Comcast’s trump card in TWC merger case is bullcrap

Comcast is now fighting an uphill battle to get approval for its monstrous $45.2 billion merger with Time Warner Cable. And the best card it has to play — the promise of low-cost broadband service for the poor — turns out to be quite different from what the cable giant has billed it as.

Bloomberg reported Friday that Department of Justice lawyers are preparing their case to deny the merger on antitrust grounds. It was the first sign that Comcast’s massive lobbying effort and media blitz may be failing. The Federal Communications Commission must also bless the deal, along with states and localities effected. But, as VentureBeat’s own source in D.C. says, Comcast now finds itself “without many friends” to push the deal through.

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To sell the deal to Congress and regulators, Comcast must ultimately convince lawmakers and regulators that the merger with TWC isn’t just good business but is also “in the public interest.”

The cable giant has said (over and over) that it would bring TWC customers onto better digital networks and give TWC subscribers access to its sprawling web of Wi-Fi hotspots. The deal, it’s said, would also make possible yearly operating cost savings of $1.5 billion via “efficiencies,” which would enable it to build out its networks faster.

But none of that changes the fact that the merger would give one large company unprecedented control over a broadband market that is already lacking competition.

By most accounts, the merger would put Comcast/TWC in control of about half of the consumer broadband market. In four out of five U.S. homes, Comcast would be the only option for broadband service of 25 mbps or greater (the FCC recently ruled that anything less than 25 mbps doesn’t even count as “high speed Internet”).

And that’s always been the part that regulators have balked at.

So Comcast pulled a trump card from its successful NBC-Universal merger bid to sweeten the deal. And that card is something called “Internet Essentials,” a kind of universal (broadband) service for low-income broadband consumers. Comcast has said that it will extend 5 mbps service to qualifying schools and individuals for 10 bucks a month.

But, it turns out, a lot of fine print surrounds Internet Essentials, as broadband expert Susan Crawford points out in a Medium post today. She calls it a “customer acquisition program masquerading as a philanthropic gesture.”

If you’re low-income and already a Comcast subscriber, you don’t qualify. If you don’t have school-age children, you don’t qualify. The elderly, the disabled, and low-income childless adults need not apply. And if a low-income household with children sign up for the program, and the children graduate, the un-discounted monthly rate goes into effect. That amounts to a new subscriber for Comcast.

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And the Internet Essentials service is slow — the 5 mbps speed is far below what the FCC calls “high speed.” And there’s no real guarantee that customers will get even 5 mbps. This can depend on many factors, including the number other subscribers being served by the neighborhood hub, and the household’s distance from it.

In fact, while the FCC required Comcast to offer the Internet Essentials program in order to merge with NBC-Universal, Comcast is under no binding legal obligation to offer the program at all.

Despite a lot of public service announcements and ads, Comcast hasn’t been effective at connecting with the eligible and getting them signed up. In California, for example, just 14.7 percent of the eligible population signed up for the program. And that’s after Comcast racked up 88 million media impressions and 242,000 public service announcements marketing the program in the state.

“[Comcast is] good at PR, [but] bad at closing the digital divide,” Crawford concludes.

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Comcast responded to the lackluster California numbers by pointing out that penetration rates vary by city and state. The cities with the highest take rates are Denver and Seattle, at roughly 29 percent.

Comcast told VentureBeat that it signed up 450,000 households for Internet Essentials between August 2011 and February of 2014.