California (Kind Of) Approves Comcast Merger

Says the company must expand services to the poor; Comcast resists.

The Comcast-Time Warner merger has — a year after it was announced — finally passed a major hurdle.

Kind of.

A California Public Utilities Commission official late last week recommended approval of the merger, one of a series of state and federal approvals the merger will need in order to go forward.

However: Comcast isn’t so sure it wants to meet the conditions of approval. Specifically, California expects the newly merged company to aggressively expand Internet service to that state’s poor.

Follow along, starting with an overview from Reuters:

Comcast Corp said on Friday that a California Public Utilities Commission Administrative (CPUC) law judge recommended to approve its pending $45 billion merger with Time Warner Cable and related transactions with Charter Communications.

The approval, characterized by Comcast as an “important step” for the overall regulatory process, was proposed with a set of conditions, including making broadband available to un-served and under-served communities.

Approval from California, the most populous U.S. state, is just one of a series of state and federal hurdles Comcast needs to clear to close the merger.

Comcast’s David Cohen responded in a blog post:

While we have just received the recommended decision, it appears that a number of the conditions are ones that will benefit consumers and the company can work with.  Some of the suggested conditions, however, could potentially prevent the full benefits of this transaction being realized by Californians, and create a more intrusive regulatory regime where innovative services could be hampered rather than helped.  In addition, at least some of the suggested conditions simply lie outside the authority of the CPUC or are unrealistic.

For example, some of the penetration rates and time frames suggested by the conditions are simply unattainable under market conditions, especially with populations that have been slowest to adopt broadband.  Deeper broadband penetration among all populations is a goal we share, and one we’ve worked very hard on for the nearly two decades we’ve been marketing broadband.  Nationally, across our footprint though we only have a penetration rate of 40% of homes we pass taking our broadband service.  In California, it’s about the same.  And that’s after we’ve spent billions marketing and advertising those services.

What does this mean? BGR explains:

The only specific conditions Cohen pointed to cover how quickly Comcast must bring broadband to underserved populations. Comcast offers $10-per-month Internet to poor people through its Internet Essentials program, which was required by its 2011 acquisition of NBCUniversal. California wants Comcast to expand eligibility for this program, offer it throughout the Time Warner Cable territory, double download speeds to 10Mbps, provide free Wi-Fi routers, connect schools and libraries in underserved areas, and sign up at least 45 percent of eligible households within two years. Comcast must submit specific plans for signing up more low-income subscribers, reduce wait times, and make the sign-up process less difficult. Customer advocates complained in July 2014 that only about 11 percent of eligible households in California were getting the discount Internet service because of how difficult it is to sign up.

Consumerist adds:

The report asks Comcast to revise the eligibility for Essentials so that it includes all households in its service territory “having household incomes equal to 150% of the federal poverty level or less.”

Currently, Comcast only offers Essentials to households with at least one child enrolled in the school lunch program. Critics have noted that this omits elderly, the childless, and adults with grown children who are no less harmed by not being able to access the Internet.

Comcast may want to resist the specifics proposed by California, but it sure seems that the company — if it wants to merge — may find itself expanding its services to the poor. Comcast launched Internet Essentials, after all, as a condition of its merger with NBCUniversal, then recommitted to the program right about the time the merger with TIme Warner was announced. The FCC may put similar constraints on its approval of the merger — assuming the approval is given— and New York regulators have made it clear they want Comcast to expand its efforts for the poor if merger approval is given.

Will those conditions be too much? Will regulators stick to the conditions if Comcast says it won’t meet the conditions? After a year of anticipation, it seems we’re about to find out.

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