Cable Group Issues Warning on Proposed Takeover of Time Warner

Problem could be big enough to force some smaller companies out of business.


Comcast Corp.'s proposed $45.2 billion takeover of Time Warner Cable could put the squeeze on Wisconsin's small cable operators, and their customers, through higher programming costs, an industry trade group warned Tuesday.

The problem could be big enough to force some smaller companies out of business, according to the American Cable Association, which represents more than 800 cable operators nationwide, including 39 in Wisconsin.

"Rising programming costs are an enormous challenge for them," said Matthew Polka, president and CEO of the Pittsburgh, Pa.-based association. "Consumers should care about this merger because of the price they will pay for what they watch on television."

In Wisconsin, Time Warner Cable and Charter Communications are the two biggest cable companies, covering much of the state with television and broadband Internet service.

Yet the state has many smaller cable companies, including some with only a few hundred customers, and they're worried about the proposed takeover of Time Warner Cable by Comcast, the nation's largest cable operator. The deal would give the combined company roughly 30 million customers.

"When you have a company the size of Comcast merge with Time Warner Cable, they're going to have enormous market power that will put pressure on content prices for everybody else," said Andrew Petersen, spokesman for TDS Telecommunications Corp., a Madison-based provider of cable and other telecom services. "If they're able to negotiate lower program access fees, it's our expectation that small and midsize cable operators will be asked to make up the difference, and that isn't in the best interest of our customers or the communities we serve."

As the industry has become more consolidated and programming costs have risen, operating a profitable business has been more difficult for the smaller firms, said Bart Olson, president of Merrimac Communications, a cable operator in western Wisconsin with 2,200 customers.

Comcast has said the Time Warner Cable acquisition would provide faster, more reliable service to more customers and would save money on TV programming costs. It hopes to ease regulatory concerns by divesting 3 million subscribers.

But smaller cable companies are still worried. They say the deal would give Comcast too much power, because not only is it the nation's largest cable company, it also is majority owner of NBC Universal, which operates TV networks and channels including NBC, USA Network, CNBC, MSNBC, Telemundo, Bravo and the Weather Channel.

"We are writing to express alarm about the increasing level of vertical integration between large programmers that own popular national networks and large cable operators we compete against," the American Cable Association said in a letter to the Federal Communications Commission.

The trade group is asking the FCC for rule changes that could give smaller cable operators more bargaining power with Comcast and other content providers.

"As the Commission soon considers whether to approve one of the largest vertical cable mergers ever ... small and medium (cable) providers like us are left waiting and wondering whether we will ever be given the full protections that Congress intended," the letter noted.

It could take a year for the FCC and Department of Justice to approve or deny the deal.

"We haven't made the decision to outright oppose it yet, but I am certain we will be seeking significant conditions to be placed on the merger to make sure that access to content is made available to our members on fair and reasonable terms," Polka said.

"ACA has long acknowledged many problems in the pay-TV market, including the soaring cost of retransmission consent and sports networks, and the record-setting number of broadcaster-imposed TV signal blackouts. We will be looking closely to see whether this transaction makes matters worse for small and medium-sized cable operators and their customers."

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