it is a megamerger for the ages. millions of subscribers with billions of dollars. there is a ripple effect. tv, broadband, phone calls stop when does the company become too big? how did comcast grow from a family run organization into a media powerhouse? it is a special report on comcast. >> live from pier three in san francisco, welcome to this special edition of "bloomberg

west." comcast and time warner cable are defending their merger. the house judiciary committee is holding a hearing. there will be antitrust experts at more as they tried to get a grip on whether this deal would ultimately help or hurt american consumers. congress holds no power to approve or deny the merger. their input can help sway the two agencies that will be making the decision. the sec and the justice department will -- fcc and justice department. >> this will drive innovation. it will also drive investment from our competitors. consumers clearly it will be the beneficiaries. >> a former justice department attorney painted a different picture. >> this merger is likely illegal.

the parties know it. that is why they are here, talking about how they plan to fix it. i am here to tell you what they won't, why it is illegal, and why the fix does not cut it. >> joining us now is yang yang. you have been following the hearing. what happened today? what stood out to you? >> time warner cable and comcast executives were in the hot seat. a congressman, the chairman of the antitrust channel of the house judiciary committee, interrupted the hearing to explain that they were having air-conditioning issues. that was to explain to viewers that if we notice any sweat, it is not because they are uncomfortable or stressing. it is because it was hot. that was a clarification that he felt it was important to make. the grilling was not that intense. that could be explained by the fact that many of the committee members do get political contributions from comcast.

as you said, this issue is not for them to approve or deny the they were there to figure out whether this is good for consumers. the executive vice president of comcast made his case. >> the ultimate beneficiary of this enhanced competition and investment is the american consumer. specifically, comcast will bring time warner cable customers faster internet speeds, more programming choices, more robust wi-fi, and our best in class operating system. business customers will benefit as well. >> the other argument he has made is that this does not hurt competition. there is no overlap with coverage. >> that no competition argument did not sit well with some of

the other witness is. >> that is absolutely right. people took issue with this. many of the witnesses were against the merger. we had several groups, different with skin in the game. he spoke out and said it was bogus. >> comcast and time warner cable do compete. the two companies compete in a number of ways. for instance, they compete to carry local and regional sports teams. they compete for advertising dollars. >> that was his take on the merger. the committee will not make a judgment either way as to whether there should be a deal or no deal. >> in washington, thank you so much. just how massive would a combined merger be? from the size and scope of the deal to the ripple effects, our

senior west coast correspondent jon erlichman rates down the merger by the numbers. >> it is a 45 billion dollar deal that would combine two of the largest companies in the united states. comcast wants to buy for more cable stop adding to comcast cost base. it would reshape the media landscape. comcast would sell or spin off 5 million subscribers as the deal. the combined grouping would be the biggest cable operator. it would reach one in three american homes. it is already dominant on the west coast, but it would put comcast on the map in new york, ohio, texas. the deal is about internet service. comcast has 21 million

subscribers. time warner cable would add another 11 million subscribers. >> jon erlichman, our senior west coast correspondent. i want to bring in editor-at-large cory johnson and former fcc commissioner from d.c. he is special advisor at a nonprofit advocacy group. i will start with you michael. how would you vote on this? >> i would vote without hesitation, a loud and clear, "no." it is a disaster for consumers and a disaster for people paying cable bills. it is a disaster for people paying broadband bills. it will send the broadband market down a monopolistic mode -- road. it is a conglomerate.

it is what people will see a -- this is too much power and it is too big for any company. >> described to us the extent of the lobbying effort. >> we will get into great detail. comcast has been working with all washington. they have been developing a great deal of power. a lot of former and future employees work at this organization will. i want to s michael about this. in terms of business, just because it is big, is it bad? what you think could happen if this goes through? >> i think if this goes through, you lose competition. it is ludicrous to argue that this is not anti-competitive when you take the enormous get

-- comcast achieved the nbc universal and all of the properties and content that they own all stop now you will impressed that footprint on the rest of the country. how does that encourage competition? we must get back to creating an environment in this country where we have independent producers and broadcasters. we need local nasal stop every time we have a merger, those things offer. i do not just blame the companies that are involved are responsible. i believe the government and the asked easy. -- fcc. they have downgraded the public interest. that agency should care about that. >> there is the argument that it does not compete in any geography. if apple and google can compete, why not comcast? >> i don't think anyone should have that kind of power stop i was just talking about it and the anti--competitive aspects of it. there's no question that

this is anti-competitive. the telecommunications act encourages competition. the expectations of consumers is also to encourage competition. if we are going to let this opportunity to create infrastructure for broadband go down the same road as radio and tv, and cable, with consolidation, that is a tragic denial of the opportunities of broadband. they are amassing too much power in a few hands that can do a great deal of damage to too many people. >> you talk about the pernicious impact this could have on consumers. it there a similar impact on business? >> yes, i think there is. if companies are given power where they can discriminate. we have this open internet before us. it is all mixed up with this merger.

if you build these behemoths and you give fast lanes for the 99% or the 1% and you give fast lane to their friends and affiliates, and bloomberg has the slow lane, how is that good for anybody? >> how do you expect this ruling -- fcc to vote on this merger? >> i hope they will take a close look on it. it should not take too long. it is ridiculous. as you point out, there is a tremendous amount of lobbying and advertising and money going into this. there is a long history at the there is a long history at the fcc of the majority favoring consolidation. it is on appeal. the final analysis will determine the outcome. we are talking about an independent agency. how do the american people feel about it?

we are seeing a lot of pushback and blowback against the deal. people are not happy with their cable producers. they are not thrilled with seeing broadband go down the same road. i think in the next few months, we will see a tremendous push not to allow this consolidation. they will do something to guarantee the openness of the internet. the so-called net neutrality issue. >> we will talk about that a little more in the show. thank you to the former fcc commissioner joining us from washington. the comcast merger is not the only thing on the docket. some say the freedom of the internet is extinct. possibly the future of innovation. find out how and what comcast stands to gain on this special edition of "bloomberg west." ♪

>> i'm emily chang. welcome back to our special edition of "bloomberg west." more than 100 technology companies including heavy hitters like amazon and facebook have spoken out about companies like comcast that charge extra fees for faster service. are they in favor of net neutrality? cory johnson is back with more on how this argument factors into the broader argument. >> i do not care about people. i care about business. the net neutrality issue is a big one. this is about innovation and the ability of companies to invest. they have to get to the potential customer. al gore did not invent the internet. but he did invent the phrase "information superhighway." that explains this controversial idea

of net neutrality. let's take a drive. gas guzzling beasts. a metaphor for a video we pull out of the hulu parking lot. we hit the interstate avenue. as fast as 100 gigabytes a second. a handful of private companies like at&t, centurylink, and their fellow travelers are traveling at the same fast speeds. that last mile is owned by a small group of individuals. it is called comcast, time warner cable, verizon. they follow different rules of the road. we may have gotten off the highway at blazing fast speeds, but now we're in a traffic jam.

people like netflix are able to pay for their own fast line. that is a deal that netflix struck recently with comcast. their service reaches comcast faster than their competitors. is that fair? net neutrality would make it an even playing field. the toll keepers like comcast and time warner cable do not like this. they want their own rules for the road. drivers like us just want to enjoy the freedom of the open road. >> joining cory and i to talk more about net neutrality and how it filters into this deal is the founder of giga ohm. thank you for joining us. this is an industry that you have been following for decades. you say that it is all about broadband.

>> if you really look at how we perceive video, it is all over ip and broadband. today, yesterday, nielsen came out with a report about the average u.s. home. they only watch 17 channels. as you look at the future, they will be watching many of those channels over broadband. that is the best way to distribute video. moreover, the broadband part of the business is involved with companies like comcast. they spend virtually no money on programming, but they get a huge amount of return for the same amount of bandwidth. i think that they need to-four channels to do 30 megabits of bandwidth. they charge close to $50 for it.

it is the same frequency and they could have -- it is a harder sell. >> do you think comcast is looking out and saying, we have a channel that we put on cable. we will have 1000 channels on broadband. that is a new broadcast medium. >> we should start thinking in terms of programs that people want to watch. i think people will use broadband. it may not happen today, but we are going down that track. from that stand point, for a company like comcast to own time warner cable and comcast together, 30 million broadband customers, that is a bigger bang customers, that is a bigger bang for them. and you juxtapose that with the net neutrality argument. they can basically charge whatever they want.

this is just a cash gusher. that is why -- if you think about it. it is very interesting. there is talk about changing net neutrality rules. it makes you wonder why we are talking about it right now. >> one of your arguments was responded to on twitter. in an ideal universe, i want net neutrality and investment. it is not obvious how to square the circle. how do you do that? >> we open up the competitive landscape. we do that by asking time warner and comcast not to be in the business of owning content. they can provide cable infrastructure or they can provide all the services, like nbc or whatever.

>> the cable guys and they have a different set of rules. that is because of the historic nature. it is different. >> the phone companies are trying to do the same thing. the phone companies are trying to dole outs similar services they do not want net neutrality to end. they can impose an old-fashioned telephone is that on this. they want to charge you for everything. phone companies want to charge you per minute. from than stand point, we need to have a more competitive landscape. we need this to be a transport service. we need to make sure that the content and the pipes are separated. you have to treat it like a utility. it is a utility. it has to be treated like one. that way if you want more competition, you can use smart technologies.

>> we will have much more you after this i break. coming up, how will a time warner comcast deal affect startups? that is coming up on this special edition of "bloomberg west." ♪

>> welcome back to a special edition of "bloomberg west." we are talking about the potential impact of a comcast time warner merger. want to talk to you about startups and innovation and how you think a potential deal would impact that ecosystem.

>> i think the big impact would be when it is broken and the companies like comcast can decide whose traffic flows faster on their network. who gets priority. in the future, the next google or instagram or twitter will have to pay comcast in order to be successful. that is like they are acting like the mob. it will be harder for startups to be successful. >> more than a third of internet traffic to go through comcast or time warner. they are giving a chance to netflix to deliver faster. the internet equal now. >> it isn't. the odds are against startups. that is what we need to avoid.

i feel very worried about that. >> ohm malick, thank you. we will be back with more of our special edition of "bloomberg west." ♪ . .

>> you are watching a special edition of "bloomberg west." we are covering the impact of a potential time warner cable and comcast merger. we are looking into the massive merger that could change the landscape of the industry as we know it. the proposed deal would give comcast control 38% of all broadband customers in the united states. what does this mean for hollywood and silicon valley? our reporter joins us from new york and we have jon erlichman in l.a.

editor-at-large cory johnson. edmund, what is the impact? >> we know comcast is largely a video company. they are selling video service across the country. they're more significantly broadband service providers. that means net clicks, google, facebook. those companies have a relationship to comcast that is up in question. they are trying to charge these guys for better access to these broadband. this could have implications for big companies out of silicon valley. >> jon, can you explain to me -- i cannot understand how disney tries to get an increase in what

they get paid and how that might change espn. >> i do not think it will change. bob iger is the ceo of disney. when the deal was first announced and we asked how it would affect them, he said it would not. we are feeling pretty good about the stuff that we have on offer. it is led by programming on espn. disney is in a good spot. the question is about those less valuable channels. that is where the different media companies -- i don't know what you want to say. some fishing channel or some low level cooking channel that nobody wanted to walk in the first place, would they keep it the various cable packages? the high end programming will continue to command the high prices. so much so that the cable bills may continue to climb. one of the things we talked about all the time, why netflix

is so popular, people are frustrated with paying their cable bills. it is in part because the broadcasters are pushing these prices on the companies. if you have got the best content, you have more leverage than comcast and time warner cable. >> the parent companies of disney, 20th century fox, they have not spoken out at all. on the other hand, you have netflix, coming out very much against this deal. they are the only one who have a payment deal with comcast. netflix saying in a statement, comcast is already dominant enough. edmund, why go out on a limb? >> that is a good point. let's put this in a bit of

perspective. disney any other programmers haven't really sounded off or if anything, they have said it will be ok. you have companies like netflix complaining about the deal. if you take a step back, disney and viacom get paid by comcast. netflix in their deal with comcast, netflix pays comcast. of course they will complain about it. companies like disney and fox will be quieter about it because they're getting paid. then the perspective, to take a step back. it is important concepts you have. -- context to have. at the same time, netflix brings up a good point. you have a company that is only -- that is owning 38% of connections to subscribers. there are higher rates going into the future.

>> i wonder if that is about culture. youold businesses no that don't criticize the people you do business with in public. netflix is a newer company. they are brave enough to do a deal with comcast and have favorite access, but also say that they do not want these in the future. >> i would put netflix in the savvy bucket. they played this game very well. when they decided to make a real push in hollywood, they did it the hollywood way. they were very friendly with the various content creators. you have seen their willingness to pay a lot of money. they did not treat themselves as outsiders. netflix is speaking out in part because they're savvy and they cut a deal with comcast. they are hedged in this story. this is about the next netflix. the companies we have not explored that could potentially change the tv or media viewing experience.

it could get started up and silicon valley or here in los angeles. but then it cannot afford to be in this game. you have to pay to play. >> edmund, you say that this deal passes. what happens in reality? >> with companies like netflix and other silicon valley companies that have made statements recently about the fcc's proposed rules for a faster lane for the internet at companies like comcast in charge content providers for, that is the thing that regulators are going to want to take a closer look at. they will look at whether they can approve this merger. if some start up can approve or persuade the fcc and other regulators, if you allow this merger to go through, they will have more power. the fcc is proposing a faster lane. the startup will lose out.

the next netflix could be hurt. they will not be able to compete as fairly. that will be a key analysis in terms of whether or not the government wants this to go through. >> edmund lee and our senior west coast correspondent, jon erlichman. we will continue our special coverage after this break. 107 lobbyists, that is the size of the lobbying effort pushing this deal through. that is next. ♪

you are watching a special edition of "bloomberg west." we are covering the potential impact of a comcast time warner merger.

comcast is no stranger to the pearly white halls of washington. do they have enough friends to push through a megamerger with time warner cable? our editor at large cory johnson is looking at comcast's government connections. the extent of them are astounding. but wasn't born last night neither were comcast lobbying efforts. they have been on it for a long time. it has been quite a while. comcast is spent over $79 million in lobbying these last five years. look at the intrigue from "house of cards." it pales in comparison to comcast's working of the system. >> in washington, there is lobbying and then there is lobbying. the $40 billion proposed merger is an exercise in lobbying.

comcast has spent $18 million in lobbying. that is more than any other company. a lot of that money went straight into the campaign coffers of politicians. $59,000 to john boehner. $27,000 to marco rubio. $25,000 to harry reid. the real power is byzantine. take this guy, former navy seal neil smith. the chairman of the national cable telecommunications association. he gave millions of dollars in lobbying last year. he's going to the same politicians that comcast contributed to. the top five lobbyists and all of washington dc. before him, the chairman was the tom wheeler. where is he now?

president obama named him the chairman of the fcc. for anyone at the fcc thinking about their next job, one person is now the ceo. meredith baker, and fcc commissioner who helped approve the deal, she left the fcc to go work for comcast as their chief lobbyist. she is one of 107 lobbyists trying to use comcast's power and influence to encourage washington to accept this deal. >> that revolving door continues. we mentioned that meredith baker left the fcc to go to comcast. now she's leaving comcast and going to lobby for the wireless industry. >> it does sound a little like "house of cards." >> it is the same characters. they all work together and they are all thinking of their next

employer. >> there is money changing hands. maybe some veiled threats. >> it is worth knowing who the players are. >> the house judiciary committee heard arguments over the deal today. congress does not have any control over the merger. the fcc and the justice department will make the final decision, answering the big question, does the merger violate antitrust allstate. that policy. with us is the founder of game changer. he's the ports the merger. he says it is good for competition. why? >> cable companies are getting screwed by the content providers. if you look at time warner, one of the reasons they are having to merge is because cbs held him up last year. they wanted to raise the fees that they were charging them

from $.50 to two dollars per subscriber for content that anyone can get free over the airwaves. cable rates are going up because the content providers have been sticking it to -- >> >> other people might say that the cable companies are screwing consumers. >> that is a perception. that is why congress is having all of these hearings. they are trying to score political points. the reality is that the cable companies are not in great shape. there are better options out there. only about 40% of households subscribe to cable. >> i think declining subscriptions could be part of the backdrop. comcast since 2009 has seen basic cable amount that they charge up 68%. >> hundreds of channels that i do not watch. >> you are saying that it is the fault of the content creators. >> absolutely.

on the broadband side, we have been talking a lot about how they own the pipes. there are other options. there are other options than merging. google announced 35 cities with a new type of broadband service. it will be 100 times faster. >> they cannot possibly get to all the places where time warner is. fundamentally, one pipe goes into the house. it is not the telephone company. google fiber cannot get to all these big cities. they are proposing second-tier and smaller cities. >> i would argue that there are a lot of ways to get the internet today. the average consumer does not need internet at lightning fast speed. you can watch movies on your cell phone. on your ipad. there are a lot of ways to do it. >> that is not necessarily a pleasant experience. >> this is about fast internet.

we have some of the slowest internet connection speeds of major countries in the world. maybe we should not use this as a selling point. >> i think it is the opposite. one of the problems is that the cable companies have not been able to invest what they have needed to to expand their services. many of the companies that are fighting this are the smaller companies. they will never invest in this. if you keep the business fragmented, it will get weaker. the people that are fighting this are the content providers. it is a fight over money. it is between companies. it is not about the consumer. >> you mentioned the following -- the falling profit. comcast made $6.8 billion last year. profits are going up a lot. >> if you look at the margins, i would argue that they are in

worse shape than the content providers. the content providers have been very successful. they have extracted a lot of money from people. if you keep comcast week, those content providers will extract more money. >> what does it mean in terms of apple tv or google? amazon fire? >> they may have to pay some money to comcast. i do not know that that impact the consumer. the consumer will pay a certain amount of money for content that they want to buy. some of that money will go to people like comcast and some will go to the content providers. today the content providers are getting rich and the people like comcast are less so. what this does is it changes the balance of power. the way i would think about it, if you look at other industries, like the retail business, people like walmart extract large fees for manufacturers.

they pay slotting fees. the consumer does not see that. as the industry has come consolidated, the consumer has gotten lower prices. there is more competition and less money going to manufacturers. >> thank you for sharing your views on this until edition of "bloomberg west." should regulators allow the time warner cable and comcast deal to go through? or is it a monopoly? we will explore the antitrust issues next on our special edition of "bloomberg west." ♪

>> welcome back to a special edition of "bloomberg west." if you have just joined us, we have been talking about the potential antitrust issues surrounding the comcast bid for time warner.

cory johnson is still with me. also with us from capitol hill is a columbia law professor who just testified at the hearing. scott, you just came out and testified that this merger does not violate any antitrust laws. why? >> to take a step back, the subject of the hearing was whether the transaction violates the clayton act. the clayton act requires us to evaluate whether a particular transaction would reduce competition. there are two issues that are normally raised in antitrust when it comes to a merger. the main one is due the parties compete head to head? there is a reduction in competition or the number of competitors. the second issue and the issue more directly raised by this transaction is whether the increased size of comcast might have the consequence of foreclosing competition.

particularly for online video. >> the executive vice president of comcast, david cohen, also testified today. i want to take a listen to what he had to say about consumer choice. >> it is a fact that every customer will have the same choices from broadband providers after this transaction as before. nor will comcast gain undue power over programmers -- >> do you believe that? >> could you say that again. >> do you believe that consumer choice will not change? consumers will have the same number of choices? >> that's right. this transaction will be usefully contrasted to the failed merger between at&t and t-mobile. as a customer in new york city, i am looking to at&t and others. the removal of one of those companies can result in

increased prices. by contrast, as a time warner cable subscriber, i do not have the option of comcast as it is. nor will i lose any options in the marketplace. the usual concern about antitrust about reduction in competition among existing rivals simply is not present. >> what about the geographic argument? there is an argument that says antitrust laws, among other things, require a geographic overlap to be considered. they are in separate places. does that trump everything else? can that be thrown out over other concerns? >> the way to think about it is that antitrust concerns into several different bucket. the major bucket, the at&t bucket, is the loss of head-to-head competition. that may happen in a particular market. as you noted, that is not true here. there's is no geographic overlap

between the companies. there is no real prospect that they will start digging up streets and building new cable systems in each other's markets. once you take that aside, you still have to ask if there might be foreclosure concerns. whether there might be concerns about the exclusion of competition, even future competition from online video to the enlarged comcast. >> scott hemphill, thank you for joining us. on this special edition of "bloomberg west." thank you all for watching the special edition of the show. we will continue to follow this story on bloomberg television and streaming on your phone, tablet, and bloomberg.com. we will see you tomorrow. ♪