Will FCC Allow Massive Merger to Protect Net Neutrality Gains?

Publication of the new Federal Communications Commission mandated network neutrality rules opens the way for court challenges, and the first lawsuit has been filed.

There are many potential ironies. Consider the present situation the FCC faces with respect to the Comcast acquisition of Time Warner Cable. On one hand, since Comcast is upgrading 21 million--virtually all--of its residential locations to gigabit levels of service, plus offering 2 Gbps to 18 million of its customers, Comcast already is the biggest Internet service provider in the United States, with the most gigabit-capable networks.

Adding Time Warner Cable would allow Comcast to extend that lead. Even before that announcement, and before changing the definition of broadband, Comcast arguably is the largest U.S. Internet service provider, and arguably the provider with the greatest share of faster-speed connections.

By about 2007, average advertised cable TV high speed access speeds were 2.5 times the average telco digital subscriber line speeds, while cable peak speeds were three times faster.

The gap since has widened, principally because Comcast is upgrading all its locations to gigabit speeds by the end of 2015, and because more cable operators will be adopting DOCSIS 3.1, which will enable gigabit speeds.

To be sure, many ISPs, including AT&T and CenturyLink, many independent ISPs and Google Fiber, are upgrading to gigabit speeds as well. But those roll-outs are coming neighborhood by neighborhood, and at a measured pace. All will be playing catchup to Comcast.

In other words, Comcast’s share of the gigabit access market will be very high, given its installed base of potential connections (21 million homes), where the other contestants would be lucky to be able to market to hundreds of thousands of homes.

In recent years, cable TV companies also have been getting 83 percent share of net new high speed access connections.  

So if the FCC approves the merger, it will sanction unusually high levels of concentration by one service provider, arguably in the most-crucial product segment of all.

Under normal circumstances, one would be skeptical.

But there is another twist. If the FCC does approve the merger, it could likely win network neutrality agreements from Comcast that would stand, even if the FCC’s network neutrality rules later were struck down.

And some believe the rules will be invalidated. “The FCC may have violated the Constitution’s separation of powers in its attempt to ‘modernize’ the 1934 Communications Act.

By reclassifying broadband as a telecom service and then selectively and arbitrarily forbearing from most of Title II, the agency has effectively rewritten the Act — something only Congress can do through legislation,” said Berin Szoka, President of TechFreedom.

There also will be procedural objections. “The agency failed to open a new comment round after scrapping its initial, more modest proposal, in favor of the President’s Title II plan,” said Szoka.

So might the FCC try to protect some net neutrality gains by sanctioning a merger that will violate most of the market share rules the FCC and Dept. of Justice normally apply when screening and evaluating mergers at the top of telecom markets?