The battle over Comcast Corp.'s proposed takeover of Time Warner Cable shifted Tuesday to downtown Los Angeles, where California utility regulators weighed whether to block the blockbuster merger.
The state Public Utilities Commission heard from more than 140 outspoken advocates, many arguing the combination of the nation’s two largest cable companies would hurt California consumers.
The hearing underscored the unusual clout state officials are exerting over a national merger that must also clear intense scrutiny from the Federal Communications Commission and the U.S. Department of Justice.
The PUC must approve the transfer of California phone licenses to Comcast from Time Warner Cable and Charter Communications. Phone service is one of three key offerings that the companies provide. Because the companies bundle their phone, cable TV and high-speed Internet services together, the PUC is weighing the effect on consumers.
The deal would give Comcast nearly 30 million customers nationwide — including 4 million in California.
Under one scenario, Comcast could clear regulatory hurdles on the federal level to win approval for its $45-billion takeover of Time Warner Cable but still strike out in California. If that happens, Comcast then might have to drop Southern California from its takeover plans.
That would leave Time Warner Cable subscribers in Southern California in limbo and subject to a scramble by other pay-TV providers who would be interested in laying claim to one of the most lucrative cable TV and Internet service markets in the U.S.
Two months ago, an administrative law judge recommended that the PUC approve the merger — and attached a list of conditions. Then, in a surprise move late last week, PUC Commissioner Mike Florio raised the stakes for state regulators when he filed an alternative proposal to deny the merger.
Florio contended that a bulked-up Comcast, which currently provides service in Northern California, would end up having too much control over the Internet service market in California because it would serve more than 80% of the state.
On Tuesday, representatives of dozens of community groups voiced support for Comcast’s deal. But nearly as many opponents urged the PUC to block the merger.
“This merger is not about the consumers,” said Joe Stringer, a retiree from South Los Angeles who opposes the deal. “These two companies want to merge so they can get more money. That’s what this is about.”
If the merger is approved, Comcast would supply cable TV and high-speed Internet service for nearly 2 million homes in Southern California.
Charter Communications, which has nearly 300,000 subscribers in the Los Angeles region, also is involved in the merger because of a separate agreement with Comcast. The two companies agreed to swap some of the markets they currently serve.
Comcast needs the support of at least three of the five PUC commissioners. The two PUC commissioners who traveled to Los Angeles for Tuesday’s hearing, Carla J. Peterman and Catherine J.K. Sandoval, declined to disclose their positions. Both commissioners are expected to play a pivotal role in the panel’s decision.
“It’s far from over,” Wells Fargo Securities media analyst Marci Ryvicker said in a report assessing Comcast’s challenges dealing with the PUC.
The PUC is expected to vote in late May or June.
This week, Comcast, the Philadelphia cable giant, reiterated its position that the merger would serve the public interest. It argued that it would provide consumers with higher-speed Internet service than Time Warner Cable. It also said that it has a more ambitious program of introducing high-speed Internet service to low-income residents.
On Tuesday, Comcast also emphasized its role in the local economy. Its subsidiary NBCUniversal employs nearly 15,000 people in the Los Angeles area.
Many people still see Comcast as only a provider of boxes and wires for cable TV, broadband and phone, but the company is moving aggressively into entertainment, Comcast Executive Vice President David Cohen wrote Tuesday in a Comcast blog post.
“Entertainment is a big and growing part of our business,” he wrote.
Cohen noted that Comcast owns the Universal Studios theme park, Universal Pictures movie studio and NBC Entertainment operations in Los Angeles County.
“Our proposed transaction with Time Warner Cable will allow us to increase our impact, distributing more content, including more diverse and independent content, for consumers,” Cohen said.
Some people at the hearing were not persuaded.
“We in California are in need of more of a choice,” said Betty Jo Toccoli of Los Angeles, one of the opponents. “And past experience has shown that bigger is not necessarily better.”
At the hearing, several local government officials, including city officials from Downey, South Gate and Huntington Park, voiced support for the deal.
Comcast hopes to gain both state and federal approval and complete the merger this summer. Meanwhile, Comcast and its allies questioned whether the PUC has any real authority to block the deal.
Former California State Assembly Speaker John A. Perez warned commissioners that their authority may be narrow. “The Legislature limited the PUC’s authority in this area,” he said outside the PUC hearing room.
This was the second public hearing that the PUC has held on the proposed merger. At a February session in San Francisco, the PUC came under fire for not holding a hearing in Los Angeles.
“We thought it was critical to hear from the people who were most affected by this merger,” Commissioner Sandoval explained.
The commissioners spent 2 1/2 hours listening to dozens of speakers.
Before the meeting, about 80 protesters, including members of the Writers Guild of America, West; Consumers Union; Los Angeles Latino Chamber of Commerce; and Presente.org, a Latino advocacy group, rallied outside the state building in downtown L.A.
Some held signs with slogans such as “Comcast Mega Merger = worst customer service = fewer choices = higher prices” and sported buttons emblazoned with the slogan “No Comcast Mega Merger!”
The Writers Guild has been particularly outspoken. The guild believes that media consolidation is largely responsible for fewer jobs in the industry.
“Los Angeles is already suffering from a loss of production over the last 10 years — media consolidation like this will only make that tougher,” said Shawn Ryan, a prominent television writer and producer who created the TV show “The Shield.” He currently is a member of the Writers Guild of America’s board of directors.
The merger, Ryan argued, “will put things in fewer hands and fewer productions will get made.”