The proposed merger of Comcast and Time Warner Cable, as it currently stands, looks like it could be a good move for the businesses and a bad move for consumers. But right now it’s still just that: a proposed merger. In order for this corporate marriage to move forward, federal regulators first have to approve the union–and that’s where it gets tricky.

There are a lot of eyes on Comcast, and on this acquisition. Some regulators are likely to be concerned for consumers, and ask for big concessions from the cable megacorp in order to allow the purchase to move forward. Others are very keen on supporting business interests, and might be inclined to wave the deal forward. What is the actual approval process, who are the players involved, and how are they likely to act?

The Merger Approval Process
Two separate entities have to approve Comcast’s plan to buy Time Warner Cable before it can proceed: the FCC, and either the FTC or the Justice Department. The FTC explains the merger approval process in detail on their website. The short version of the process is:

• Filing. The companies involved, in this case Comcast and Time Warner Cable, file notice of their proposed deal. From the date those documents are filed, the companies must wait at least 30 days before concluding the deal.
• Clearance: The FTC and Department of Justice sort out between them which agency will have oversight of the deal, called “clearance.” When clearance is granted, the agency can start digging into investigation, including accessing non-public information from both companies.
• Next steps: Once an agency has clearance, it can take one of three actions: terminate the waiting period early, allow the waiting period to expire, or ask for further information, called a second request, from the companies. The first two actions, ending the waiting period in any way, are essentially a green light to merger. Comcast/TWC will be subject to second requests, no matter which agency gets clearance.
• Compliance with second request: This is the part that takes a while. The second request from the investigating agency includes information about the companies and the industry, the relevant market conditions, and the “likely competitive effects” around the proposed merger. Once the companies have “substantially complied” with the requests for information, it kicks off another 30-day period for the agency to review the information and potentially make more requests.
• Approval or challenge: If the investigating agency closes its investigation without taking action, that’s approval and the business deal moves forward. If the agency does want to challenge the merger, they can do it in two ways: either they enter into a negotiated consent agreement, in which the companies work out details that will keep the marketplace competitive, or the agency files a preliminary injunction in federal court that stops the entire deal.

Comcast has said they plan to file their premerger notification documents in late March, which will get the ball rolling on the formal process.

Because Comcast and Time Warner Cable are communications companies, they are also subject to FCC oversight. The FCC’s role is “to ensure that the public interest would be served by approving the transaction.” Once the process begins, the FCC will maintain a public timeline of filings, as they did for the Comcast purchase of NBCUniversal in 2010-2011.

The proposed merger is also big enough to have attracted the attention of the Senate. Government scrutiny of this deal begins on March 26, when the Senate Judiciary Committee holds a hearing on the issue. The Antitrust, Competition Policy and Consumer Rights subcommittee, under the Judiciary Committee, oversees antitrust enforcement at both the DoJ and FTC.

The Players
It’s clear that Comcast has a lot of work to do to convince the FCC and the FTC/DoJ that this deal is not anticompetitive and is in the public interest. The merger announcement may have been made only two weeks ago, but Comcast has been laying a foundation of support for a very long time.

The New York Times reported last week on the sheer scope and reach of Comcast’s lobbying efforts. Those efforts not only include traditional lobbying and campaign donations, but also rallying organizations to which Comcast has made philanthropic donations. Those nonprofit groups are likely to write letters of support for the deal to the FCC en masse.

And of course, no company would spend so much time and money on lobbying if it didn’t work. As the NYT reports, 91 of the 97 members of Congress who signed a letter in support of Comcast’s 2011 purchase of NBCUniversal received contributions from Comcast’s PACs or executives.

The revolving door between regulators and the regulated is another piece of the puzzle. When lobbyists become lawmakers and retiring lawmakers start lobbying, everyone knows exactly whose elbows to rub. Comcast currently has two former Senators and two former Representatives lobbying on their behalf, and a former FCC commissioner who approved the NBCUniversal buyout immediately turned around and became a Comcast executive.

As influential as all of those people and organizations are, though, none of them actually get to approve or challenge the merger. The FCC does.

The FCC is a five-member bipartisan commission with a chairman at the helm. Commissioners serve fixed terms (but can serve more than one) and are nominated by the President and confirmed by the Senate.

Analysts and spectators have been looking to Comcast’s 2011 purchase of NBCUniversal as a guide for how the FCC might approach the proposed Comcast/TWC merger. Only one current FCC commissioner, Mignon Clyburn, also served in the role during the Comcast/NBCU purchase. She, like the majority of the FCC, voted in favor of the deal. At the time, she wrote in her statement that she felt the combination of Comcast’s voluntary commitments and the regulators’ requirements would be sufficient to keep the environment fair. In the end, Clyburn signed the approval “with far more comfortable optimism than fearful skepticism.”

Other commissioners are more inscrutable. Jessica Rosenworcel, who worked as a legal advisor for former FCC commissioner Michael Copps–the lone dissenter in the Comcast/NBCU deal, and who has been outspoken in condemning the FCC’s pro-merger stance since his term ended–will proably be cautious. Meanwhile pro-business commissioner Ajit Pai, whose official bio says he “believes that it is vital for the FCC to adopt policies that will give private firms the strongest incentive to raise and invest capital; to develop new products and services; and to compete in established and new markets,” may well favor the deal.

FCC chairman Tom Wheeler just began his tenure in November, as did commissioner Michael O’Reilly. Once upon a time, chairman Wheeler worked for the NCTA, the major industry/lobbying group for cable television. However, in recent conversations around net neutrality, he has expressed concern for individual consumers and has promised, if vaguely and tentatively, to protect consumer interests.

At the very least, then, the FCC seems likely to comb over every detail, to try to look for the repercussions, and to ask for concessions before approving any potential merger. The Justice Department, which has been more cautious with mergers since approving the NBC deal in 2011, will probably also take a fine-toothed comb to the proposal.

FCC commissioner Pai said in December that he felt a Comcast/TWC merger was likely to face hurdles from the Obama administration, and it probably will.

Which brings us to…

Concessions, Spin-Offs, and the Regulation Game
The real question probably isn’t “will regulators approve this?” The real question is: “What concessions or divestitures will regulators require to approve this?”

Comcast and Time Warner Cable don’t operate in any of the same markets, as they have been careful to shout since day one, so it’s true that consumers in those markets won’t see any less competition after a merger than they see right now. On the other hand, consumers in most markets are barely seeing any competition right now as it is, and the merger would give Comcast enormous reach over huge stretches of the country.

The issue is not just of Comcast being a potential monopoly, which they probably aren’t, but of being a monopsony. Where a monopoly has to do with buyers’ ability to choose services, monopsony has to do with a company’s ability to dominate the marketplace farther up the supply chain.

Basically, in any industry, the bigger the biggest company gets, the less wiggle room other companies have with their own buying power. Reuters uses the example of how Walmart’s size affects manufacturers, who have to hit a certain price point–sometimes to their own detriment–to end up on the shelves of the world’s largest and most dominant retailer. That, in turn, affects manufacturing and retail around the world, because of Walmart’s sheer scale.

When one company gets significantly larger than most of the other players combined, they have more power to dictate the terms of the marketplace. With pay TV, that comes across in content carriage fees: cable networks get a certain amount of money per subscriber from the cable and satellite companies that carry them. And in the broadband arena, that can include things like the recent agreement between Comcast and Netflix.

Comcast clearly anticipates challenges. In the initial announcement, Comcast said it was prepared to ditch 3 million existing subscribers “in order to reduce competitive concerns.” Regulators could ask for a lot more than that, wanting Comcast to spin off or open up certain markets to competition from other companies, like Charter and Cox or even smaller operators.

It’s also possible that regulators could ask Comcast in some way to split its businesses. Regulators could ask Comcast to sell NBCUniversal off again, as the cost of acquiring Time Warner Cable. Or perhaps a service split: both Comcast and TWC support a very high number of double- or triple-play subscribers, who receive a discount for purchasing their pay TV, broadband internet access, and home phone service from one company. If services were split–TV being separated from internet and phone, say–it would certainly mix up the marketplace.

If the feds did ask Comcast to split their services, would they still find TWC’s juicy markets worth acquiring? Or would Comcast back down and seek a smaller target? As regulators and lawmakers spend the year diving into the details of this proposed buyout, Comcast’s real goals–and the price it’s willing to pay–are what we’ll begin to find out.

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