FCC's Sallet: Comcast-TWC merger would have thrown 'sand in gears' of online video distributors

Shedding light on the FCC's rationale for rejecting Comcast's (NASDAQ: CMCSA) proposed takeover of Time Warner Cable (NYSE: TWC) earlier this year, agency general counsel John Sallet said concerns over how the merged cable giant would handle online video competition weighed most heavily in the FCC's decision-making.

"The question was not only whether a single kind of action -- access to devices, or data caps or interconnection or video programming terms -- by itself would degrade competition. It was also whether the merged company would possess the toolkit that would allow it to put sand in the gears of competition through the totality of its efforts," Sallet said last week a the Telecommunications Policy Research Conference, an event covered by Broadcasting & Cable.

"The core concern came down to whether the merged firm would have an increased incentive and ability to safeguard its integrated pay-TV business model and video revenues by limiting the ability of OVDs to compete effectively, especially through the use of new business models," he added.

The FCC hasn't released any documents that summarize its rationale for objecting to the $45 billion deal because Comcast terminated its offer before the agency could render a formal decision. 

Sallet's comments aren't surprising -- it was widely reported during review of the proposed merger that the FCC was concerned about how a merged operation that controlled more than 50 percent of the U.S. broadband market would treat online video competition. 

However, with the FCC asking similar questions of Charger Communications in its ongoing bid for TWC, a forensic look at the FCC's earlier decision-making probably has some value. 

"We understood that entrants are particularly vulnerable when competition is nascent," he said. "Thus, staff was particularly concerned that this transaction could damage competition in the video distribution industry by increasing both Comcast's incentive and its ability to disadvantage online video distributors (OVDs) and thus retard or permanently stunt the growth of a competitive OVD industry. In doing so, consumers would be denied the benefits that innovative competition could bring," Sallet said.

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