APRIL 23, 2015
Comcast Is Said to End $45 Billion Bid for Time Warner Cable
By EMILY STEEL, DAVID GELLES, REBECCA R. RUIZ and ERIC LIPTON
Facing intense regulatory scrutiny, Comcast is planning to abandon its $45 billion takeover of Time Warner Cable, people briefed on the matter said on Thursday, ending a bid that would have united the country's two largest cable operators and reshaped the rapidly evolving video and broadband markets.
Broadband service, in particular, has become more important than ever, with advances in technology and an array of Internet offerings upending how people watch and pay for television. Had the deal been approved, the combined company would have controlled as much as 57 percent of the nation's broadband market and just under 30 percent of pay television.
Opponents portrayed Comcast's takeover effort as a land grab that would have given the company too much leverage in the industry, and over the last year lawmakers, consumers, public advocacy groups and media and technology companies rallied against the merger. Complaints reached a fever pitch in recent weeks.
The fears were plenty: that customers would end up paying more for declining service; that the industry behemoth would use its heft to stifle competition in the budding online video business; that there would be a lack of independent and diverse voices on television. Critics also criticized the company for failing to live up to promises it had made in previous deals, particularly its acquisition of NBCUniversal in 2011.
"My fear has been more and more concentration of power, and that is why I have been against this," said Senator Al Franken, the Minnesota Democrat who has been a vocal opponent of the deal since it was announced in February 2014. "We need more competition in this space, not less."
The public perception of the two companies was also damaging to the deal's prospects. Comcast and Time Warner Cable consistently rank at the bottom of consumer satisfaction surveys.
A Comcast spokeswoman declined to comment, as did a spokesman for Time Warner Cable. The companies are expected to announce their decision as soon as Friday morning.
The development is a major blow for Brian L. Roberts, the chief executive of Comcast who has steadily built his company into one of the country's largest media conglomerates through a series of acquisitions in recent years, and who was praised for boldly seizing the moment when Comcast announced its bid for Time Warner Cable 14 months ago. It is also a setback for David L. Cohen, Comcast's executive vice president, who was in charge of steering deals past regulators. Mr. Cohen is a well-connected lobbyist known for his influence in Washington.
For Comcast, the deal was a rare opportunity to become a national provider of television, Internet and phone service, giving it unprecedented scale to compete against smaller rivals. The company had dismissed concerns that the deal would face major backlash from regulators, arguing that the transaction would not change the competitive landscape because the two companies did not compete in the same markets.
"This is not that complicated a deal from an antitrust or a regulatory perspective," Mr. Cohen said when the deal was announced. "It presents a lot fewer issues than the NBCUniversal transaction did."
That position did not convince skeptical regulators -- the Justice Department, which had to determine whether a deal would harm competition, and the Federal Communications Commission, which would decide whether it was in the public interest. On Monday, Mr. Roberts met with Tom Wheeler, chairman of the F.C.C., according to a government filing made by Comcast. During the meeting, Mr. Roberts made one last pitch as to why the transaction was in the public interest and promised that Comcast would deliver "best-in-class" service to its new customers. He said that the company would live up to the commitments it made, and as evidence pointed to its earlier deals.
Then on Wednesday, Comcast officials met with officials from both the F.C.C. and the Justice Department and met with stiff resistance from both agencies.
One of the biggest concerns of the Justice Department, according to two former antitrust lawyers for the department who were briefed on the agency's concerns, was that Comcast, with such a large footprint in broadband and cable television operations, could use its clout to place restraints on television networks. For example, it could pressure networks not sell their content through stand-alone Internet streaming services, like those offered by HBO and CBS, that let consumers watch programming without paying for a traditional cable subscription.
The death knell for the deal came on Wednesday when Jonathan Sallet, general counsel of the F.C.C., met with staff members. He told them that his office was going to recommend that the transaction be referred to a hearing before an administrative law judge, multiple people involved in the meeting said.
That hearing process is long and drawn-out, and was essentially a way of saying the deal would be blocked, said Robert M. McDowell, who until 2013 served on the commission and is now in private practice. He said that in his 25 years of observing actions by the F.C.C., he could not recall a transaction being approved after such a referral took place. In 2011, the F.C.C. formally proposed the same path when considering the AT&T and T-Mobile bid to merge. Within a week the two companies had withdrawn their application. 
"That is a fatal bullet to the heart of the deal," Mr. McDowell said.
Neil Grace, a spokesman for the F.C.C., declined to comment.
Christopher Jon Sprigman, a former Justice Department antitrust official who is now a professor at the New York University School of Law, said that officials he had spoken with in recent days who were involved in reviewing the transaction had concluded that the deal could not be fixed simply by asking Comcast to make changes.
The Justice Department "is not confident in its ability to restrain Comcast with conduct remedies," he said, referring to concessions Comcast might offer to win approval. "They are too powerful and they had shown before they don't respect them very much."
The collapse of the deal, one of the biggest in the media industry in recent years, effectively puts the brakes on several other multibillion-dollar transactions.
Charter Communications, the regional cable operator controlled by the billionaire John C. Malone, will no longer acquire some of the Time Warner Cable markets  that Comcast had expected to divest. And Charter's planned $10.4 billion acquisition of Bright House Networks  was also contingent on the completion of Comcast's acquisition of Time Warner Cable.
While those blows represent a near-term setback for Charter, the company may soon resume its pursuit of Time Warner Cable. Before Comcast and Time Warner Cable agreed to their deal last year, Charter had aggressively pursued a hostile acquisition of Time Warner Cable.
In November, Mr. Malone said  that if the Comcast deal fell apart, Charter would try its hand again. A spokesman for Charter declined to comment.
For Time Warner Cable, the drawn-out process could prove particularly costly. In many such acquisitions, the buyer would have to pay the target company a steep breakup fee if the deal fell apart. But Comcast and Time Warner Cable did not include a breakup fee in their deal. Rob Marcus, the Time Warner Cable chief executive, also missed out on a big payday. He will not collect on the extraordinary $80 million exit package he would have received had the merger gone through.
The collapse of the deal will also have widespread ramifications across Wall Street.
Several of the nation's top investment banks, including JPMorgan Chase, Goldman Sachs, Morgan Stanley and Citigroup, will miss out on tens of millions of dollars in advisory fees. Investment banks typically get paid for their work on deals only after the transactions are completed.