Comcast-TWC proposed $45bn merger hits regulatory turbulence

Comcast's hopes of completing its $45bn purchase of Time Warner Cable have been dealt a blow after the US communications watchdog recommended an administrative hearing, a move it typically makes when it decides a deal is not in the public interest.

The recommendation by the Federal Communications Commission "appears certain death for the transaction", said Rich Greenfield, an analyst at BTIG Research. "The question now is how soon does Comcast walk away and what do they focus on next?"

The deal to combine the US's two largest cable and internet providers would have changed the media landscape, creating a content and distribution powerhouse.

A combined Comcast-TWC would have supplied some of the largest metropolitan areas in the US with cable television services and, more significantly, would have been the largest provider of fixed-line, high-speed internet access.

Comcast also owns the NBC Universal broadcast and cable network, as well as the Universal Studios theme park and movie studio.

The deal, which requires approval from both the FCC and the justice department, has faced more than a year of regulatory scrutiny and a storm of protest from open internet advocates and opponents of cable consolidation.

Critics and companies such as Netflix and Discovery Communications have lined up to urge the FCC to block the deal because the combined companies would wield too much market power.

The FCC's staff recommendation must now go to the regulator's five commissioners, who will vote on whether to approve it.

The FCC is required to refer merger proposals to a judge via a hearing designation order if it cannot determine that a deal is in the public interest or if it has substantive questions about its details. An administrative law judge then reviews the deal in a trial-style process.

It is rare for transactions to be passed to a judge by the FCC, but in 2011 the regulator's decision to refer AT&T's attempt to buy T-Mobile turned out to be a bad omen for that deal, which eventually collapsed.

A review by an administrative law judge would probably take several months.

Comcast and Time Warner Cable declined to comment on the recommendation for an administrative hearing, which was first reported by the Wall Street Journal.

"Giving so much control over our communications system to one company - especially one with a track record of spiralling prices, terrible customer service and blocking internet content - would be a mistake," said Matt Wood, policy director of Free Press, a non-partisan group that opposes the deal.

If, as seems likely, the deal collapses, other transactions will be jeopardised.

Comcast's proposed sale of 3.9m subscribers to rival Charter Communications - which it proposed to appease regulators - would fall through. Charter's agreed $10.4bn purchase of Bright House Networks would also be in doubt.

The tide first began to turn against the deal in November 2014, when President Barack Obama urged the FCC to regulate the internet as a public utility much like the US telephone system.

His intervention stunned Comcast, which has argued against reclassification, and sparked market jitters that the deal would be blocked.

Comcast held separate meetings on Wednesday with the FCC and with the justice department. Bloomberg reported last week that justice department staff attorneys were nearing a recommendation to block the deal.

It is unclear if Comcast and TWC would agree to further concessions to ease regulatory worries over the combined company's footprint in pay-TV and broadband and its negotiating power over TV programmers.

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