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How the Comcast/TWC merger failed

Time Warner Cable Comcast merger
Protesters gather in front of the Time Warner Center building in New York, NY to protest in favor of Net Neutrality. – Image credit: Flickr / Backbone Campaign

Both Bloomberg and Comcast-owned CNBC are reporting that Comcast will drops its’ plans to buy Time Warner Cable after the Federal Communications Commission recommended a hearing on the merger. The merger was announced 14 months ago and was immediately condemned by everybody not associated with Comcast. Coalitions began building and support for the merger began to erode. Now the plug has been pulled and the merger is dead.

Let’s rewind and see where it all went downhill for Comcast.

The Coalition against

Consumer, privacy and other lobbying groups – mainly the Free Press Foundation – immediately rejected the proposal soon as it became official.

As the rest began examining the merger, the coalition against the merger began.

Realizing that Comcast would control 33% of cable subscribers in the United States and would be the default cable and broadband provider in every city that’s in the top 10 TV market (New York, Los Angeles, Chicago, Philadelphia, Dallas, San Francisco, Boston, Washington DC, Atlanta and Houston), cable TV channels began voicing their opposition to the merger,  mainly from smaller channels like WeatherNation and Glenn Beck’s The Blaze TV. Then broadcast stations came onboard, mainly Sinclar. Then came competing cable operators. Then came Netflix. Whatever room was left onboard the bandwagon was filled with everyone else to didn’t want the merger to proceed.

The coalition for the merger never mature to the level of the coalition against. In fact, was simply embarrassing. Those that supported the merger were either told by Comcast what to say or benefited from the merger.

The Bad PR

All Ryan Bloc wanted to do was cancel his service with Comcast. Instead he was given the runaround.

This nightmarish call started the tidal-wave of bad PR stories involving Comcast and their customer service. The Verge put out a call to Comcast representatives and more than 100 responded with the same message:

These employees told us the same stories over and over again: customer service has been replaced by an obsession with sales, technicians are understaffed and tech support is poorly trained, and the massive company is hobbled by internal fragmentation.

Dubbed Comcast confessions, The Verge detailed all conversations from those that worked at Comcast. One story was why a cable technician would be late:

Comcast, like most cable companies, schedules appointments in time frames instead of set times to allow technicians some flexibility. But Comcast technicians told The Verge that they’re frequently booked solid throughout the day, making it easy to fall behind. On busy days, employees said, a dispatcher will even overbook technicians, figuring at least one appointment will cancel.

If technicians aren’t able to quickly diagnose and resolve a problem, they may kick the can down the road by scheduling yet another appointment, or “truck roll.” To keep up with their stacked schedules, technicians are tempted to cut corners, resulting in shoddy work, customer complaints, and repeated visits. Third-party technicians contracted by Comcast are typically paid by the job, incentivizing them to cram as many visits into a day as possible.

The Verge was provided with the guidebook on what call reps say when people call in to cancel their service, special VIP access lines and more people taping their cancellation horror stories.

An embarrassed company finally revealed what everybody already knew, that they needed to fix customer support and a person was assigned to fix it. And if Comcast wanted to buy Time Warner Cable, they have to show that the new Comcast really cares about their customers and not solely on income and high stock prices.

The eye-opening moment that caught peoples attention was the last paragraph of Comcast’s press release:

Transformation isn’t going to happen overnight. In fact, it may take a few years before we can honestly say that a great customer experience is something we’re known for.  But that is our goal and our number one priority … and that’s what we are going to do.

Even with Comcast saying customer support is being fixed, the bad press continued. A homeowner who was told it was serviced by Comcast but not. One about ghost-writing support leaders written by government officials. Another about removing an article on a Comcast-affiliated site.

There’s one story where voters in some parts of Colorado approved measures to build municipal Internet providers without Comcast trying to defeat the measure.

With numerous corporations and groups opposed to the merger and bad press involving customer support, support for Comcast’s attempts to buy Time Warner Cable was starting to turn.

The FCC and the moment that changed

When a merger of two companies that involves any type of communication, it must be approved by the FCC – the Federal Communications Commission. When the commissioner receives a notice of a pending merger, the commission has 180 days to review the merger and either approve it or not. The commission can pause the clock if they see fit. The first pause occurred in October of 2014 and paused again in December. The clock was resettled in January of 2015 and – unexpectedly, paused again last month.

Doubts began getting stronger that this merger wasn’t going to happen but it was still looking good that it will be approved. It wasn’t until the FCC made a change that will be the defining moment the Comcast/TWC merger was doomed.

That moment came on January 26 – a month before the FCC voted on Net Neutrality regulations – when the commission changed what was defined as broadband speed.

Per the New York Times:

The new broadband benchmark sets downloads at a speed of 25 megabits a second and uploads of 3 megabits a second. The previous standard was a download speed of 4 megabits a second and an upload speed of 1 megabit a second.

Under the existing rules, Comcast was able to claim that even with the merger, the new company would only control 35% of the broadband market.

Under the new rules, the new Comcast/TWC corporation would control 60 to 70 percent of the nation’s broadband market – with 63% of the country having Comcast/TWC as the sole provider of Internet Service.

Now the focus begins to shift from the FCC to the Department of Justice and whether they would block the merger due to antitrust concerns.

Both companies began their sales-pitches to keep the merger alive but the drum-beat of a failed merger was getting louder.

The Past comes back to haunt

The merger with Time Warner Cable failed because of Comcast’s past: The acquisition of NBCUNiversal, focusing on what was promised and what wasn’t delivered.

Mainly “Internet Essentials” as described by Harvard Law professor and technology expert Susan Crawford:

But Comcast’s biggest tool of persuasion has been a program it calls “Internet Essentials,” originally used to convince the FCC that the company’s 2011 merger with NBCU was a good idea. It involves extending low cost access to schools and people who can’t afford Comcast’s high rates.

What was touted as something positive for approving the NBCUniversal merger came back and bit Comcast in the ass.

Crawford continued:

For starters, only low-income families with school-age children are eligible for the program. It does nothing to close the digital divide for other underserved groups like the elderly, the disabled, and low-income childless adults. Plus, it’s hard to apply: the California Emerging Technology Fund says that it takes two or three months for applications to arrive. No existing Comcast customers are eligible — no matter how “low-income” you are, you can’t decide to reduce your bill by applying for Internet Essentials instead. (Families have been told to drop their Comcast service for 90 days and then try signing up — a terrible hardship for anyone.)

It hasn’t been a popular program in California, where somewhere between just 11 and 15% of eligible families have signed up, depending on how you count. (Comcast makes it virtually impossible to figure this out; it doesn’t release data that would allow this calculation to be made reliably, so everyone squirrels around trying to reverse-engineer the numbers Comcast does make public.)

The failed “Internet Essentials” program was all it needed to end the merger. The FCC announced a hearing on the merger and Comcast has thrown in the white flag.

The merger was off.