with what one company official called "organized haters" - including nonprofit advocacy groups and commercial competitors such as Netflix and Dish Network - all fueled by customer-service mishaps exploding on social media.

"They can't catch a break," John Bergmayer, senior staff lawyer for the nonprofit advocacy group Public Knowledge, said of Comcast.

Public Knowledge opposes AT&T/DirecTV and Comcast/Time Warner. Although the group believes the potential economic harm for consumers and content suppliers can be averted with negotiated conditions on AT&T/DirecTV, Public Knowledge doesn't believe conditions could fix Comcast/Time Warner.

Politics in Washington also has shifted since the merger proposals were announced in 2014. With President Obama's blessing, the FCC voted 3-2 along partisan lines in late February to regulate the Internet as a utility to guarantee its freewheeling and open nature. "We see an FCC," Bergmayer said, "that has been much firmer with the broadband industry than people would have thought a year ago."

Some believe the FCC's "open Internet" vote indicates the agency could take a harder line on the Comcast/Time Warner review. Others believe it could allow the FCC to go easier because the agency now has powerful tools to enforce regulations on broadband services.

Rob Frieden, professor of telecommunications and law at Pennsylvania State University, said the FCC had approved 95 percent of the merger transactions. But he handicaps the Comcast/Time Warner merger at a 50 percent chance of approval, and AT&T/DirecTV at about 75 percent.

Frieden agreed AT&T/DirecTV seemed the most problematic at the beginning of the regulatory review. "One would think that AT&T buying out a direct competitor would be a bigger concern," he said. If the government approves AT&T/DirecTV and rejects Comcast/Time Warner Cable, AT&T would be the nation's largest pay-TV provider, which would give it the leverage when negotiating with entertainment companies for cable channels.

But Frieden noted that Comcast customers had been frustrated for years and were speaking out. According to the FCC, groups and individuals have filed 14,717 comments with the federal government over the AT&T/DirecTV deal. The number filed over Comcast/Time Warner Cable: 100,587.

A frustrated consumer, Frieden said, "can push back even though it has nothing to do with the merits of the transaction."