FCC Staff Recommends Hearing on Comcast-Time Warner Cable Merger

Federal Communications Commission staff recommended that the regulatory agency designate Comcast Corp.'s proposed acquisition of Time Warner Cable Inc. for a hearing, according to people familiar with the matter, a significant setback for the companies" merger plans.

The staff reached a conclusion that the best option for the FCC is to issue a "hearing designation order." In effect, that would put the merger in the hands of an administrative law judge, and would be seen as a strong sign the FCC doesn't believe the deal is in the public interest.

Comcast and Time Warner Cable may still have an opportunity to weigh in on the matter before the proceeding moves forward, one of the people said.

A hearing could be a drawn-out process, and some regulatory experts describe the procedure as a deal-killer, though Comcast would be entitled to make its case for the tie-up.

Comcast executives on Wednesday met with officials at the FCC and the Justice Department, as those regulators" reviews of the proposed $45.2 billion merger enters its final stages.

A Comcast spokeswoman declined to comment. In a written statement, the company confirmed it met with FCC and Justice Department officials but said, "we do not believe it is appropriate to share the content of those meetings publicly."

Regulatory scrutiny of the deal has intensified in recent weeks. The government is concerned about the influence the combined cable behemoth would have in the broadband and pay-television markets. The deal would create a company with control over roughly 30% of the pay-TV market and 57% of the market for broadband Internet service, which the FCC now defines as speeds 25 megabits per second and higher.

The Justice Department meeting with Comcast on Wednesday was a chance for both sides to air their views and begin discussing whether there are any concessions the cable companies could offer that would ease the regulators" worries.

Justice officials are said to be wary of attempting to address the agency's concerns through "behavioral remedies," or pledges by Comcast that it will conduct business in a certain way.

But there might not be a lot of scope for more "structural" conditions on the deal. Comcast and Time Warner Cable already have deals with Charter Communications Inc. to sell or spin off systems serving 3.9 million customers if the merger goes through.

The use of hearing designation orders is rare, but the procedure doesn't bode well for mergers. In 2011, AT&T Inc. and T-Mobile USA dropped a planned $39 billion merger after the Justice Department filed an antitrust lawsuit to block the deal and the FCC issued a hearing designation order on the deal.

Brent Kendall contributed to this article.

Write to Shalini Ramachandran at [e-mail] and Joe Flint at [e-mail]

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