In Scrutiny of Cable Merger, Internet Choice Will Be Crucial Battlefield

Since announcing plans to take over Time Warner Cable two months ago, Comcast has steadily beat the drum with one big message: The merger will not limit consumers’ choice in picking a cable-television or high-speed Internet service provider.

Comcast is expected to repeat this message twice -- during the first Senate hearings on the $45 billion deal, and again in legal filings it is expected to give to the two government agencies reviewing the merger.

But in highlighting how the two companies do not compete with each another in any metropolitan market, Comcast has exposed a potential weakness in its argument, legal experts say. The lack of overlap in cable TV is the legacy of government-granted local monopolies.

But the government never granted monopolies in the unregulated, highly lucrative business of high-speed Internet service -- an area where the two companies face little to no competition. As a result, regulators are likely to focus as much on how the merger will affect the market for high-speed Internet, also known as broadband, as how it will affect cable TV service. Comcast, however, might have provided evidence that it faces little competition in high-speed Internet in dozens of Federal Communications Commission petitions filed over the last few years seeking to get out from under local cable rate regulation.

In the petitions, Comcast argues that the nation’s two satellite television companies, DirecTV and DISH Network, meet those requirements in many markets by accounting for at least 15 percent of television service. While a few markets also have telecommunications, usually AT&T or Verizon, competing to provide television service, most of the petitions cite only the satellite companies as rivals. But satellite companies do not offer high-speed Internet service, as the technology prevents it. That means that in those markets, Comcast is usually the only provider of high-speed broadband using a cable modem -- the fastest service going, next to fiber-optic cable, which is not widely available in the United States.