Comcast Spent Big For Little Result

   (FROM THE WALL STREET JOURNAL 4/25/15) 
   By Shalini Ramachandran, Brody Mullins and Brent Kendall 

WASHINGTON -- Comcast Corp. Chief Executive Brian Roberts called Federal Communications Commission Chairman Tom Wheeler on Monday to lobby for his $45 billion deal with Time Warner Cable after rumors surfaced it was in trouble.

Mr. Wheeler didn't tip his hand during their call even though he had made up his mind to oppose the merger. Instead he said Comcast would learn more later in the week. On Wednesday, FCC officials told Comcast they had concluded the deal wouldn't be in the best interests of consumers and were preparing to recommend it for a hearing, which would effectively kill the merger.

The 11th-hour lobbying push from the Comcast's chief executive represented one last failure of Comcast's vaunted lobbying effort in a 14-month drive to secure regulatory approval to merge the nation's No. 1 and No. 2 cable and broadband Internet providers.

The company's inability to convince Mr. Wheeler -- once a cable lobbyist and a longtime acquaintance of Mr. Roberts -- was a final and unexpected blow. In recent weeks, people close to the companies had claimed that Mr. Wheeler may be on their side.

In the end, Comcast's strong ties in Washington were no match for a more powerful force: Concerns that the broadband giant created by the deal would have the power to harm the burgeoning streaming-TV industry.

Comcast built a giant lobbying operation in Washington, employing more than 100 individuals at 40 lobbying firms. It spent $17 million on lobbyists in Washington last year -- more than any other U.S. corporation.

Among those paid to press for the merger were former aides to just about every significant lawmaker and policy maker as well as Mr. Wheeler himself.

Few companies have a closer relationship with President Obama. Mr. Roberts golfed with the president in Martha's Vineyard and Mr. Obama has attended more than one fundraising event at the Philadelphia-area home of David Cohen, the head of Comcast's government affairs division. Both Messrs. Cohen and Roberts have visited the White House, according to visitor logs.

But officials at both the FCC and Justice Department's Antitrust Division concluded the combined companies would have the incentive and the ability to prevent online video competitors from gaining traction.

Attorney General Eric Holder authorized the Justice Department to challenge the deal two weeks ago after he was briefed on the merger by the antitrust division, according to a department official.

Ultimately, it was Mr. Wheeler's FCC that killed the deal.

Comcast long thought it had a shot at convincing Mr. Wheeler, given his lobbying ties to the telecommunications industry. Yet from the beginning, Mr. Wheeler didn't see much positive in the deal, a person familiar with his thinking said.

In recent weeks, as staff analyses showed the combined company's market power, the negatives of the deals crystallized for Mr. Wheeler, the person said.

Staffers began to sum up their research in recent weeks and reached two main conclusions: Comcast's claimed benefits for the deal were slight, while the potential risks posed by the transaction were large, according to an FCC official.

A pivotal moment came in November, when Mr. Obama announced he wanted the FCC to create the strongest possible rules on net neutrality.

The announcement was seen by many as undercutting Mr. Wheeler, who had been working for a year on his own, more moderate version of a net-neutrality proposal, which he had not yet unveiled.

Mr. Wheeler embraced Mr. Obama's guidelines and in February the FCC approved net neutrality rules that tracked the White House request that all Internet traffic be treated equally.

At the time, observers as well as Comcast executives thought the government's new net-neutrality rules were so strong the "broadband concentration issue" arising from putting together Comcast and Time Warner Cable would no longer be a concern for regulators.

Officials at both agencies said the net-neutrality rules did not reduce or resolve the competition concerns raised by the deal.

In the later stages of the review, FCC staff decided to recommend to the chairman's office the agency refer the merger for a hearing in front of an administrative law judge, a move that would effectively kill the deal.

On Monday's call with Mr. Wheeler, Comcast's Mr. Roberts said that before the company announced the merger, it hired four antitrust law firms to predict whether it would win government approval. All four said it would, Mr. Roberts told Mr. Wheeler.

On Wednesday afternoon, the FCC staff told aides to the commissioners they had concluded the deal was not in the public interest.

About an hour later, Comcast lobbyists and lawyers went to the FCC and met with Mr. Wheeler's team. Jonathan Sallet, FCC general counsel, broke the news to Comcast.

Mr. Sallet and other senior FCC staff told Comcast and Time Warner Cable executives and lawyers that FCC staff didn't believe approving the deal would be in the public interest.

People familiar with the meeting said there was no discussion of alternatives.

On Thursday, Mr. Cohen called Mr. Sallet to make sure that what he heard about the meeting was true. He also wanted to confirm that the FCC's views matched Mr. Wheeler's perspective on the deal.

Mr. Sallet said yes. Mr. Cohen told Mr. Sallet that the company would examine its options. He hung up the phone and began planning to call off the merger.

A few hours later, on Thursday evening, Comcast's board voted to abandon the deal.

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