Comcast Calls Off Mega-Merger with Time Warner

One of the largest mergers in US history will be called off, according to Bloomberg News, as Comcast will drop its $45.2 billion offer for Time Warner.

The writing was on the wall yesterday when the FCC staff recommended that hearings be held on the deal and that an administrative law judge rule on whether the proposed merger would be harmful to consumers.

This, along with months of foot dragging by the Department of Justice, apparently spooked Comcast enough that an announcement is expected in the next 24 hours calling off the merger.

CNNMoney:

There was initially an air of inevitability around the merger when Comcast announced its bid back in February 2015.

But doubts grew in recent months as the government’s reviews of the deal dragged on, and the company’s stock prices shifted accordingly.

The key piece of new information after Wednesday’s meetings was about the Federal Communications Commission, which along with the Department of Justice had been reviewing the proposed combination in great detail.

FCC staffers are not convinced the merger is in the public interest, and they are recommending that the case be heard by an administrative law judge, according to people with direct knowledge of the matter.

It’s a bureaucratic maneuver, one that effectively strangles the merger by swallowing up months and months of time. It happens so rarely that the FCC barely has the staff to do it.

The Wall Street Journal first reported on the staff recommendation on Wednesday night. BTIG Research analyst Richard Greenfield reacted by saying, “This would appear to be a death sentence for the transaction.”

An FCC spokeswoman declined to comment. But another person confirmed to CNNMoney that the five commissioners have been briefed on the recommendation, and that a vote will be scheduled soon.

The commission is comprised of three Democrats and two Republicans, so the hearing will likely be supported by a majority.

But the vote would be rendered moot if Comcast withdraws from the deal.

There is said to be serious skepticism about the deal within the Justice Department, as well.

Critics of the deal are ecstatic:

“Comcast’s withdrawal of its proposed merger with Time Warner Cable would be spectacularly good news for consumers concerned about the spiraling costs of cable and broadband and for millions of citizens who want nothing more to do with gatekeeping and consolidation in the communications ecosystem on which our democracy depends,” said former FCC chairman Michael Copps, who is now special advisor to Common Cause’s Media and Democracy Reform Initiative.

“Comcast’s apparent failure to take control of Time Warner Cable should be a lesson for the industry,” said Free Press President Craig Aaron. “Communications giants should stop trying to consolidate and instead focus on providing the fast, affordable and neutral Internet services that Americans demand.”

TWC won’t be without a bidder for long. Already, Charter Communications is thought to be planning a bid for Time Warner’s 11 million subscribers. There are losers, however:

That’s not to say either side will be celebrating. (It would be a particularly sad day for TWC chief executive Rob Marcus, who was supposed to receive $80 million upon completion of the deal.) Wall Street banks and law firms contracted by both companies won’t be smiling either—they stand to lose out on hundreds of millions of dollars that they would have made in fees.

There were always pros and cons for consumers in this deal, but in the end, the nixing of a deal to create the largest broadband media company in the US is probably a good thing. Economies of scale are wonderful — if you’re on the heavy end of the scale. Otherwise, competitors would have been squeezed, reducing competition, and more than 30 million consumers would have been at the mercy of a gigantic media conglomerate already holding a monopoly on cable TV service in big markets all across the country.

Comcast was my cable-broadband provider for 6 years before I switched to DirecTV and my experience with their customer service and technical departments was usually frustrating and maddening. I don’t see how that could improve if they increased in size by 50%. Consumers are probably better off without the merger.