Bad News for Comcast Deal in FCC Report

The cable giant did well in the study, but it undercuts a Comcast argument for buying Time Warner Cable.

POMPANO BEACH, FL - FEBRUARY 13: A Comcast truck is seen parked at one of their centers on February 13, 2014 in Pompano Beach, Florida. Today, Comcast announced a $45-billion offer for Time Warner Cable. (Photo by Joe Raedle/Getty Images)
National Journal
June 18, 2014, 12:19 p.m.

Com­cast per­formed well in an In­ter­net speed study re­leased Wed­nes­day, but the fed­er­al re­port could still be a blow to the cable gi­ant’s plan to buy Time Warner Cable.

The Fed­er­al Com­mu­nic­a­tions Com­mis­sion re­port found that DSL con­tin­ues to lag be­hind oth­er In­ter­net ser­vice op­tions such as cable and fiber, call­ing in­to ques­tion just how com­pet­it­ive the broad­band mar­ket really is.

A key ar­gu­ment that Com­cast is mak­ing for why it should be al­lowed to buy Time Warner Cable is that con­sumers have an ar­ray of oth­er choices for In­ter­net ser­vice. The Justice De­part­ment and FCC are cur­rently re­view­ing wheth­er the mer­ger of the top two cable com­pan­ies would il­leg­ally sup­press com­pet­i­tion.

In testi­mony be­fore the Sen­ate Ju­di­ciary Com­mit­tee earli­er this year, Dav­id Co­hen, Com­cast’s ex­ec­ut­ive vice pres­id­ent, said DSL pro­viders are “for­mid­able broad­band com­pet­it­ors.”

“While some may scoff at the com­pet­it­ive vi­ab­il­ity of DSL ser­vice, mar­ket real­it­ies and in­vest­ments by tel­cos in DSL tech­no­logy that have led to in­creased DSL speeds re­but those con­cerns,” Co­hen said.

While the re­port found that many In­ter­net ser­vices have got­ten faster in re­cent years, DSL pro­viders showed “little or no im­prove­ment in max­im­um speeds.”

Ad­di­tion­ally, DSL pro­viders are ad­vert­ising faster speeds than they ac­tu­ally de­liv­er, the agency found. Ac­cord­ing to the re­port, DSL pro­viders were the only com­pan­ies to fail to de­liv­er at least 90 per­cent of the speeds that they ad­vert­ised.

The re­port also found that con­sumers are in­creas­ingly de­mand­ing faster ser­vice, fur­ther un­der­cut­ting Com­cast’s claim that many con­sumers would be will­ing to switch to DSL.

Com­cast and oth­er cable pro­viders per­formed well in the study. Com­cast de­livered 108 per­cent of its ad­vert­ised down­load speeds dur­ing peak hours, a slight im­prove­ment over last year’s res­ults.

The FCC sent let­ters to the DSL pro­viders and oth­er un­der­per­form­ing com­pan­ies de­mand­ing more in­form­a­tion about why their cus­tom­ers aren’t get­ting the speeds they paid for.

In a state­ment, FCC Chair­man Tom Wheel­er said it is “en­cour­aging” that some pro­viders are im­prov­ing their ser­vices but he is “con­cerned that some pro­viders are fail­ing to de­liv­er con­sist­ent speeds to con­sumers that are com­men­sur­ate to their ad­vert­ised speeds.”

Har­old Feld, the seni­or vice pres­id­ent of con­sumer-ad­vocacy group Pub­lic Know­ledge, said the re­port is “one more piece of evid­ence” that the gov­ern­ment should kill the cable mer­ger.

“Cable broad­band is not a dir­ect com­pet­it­or to DSL in a rel­ev­ant way,” he said, point­ing to “in­her­ent lim­it­a­tions” in DSL tech­no­logy.

He ad­ded that the re­port could ac­tu­ally bol­ster AT&T’s case for why it should be al­lowed to buy Dir­ecTV. AT&T has ar­gued it needs ad­di­tion­al rev­en­ue to up­grade its DSL net­work.

Com­cast did not re­spond to a re­quest to com­ment, but the Na­tion­al Cable and Tele­com­mu­nic­a­tions As­so­ci­ation, a lob­by­ing group that rep­res­ents Com­cast and oth­ers, pub­lished a blog post tout­ing the strong per­form­ance of cable pro­viders.

“The good news from a cable per­spect­ive is that pro­viders are de­liv­er­ing speeds that con­sist­ently meet or ex­ceed ad­vert­ised num­bers,” the as­so­ci­ation wrote.

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