FCC Chairman Explains How Comcast-Time Warner Deal Threatened Online Video

Before the deal collapsed this week, Federal Communications Commission Chairman Tom Wheeler hadn't said much publicly about Comcast's $45 billion bid to take over Time Warner Cable.

Now that the merger is dead, Wheeler no longer is keeping his views to himself.

“The proposed merger would have posed an unacceptable risk to competition and innovation, including to the ability of online video providers to reach and serve consumers,” the FCC chief said in a statement issued this morning, shortly after Comcast officially called off the deal.

He added that the deal's demise is “in the best interests of consumers.”

Comcast's decision to walk away from the deal came soon after reports surfaced that regulators at the FCC and Department of Justice opposed the takeover, which would have left the company as the sole broadband provider for many U.S. residents.

Wheeler, a former cable industry lobbyist, is now being praised as a consumer hero -- both for his stance on Comcast as well as his decision earlier this year to reclassify broadband as a utility and impose common carrier rules on providers.

“Twice now, Wheeler has impressively dodged the lure of the crony capitalism that often seems to infect Washington, statehouses and city halls -- no matter which party runs them -- when it comes to regulating big, powerful and well-connected companies like Comcast and Time Warner,” Philadelphia Inquirer columnist Jeff Gelles writes today.

Wheeler -- and other regulators -- obviously were afraid that a combined Comcast-Time Warner could wield its control over broadband access in a way that stymied competition from Netflix, Amazon and other companies that offer streaming video.

Unfortunately, however, broadband providers remain in a position to stifle online video distributors. For instance, Internet service providers could impose the kinds of data caps that make it impractical for people to replace cable video subscriptions with online only offerings.

ISPs have this kind of power for a simple reason: lack of competition. In many parts of the country, people who want service at speeds of at least 10 Mbps typically have a choice of just two wireline providers, according to a report issued in December by the Commerce Department. Only 37% of U.S. residents have a choice of two or more broadband providers offering 25 Mbps connections, the report states.

Re/code writer Peter Kafka proposes that Google Fiber could expand to new areas of the country and offer competition to the incumbents.

But that's not the only option. Cities could also take matters into their own hands and create municipal networks.

Some towns like Wilson, N.C. and Chattanooga, Tenn. have already done so.

But the cable companies and telecoms in those states (and around 18 others) pushed back by lobbying local lawmakers to restrict other towns from building their own networks.

Wheeler recently took on those laws as well. At his urging, the FCC invalidated curbs on muni-broadband in North Carolina and Tennessee. The move likely guts restrictions in around 18 other states as well.

That decision, while it didn't grab as many headlines as opposing the Comcast-Time Warner merger -- or declaring broadband a utility service -- could prove enormously significant. Doing away with muni-broadband curbs paves the way for towns to create the kinds of networks that pose real competition to the incumbents.

Not surprisingly, the state of Tennessee is appealing the FCC's muni-broadband ruling. Also not surprisingly, trade organizations and ISPs are appealing the FCC's decision to reclassify broadband as a common carrier service.

There is no telling yet whether the courts will uphold the decision to reclassify Internet access, or to nix restrictions on muni-broadband. But Comcast's decision to walk away from Time Warner appears to be final -- and will long be viewed as a victory for Internet users.

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