By Shalini Ramachandran, Gautham Nagesh and Brody Mullins
WASHINGTON--When Comcast Corp. heard rumors that President
Barack Obama was preparing to call for tough new Internet
regulations, the cable giant's influence machine swung into
action.
Chief Executive Brian Roberts telephoned Valerie Jarrett, Mr.
Obama's senior adviser. He pressed her for information and stressed
that Comcast opposed such a move, according to people familiar with
the call.
But Ms. Jarrett told him nothing and the last-ditch lobbying
fell flat. A few days later, on Nov. 10, Mr. Obama called for the
"strongest possible rules" to make sure broadband providers treat
all Web traffic equally--a change that would regulate Internet
service like a public utility.
The news took Comcast by surprise. The company believes the
president's strong "net-neutrality" proposal, if enacted, could
threaten future investment in its fast-growing Internet business
and cast doubt on the logic of its proposed $45 billion merger with
Time Warner Cable Inc.--a deal currently being chewed over by
antitrust regulators.
Comcast boasts one of the biggest corporate lobbying operations
in Washington, spending $17 million in 2014, second only to Google
Inc. That presence is being tested now like never before. In
addition to the threat of new Internet restrictions, Comcast is
facing intense scrutiny from regulators on its merger.
The head of the Senate's antitrust panel has called for
regulators to look closely at whether the proposed tie-up would
inhibit competition. And the chairman of the Federal Communications
Commission has voiced concerns that the overall market for
high-speed Internet service lacks competition.
At stake is Comcast's huge bet on Time Warner Cable, which would
combine the country's two largest cable and broadband providers and
cement Comcast's status as America's largest media and cable
conglomerate. The combined entity would control nearly 40% of the
U.S. market for broadband Internet service.
The deal could well be approved despite concerns, especially if
Comcast is willing to accept conditions that regulators might
stipulate. But the challenges that telecommunications companies
like Comcast are facing in Washington aren't likely to ease in the
near term. Technology companies such as Google and Netflix Inc.
have emerged as sizable lobbying forces and have different views on
issues including net neutrality.
"Silicon Valley's influence in Washington has skyrocketed in the
past couple of years," says Robert McDowell, a former Republican
FCC commissioner who served until 2013.
Comcast has told regulators the Time Warner Cable deal isn't
anticompetitive and is vital if Comcast is to compete with large
technology companies in the rapidly changing landscape for pay-TV
and streaming services.
Comcast Executive Vice President David Cohen, who is in charge
of the company's lobbying, acknowledged in an interview there have
been bumps in the road, but said it is too early to draw
conclusions about which way regulators are leaning. He said Comcast
remains confident it will receive approval for the deal early this
year. He said he was disappointed about Mr. Obama's proposed
Internet rules.
The cable-TV and phone industries, among the most regulated
business sectors, have long spent heavily on Washington lobbying.
Of the 10 leading corporate spenders on lobbying, three are phone
or cable companies--Comcast, AT&T Inc. and Verizon
Communications Inc.--according to the nonpartisan Center for
Responsive Politics.
In 2001, Philadelphia-based Comcast was a midsize cable firm
with a lightweight Washington operation employing just two
lobbyists. It spent one-tenth as much on lobbying as AT&T, the
powerhouse of corporate lobbying for decades, lobbying disclosure
forms show. That year, Comcast announced a deal to buy AT&T
Broadband, a move that helped catapult it to the No. 1 cable
company by subscribers.
As Comcast pursued other big-ticket deals over the years, its
lobbying operation ballooned and it enjoyed success in Washington.
Its lobbying efforts were considered "among the very few best...in
any industry from a standpoint of effectiveness," says Michael
Copps, a former FCC commissioner. Regulators approved its
acquisition of a chunk of Adelphia Communications Corp. and its
purchase of NBCUniversal from General Electric Co.
Over the past two years, no other U.S. company has spent more on
lobbying and political donations from its employee pool than
Comcast, according to an analysis of data from the Center for
Responsive Politics.
One beneficiary has been Mr. Obama, who has golfed with
Comcast's CEO and has called Mr. Cohen and his wife "great
friends." Comcast employees donated $337,000 to Mr. Obama's
re-election campaign, making the company No. 7 among corporate
sources of money, according to the Center for Responsive Politics.
Of the roughly 750 "bundlers" who raised money for Mr. Obama's 2012
re-election campaign, Mr. Cohen and his wife ranked No. 15,
tallying nearly $1 million.
In November 2013, Mr. Obama joined Mr. Cohen for a fundraising
event at the executive's home. Mr. Cohen gave Ms. Jarrett, the
White House aide, birthday greetings and introduced Mr. Obama by
performing a riff on the Passover Seder song "dayenu."
Mr. Cohen and Comcast's CEO, Mr. Roberts, have been visitors to
the White House, according to visitor logs. Several former White
House aides have landed on-air jobs with Comcast affiliates,
including former advisers David Axelrod and Robert Gibbs.
Earlier this year, before the Time Warner Cable deal was
unveiled, Comcast invited members of Congress and other government
officials to a large Washington party for the opening ceremonies of
the Winter Olympics, which was televised on NBC. Among those
invited: Renata Hesse, a senior antitrust official at the Justice
Department.
"It sounds like a really fun event," Ms. Hesse wrote in a Jan.
15 email to Kathryn Zachem, Comcast's senior vice president for
regulatory and state legislative affairs. "Unfortunately, though,
the rules folks over here tell me that I can't do this."
Ms. Zachem, the Comcast lobbyist, replied on Jan. 21 that she
thought the invitation "would be OK as we have nothing formally
before you all." Ms. Hesse didn't attend.
Less than a month later, Ms. Zachem emailed Ms. Hesse to alert
her that Comcast would announce the following day its plans to
acquire Time Warner Cable.
A Justice Department spokeswoman says Ms. Hesse's "politeness
should not be confused with being subject to improper
influence."
The job of winning regulatory approval for the deal falls to Mr.
Cohen, a 59-year old lawyer and onetime chief of staff to former
Philadelphia Mayor Ed Rendell.
During Comcast's bid to take over NBCUniversal, then-FCC
Chairman Julius Genachowski wanted some important merger conditions
to apply for a decade. Mr. Cohen indicated that would be a deal
breaker--Comcast would agree to five. They compromised at
seven.
Mr. Cohen has cultivated relationships with many members of
Congress. At a Senate hearing in July related to the TV
marketplace, Sen. Cory Booker (D., N.J.) said he could speak to the
Comcast executive later if time ran out. "I've got Mr. Cohen's
cellphone number," he said.
Last year, Comcast began experiencing some turbulence in
Washington.
Some congressional Hispanics said Comcast hasn't done a good job
of promoting diversity on air and behind the scenes--a pledge the
company made when it won approval to buy NBCUniversal.
Hispanic lawmakers pointed to a segment that aired last spring
on MSNBC's "Way Too Early" about Cinco de Mayo, which featured a
correspondent slugging tequila while a host talked about the
Mexican holiday. "As you know, Cinco de Mayo is not a day of
debauchery," Rep. Rubén Hinojosa, the chairman of the Congressional
Hispanic Caucus, wrote to Mr. Cohen and the company.
Lawmakers said Mr. Cohen apologized to them. Not long after,
MSNBC gave a prime spot to broadcaster José Díaz-Balart, brother to
both a current congressman and a former one. Comcast says it has
done a good job promoting diversity, and that many
Hispanic-affiliated groups support the deal.
Members of Congress don't have the power to approve or reject
mergers, but they can exert pressure on regulators. Last summer,
some 50 House lawmakers sent a letter to Comcast and Time Warner
Cable raising concerns about the merger and asking them to commit
to carrying independent Latino program providers.
In a return letter, Mr. Cohen warned the lawmakers not to be
swayed by "parochial business interests"--what he said was a desire
by some content providers to get space in Comcast's cable lineup.
Rep. Tony Cárdenas, a California Democrat, said he found the
response from Mr. Cohen "insulting."
The proposed deal has drawn objections from Internet and media
companies worried about being squeezed by the combination. After
Netflix, Discovery Communications Inc. and other companies raised
potential harms to regulators or asked them to deny the merger,
Comcast accused them in a September regulatory filing of
"extortion." Mr. Cohen said at the time he wanted to "expose the
pretense" of opponents that were using the transaction to seek
business concessions from Comcast. The companies said he was trying
to divert attention from their legitimate concerns.
Some people involved in securing approval for the deal worried
that Mr. Cohen would hurt Comcast's chances if he continued with
such strident tactics. Mr. Cohen said the media blew his comments
out of proportion.
In November, Mr. Obama called for stringent rules to prevent
broadband providers such as Comcast, AT&T and Verizon from
charging online video outlets and other content providers for
faster access to their networks. The utility-style regulation
proposed by the president could give the FCC authority over
everything from prices to how broadband providers update their
networks.
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How to regulate broadband providers has been a hot question
since the FCC was forced by the courts to address the matter. Mr.
Obama's intervention on one side of the debate surprised some of
the combatants and delighted Silicon Valley firms looking to
shackle Comcast and others.
Mr. Cohen says he realizes "that there are going to be frequent
occasions when candidates you've supported do things, say things
and take positions that I don't agree with."
In response to the Time Warner Cable proposal, Sens. Mike Lee
(R., Utah) and Amy Klobuchar (D., Minn.), the top Republican and
Democrat on the Senate's antitrust panel, sent a letter in November
asking regulators to carefully review the deal because it raises
"important competition and public interest concerns."
A spokesman for Mr. Lee says the proposed Comcast merger is
different from prior deals the antitrust panel has reviewed
"because of what it would mean to the industry to put these two
entities under one roof and because of the potentially negative
consequences that could occur to the consumer if it's not done the
right way."
The power to approve mergers lies with the Justice Department
and FCC, where officials haven't yet made a decision.
Regulators at the Justice Department and FCC don't view
regulatory approval as inevitable, according to people with
knowledge of the reviews. The regulators are concerned that Comcast
could gain too much leverage as a major buyer of TV programming and
the dominant high-speed broadband provider in many big markets,
these people say. That could give Comcast outsize power to squeeze
programmers and newer online video entrants.
The Justice Department, however, may face difficulty challenging
the deal because Comcast and Time Warner Cable don't currently
compete directly against each other.
The FCC has a broader mandate to decide whether the merger would
serve the public interest.
Over the last couple of months, regulatory officials have been
asking Internet and media companies whether they can point to
specific examples of Comcast using its market power to unfairly
crimp their businesses, particularly in experimenting with new
online video models, according to lawyers and executives who have
discussed the deal with regulators.
As of mid-January, Comcast had yet to begin hashing out
conditions with regulators, according to people involved in the
deal review. When it announced the deal nearly a year ago, Comcast
had said it expected the transaction to close by the end of 2014.
Mr. Cohen says he doesn't believe the deal is running into greater
static than the NBCUniversal acquisition.
On Dec. 15, Comcast's CEO Mr. Roberts met with Tom Wheeler, the
FCC chairman. The two are longtime acquaintances, dating back to
Mr. Wheeler's time running the cable industry's trade
association.
Mr. Roberts lobbied for the merger, say people familiar with the
meeting, but Mr. Wheeler was noncommittal.
Brent Kendall and Keach Hagey contributed to this article.
Write to Gautham Nagesh at gautham.nagesh@wsj.com and Brody
Mullins at brody.mullins@wsj.com
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