Transcripts For ALJAZAM Inside Story 20140214

Comcast is a huge company and the largest Communications Company in the world with revenues, it is owning a number of companies, the golf channel and pictures and theme parks and digital voice and broad band internet properties. Time warner is a huge company and owning operations in 29 states, news and sports channels, internet and Computing Services and now the two plan to become one, americaning the first and second largest Cable Providers in america to control a big share of the american cable tv market and putting the other a competitor in the shade. If you are watching on television you are by definition a cable watcher. This could have long term impacts on the products you buy and what this merger means for the competitors and millions of people buying the services is the inside story. The two companies are planning to join forces by the end of this year. Comcast ob soshing time warner. The move is affecting the two companies 33 million subscribers. The Technology Enabled by the two kean companies coming together can be better products and new products and just a faster pace of change, so im incredibly excited about it and the opportunity for the customers is great. The negotiations between charter crumbled and opening the door for comcast. As the two teams rejoice, the massive mernl is raising questions from consumer groups, will the new Cable Provider hinder the competition and optioning for subscribers, the ceo is playing down the concerns on thursday. As we look at the competition of which is this much in video, direct tv, dish, at t, verizon, this allows us to compete better by bringing the products into new products. Time warners ceo agrees. Ono reduction in competition, improved customer experiences. Comcast is a major player in broad band and comcast deal is bringing a focus to Net Neutrality, the right of the content to have equal access to the internet and that is in limbo right now after the court of appeals struck down the fcc regulations and saying they do have the authority but using the i dont think justification and now they can rewrite the rules or congress can act. The planned acquisition is coming at a critical time in the history of Cable Television, the subscriptions and ratings are on the decline and demand services are on the rise. A new wave of chord cutters and opting out of Cable Television are putting the pressures on. Time warner losing a million subscribers in 2013 and 5 million overall between 2010 and 2013. The merger that seeks to join the two big players in american communication comcast and time warner. From new york david a reporter with the New York Times who corpses mergers and acquisitions for the paper and deal book, and barren, a lawyer and president of tech freedom. David, lets start with you, you tweeted out to the followers and surprised how fast this is moving along. No long dating dance . The companies have been in touch over the years and charter made a push to get a deal done with time warner and time warner was not comfortable with the deal and tim believed that charter stock wouldnt be that valuable after the merger. Time warner reached out to the ceo of comcast and lets restart the deal talks and over the past couple of weeks the talks proceeded and even then not getting all the way there. Only after a road show on january 28th and he heard from comcasts investors they wanted a deal to be done between comcast and time warner and then roberts coming back and called them and said lets get this done and the two sides hammered out the final details. And the worries about the charter stock, this deal from comcast is all stock. Robert marcus said that is apples to oranges and charter stock is not valuable as comcast stock. The reason is that charter was going to have to lever up so much debt that the Company Really would be barely investment grade. Comcast stock is backed up by the subscribers and nbc universal. Let me go back to washington to barron you heard about the executives and saying how good for consumer and ceo from comcast calling it in no way anticompetitive and is this good for the customers . I think it is. Hes right. The Cable Companies, usually unl one in one given market. What we are talking about here is not reduction in the choices, you simply have in some of the markets time warner replaced by comcast. Is concern about the mergers like this is not what we call the horizontal competition, maybe just to much leverage of the programs. First of all that cuts both ways, in some respects that leverage can help out the consumers and the reasons that the cable bills are going up the power, the market power in the industry is held by the content owners and they are extracting more and more in the royalties by the cable channels and if comcast gains the leverage here that could help. Comcast could favor their own affiliated content or stopping new cable market, new Cable Program or channel from gaining a minimum viable scale and it is important to note that thefcc tried to implement a 30 cap on a sing cable operator and failed because thech not justified the 30 . O that figure is interesting, this new Company Controls roughly 30 of the cable market. And indeed that is deliberate. They are going to volunteerly sell off some of the Time Warner Cable subscribers in order to stay below the 30 goal, again, that is not a legal threshold but that is what the fcc thinks could be a problem. We are not even there. Craig, a benign deal . I dont think so. This is a disaster for for the consumers and they are going to feel it in the wallets and bills going higher and higher. We are talking about the Largest Cable Company scooping up the number two Cable Company. This is giving the comcast a lot of power over communication. I would say too much power. I dont see this in the Public Interest at all. Comcast is moving aggressively and it is important that the fcc and the Justice Department scrutinize the deal. The deals like this are why the fcc measures why it is in the Public Interest. Wouldnt this concentration, barron give the Company Pricing power and Product Offering power that other competitors dont have because they are content produzers and Service Providers and control the share of the market. No one saying that the deal is not going to be scrutinized but the fcc will find that the conditions that were imposed on comcast when buying nbc, those conditions will be extended to time warners subscribers and somebody like craig that believes in neutrality rules should see this as a victory, the rules were struck done by the circuit and the fcc enforces the neutrality in an informal way. Comcast is subjected to the rules and now more cable subscribers are subjected to the rules. There might be the need for the conditions but the conditions are already in place by virtue of the previous merger. Sometimes conseeding they have to do things. Do we know what the two Companies Plan to as their pitch to regulators and making sure no market control or antitrust problems. Some of that was covered. There is a deal technique that everyone on wall street is scrutinizing today, that is the absence of a break fee. No stipulation that if the deal falls apart that comcast has to pay time warner money. That shows up in the big deals like this at times and attracts some of the antitrust scrutiny and not having a break fee is a sign of strength and a sign of faith that the deal is going to be done and some of the last minute negotiations were actually Time Warner Cable saying okay we are going to alone without a break fee if you commit to investing the 34 million subs to get to the 30 level and commit to extending some of the Net Neutrality pleasures. Everyone we have talked to believes that this deal can get done. We are going to talk more about the two companies heavy invested in the internet. We are taking a short break and hitting that when we come back. This is inside story. Welcome back to inside story. Im ray suarez. Mergers are nothing new. Aol brought time warner and comcast buying yuan ver sal. The news today is a huge play in cable, comcast wants to buy time warner. Number one takes over a two to create a bigger number one. The merger is more than cable tv, and we are discussing what it means for the business of media and for you the consumer. Craig, we should talk about Net Neutrality and that sounds like a cable tv deal, but the internet is important to both of these companies, isnt it . Yes, it is all about the broad band, that is the future, comcast is a largest Internet Provider and time warner is adding a big footprint and in the end it is about broad band and efforts like comcast to continuing to tying the profits to the television services. If you subscribe to cable to get whoo you want online that is good for the business. For most of the americans, these companies could be the only option for high speed broad band, for most places if you truly high Speed Internet you are talking about the Cable Provider. How does Net Neutrality and the rules and debate about the future of the internet play into this . It is a red herring. Comcast is subjecting to the Net Neutrality rules. That is running until 2018. The fcc didnt lose the Net Neutrality case. They had the orders struck down, but the Court Granted them Broad Authority. So the fact of the matter is what while i think that the fcc should be more careful in regulates and they are the brorder authority to regulate. If there is a concern in the future, the fcc can address that then and the conditions in place today are not just about Net Neutrality but about making sure that comcast doesnt leverage the media content it owns against other net works and not discriminating against the video providers. This deal actually means better broad band for Time Warner Cable subscribes. The comcast upgraded the speeds and faster speeds in the markets that time warner does and if we are concerned about the better broad band this is a great deal for the consumers and saving one and a half billion dollars in if efficients of running the companies together. We hear about the cable cutters, does this position the company in a different way to handle a public that is already starting to look past cable tv as a product . Certainly. This is something that Bryan Roberts the ceo of comcast has been working for. If you look back on the universal deal they would content and distribution. This is pushing the distribution side but as was said also really emphasizes the future of drishgs distribution over the web. But the web enters a lot of home via Cable Television, the same thing that brings in the tv. Yes, the number one source, 85 of americans that is the only option for truly high speed broad band that is the power of cable having, and their ability to interfere with that connection in the future after 2018. Not that far done the line the problematic. Imposing the data caps, the ability to slow down netflix and other competitorcompetitors. This is their own vision. The reason theres a Net Neutrality on the merger is comcast was violating the Net Neutrality and blocking the file sharing. They have a record of this. It is a cold comfort to me that o, no, no, we are going to arafat Net Neutrality, dont worry, trust us. What you dont hear on the list from the consumer benefits are lower prices, that never comes, the only direction that the cable prices have gone are up, up and up again. Craig cant have it both ways. The concern has been about vertical pressure, the fcc, congress, always afraid if Cable Providers got too big too much leverage over programming and i will stipulate that could be a concern and was in the 1990s when the cable channels owned by the Cable Operators and that number is low today. What we are talking about is a situation with comcast already has their hands tie and cant leverage their own content. For four years . Yes, four years and maybe longer, and the fc contraction has rules, Broad Authority under the decision i mentioned at the d. C. Circuit handing down and the antitrust law and the point here, craig is complaining about two problems, which i agree on. The second problem is the cabling bills are rising and that is not necessarily because of the Cable Companies but the programmers really have the power. It is easier to fight the market power with the Company Power and maybe better deals for the consumers and maybe see the prices fall or not rise as fast as they would be. After this break, we talk about creating a company that is powerful as a programmer as well. Time for us to take a short break. When we come back we talk about the future of what you read, watch and listen to in your home. This is inside story. Welcome back to inside story. Welcome back to inside story. Im ray suarez. How we consume media in the country is changing at the speed of the internet. Comcast the biggest player in cable is getting much bigger with the acquisition of time warner and we are discussing the deal and what it tells us about the future. David, you were trying to jump in before the break. Go ahead. There is an arms race going on between the distributors and the providers of cable. They considered doing a deal for scripts, a big Cable Network provider and the reason they didnt do it because they feel like they have enough leverage now. What people close to the deal said was if the Cable Operators get bigger well have to consolidate bigger, so this deal could spur more deals and that this arms race is going to rage for years and years and to be sure, it is driving up prices for cable subscribers but looking at what the cable content providers have planned theres little to reason to think that is going to stop any time soon. Craig, would this company have to promise it is not going to play hard ball on the channel placement and the carrying of the offerings and in ways that they wouldnt have the power to be muscular about what americans see on television. The merger conditions of that sort are very hard to enforce and as administrations change and different people are there, we havent really seen it. I think that the advantages here for comcast are in building the up their muscles. If you hate the cable guy you are going to like the cable guy on steroids and this is what the deal is creating. Time warner is a Company Raises the rates regularly and saying it is because of the programming costs and comcast you are happy to see those rates rise. This is really a situation where they make a lot of promise and assurances br the viewer, the customer, this is really a loselose situation and hitting them in the wallets and leeing them with viewer choice and putting comcast in a powerful gate keeper role over the future of the internet and tv and going to be calling a lot of the shots. Barron, why wouldnt this combined company use their power in that way, that is the reason that the Companies Get big to have to power and control the marketplaces . Sure, they have agreed when buying nbc to a set of conditions preventing from those conditions and when thaez conditions expire, the fcc can police the negotiations. Now if you are concerned about as you think the Cable Company is continuing to get bigger, it is worth noting that market share has decreased and in fact, comcast is not the number one video provider. The Satellite Companies chipped away at the market share of the Cable Companies over the years and what we are seeing now is competition from a new source, which is new entrance into the broad band, verizon, which built out of a fiber network, google, century link, this is where i agree with craig doing everything we can to make sure those companies have an easy time as possible and not going through a lot of hurdles to roll out the fiber, if the competition is the problem, we are deal with that problem and if we spent the next six months that otherwise will wasted talking this be deal, if we spent that time instead talking about the encouraging broad band deployment the market would be more competitivcompetitive. Well have a conversation in the future about what the future holds for people just trying to get content into their homes, obviously that marketing place is in flux. Thank you for being with us today. In washington, im ray suarez. Welcome to al jazeera america. Im del walters. These are the stories we are following for you. The nfl releasing that independent report on the scandal that rocked the miami dolphins. The aftermath of a storm, dozens of cars and trucks in a huge pileup in pennsylvania. President obama traveling to california, trying to get a firsthand look at that devastating drought. Th