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Comcast defends Time Warner Cable deal as U.S. review kicks off

The Time Warner Cable office is shown in Carlsbad, California November 5, 2012. REUTERS/Mike Blake
The Time Warner Cable office is shown in Carlsbad, California November 5, 2012. REUTERS/Mike Blake

By Alina Selyukh and Liana B. Baker

WASHINGTON/NEW YORK (Reuters) - Comcast Corp sought to rebut critics of its planned $45.2 billion takeover of Time Warner Cable Inc, arguing that newcomers like Google Inc and Apple Inc would ensure competition in both Internet and video markets.

In a 175-page filing with the Federal Communications Commission that kicks off the FCC's review of the deal, Comcast argues that combined with Time Warner Cable, it will compete with an "array of sophisticated companies with national or even global footprints" such as Google, Netflix Inc or Verizon that have gained ground against Comcast.

"In the evolving video marketplace in which these companies have thrived, there is no reason why a cable company should be limited in evolving as well," Comcast's filing said.

"Over the last few years, our competitors have evolved into being much larger companies by revenue, by cash flow and or by customers than we are to all have a larger geographic scope than we have," Comcast Executive Vice President David Cohen told reporters after the filing was made public on Tuesday.

If approved by the Justice Department and the FCC, the merger would result in a company that would serve just under 30 percent of the U.S. pay television video market, after Comcast's plan to divest 3 million subscribers.

The merged provider would also serve between 20 percent and 40 percent of U.S. broadband subscribers, depending on whether wireless broadband offered by telecom companies is included, Comcast said.

Opponents have raised concerns that the sheer size of the merged company would give it too much control over what Americans can watch on television and do online as Comcast boosts its power as a buyer of web and pay-TV content.

"The great equalizer is that for many of those companies, they don't own the network in the high-speed video marketplace," said Chris Lewis, vice president for government affairs at consumer interest group Public Knowledge, referring to Google, Apple, Netflix and other content providers Comcast cited as its growing competitors.

Cohen and Time Warner Cable's finance chief Arthur Minson are expected to hear about these concerns when they testify at the Senate Judiciary Committee on Wednesday.

A Reuters/Ipsos online poll last month found a majority of Americans skeptical about the proposed merger, with 52 percent of the 1,368 surveyed people saying that mergers such as the Comcast-Time Warner Cable deal result in less competition and are bad for consumers.

Comcast shares on Tuesday traded at their lowest level since the Time Warner deal was announced in February, a four-month low of $48.24 per share, and were 0.3 percent lower in the session.

BROADBAND COMPETITION

Since announcing its bid, Comcast has underscored that the merger combines two companies that do not directly compete in any markets, meaning no consumer would lose a choice of an Internet or cable provider. It has argued that Time Warner Cable's customers would see a boost in quality of their services and the speed of their Internet.

However, while lack of direct competition does away with major antitrust concerns that could trigger a block from the Justice Department, the FCC gets much broader leeway in examining whether the deal is in the public interest.

Cohen said in more than 98 percent of the broadband markets served by Comcast and Time Warner Cable, customers have another Internet service choice offered by a top-ten telecom provider, delivered through fiber or new-generation DSL, plus newer entrants such as Google Fiber.

Comcast also made the case that its sales of service including broadband to small and large businesses could present companies with an alternative to telecom providers such as Verizon and AT&T.

The company also reaffirmed its commitment to so-called network neutrality rules, which ban Internet providers from slowing down or blocking access to content online, and that have been struck down by a court as formal FCC rules in January.

Comcast, thanks to a condition placed on its 2011 merger with NBC Universal, is now the only company bound to uphold net neutrality for the next five years and has promised to apply it post-merger when it becomes larger.

The FCC is now reviewing how to rewrite the net neutrality and the treatment of web traffic, including the fees content companies pay Internet service providers in so-called interconnection deals, is likely to be part of the agency's review of the merger.

(Editing by Andrew Hay, Bernard Orr)

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