Comcast fight with upstart Spanish station is grist for merger foes

[February 18, 2015] By Diane Bartz

WASHINGTON (Reuters) - A fight between an upstart Spanish language TV network and Comcast Corp has provided more ammunition for critics who fear Comcast would gain too much market power if its buyout of Time Warner Cable Inc goes ahead, antitrust attorneys said.

Formed by the son of a Mexican immigrant in 2009, Estrella TV currently is distributed by Comcast in 16 markets on an unreimbursed, "must carry" basis under a contract that ends Thursday in Houston, Denver and Salt Lake City. The channel competes for viewers with Comcast's Telemundo.

Comcast, which also owns NBC Universal, has declined Estrella's request to pay for its content and expand distribution to cities like Miami, with many Spanish speakers. Estrella is one of several independent programmers who have complained of being squeezed by Comcast.

"They should give us increased distribution and we should get paid," Estrella Chief Executive Officer Lenard Liberman told Reuters last week.

Regulators are studying whether the proposed $45 billion merger between the two biggest U.S. cable operators would give one company too much control over what Americans watch on television and see on the Internet. Announced a year ago, the Comcast-Time Warner deal combines two companies that together would have 40 percent of the broadband market and 30 percent of the cable market.

Estrella says it deserves to be paid because its ratings have gone from non-existent to respectable in just a few years. Comcast disagrees and accuses Estrella of cherry picking Nielsen data to present itself as stronger than it is.

Comcast says it is in its own interest to support independent programming to make its customers happy. But it disagreed that a broadcaster that has had "must carry" status could be paid like a cable channel.

"Comcast is proud to be the nation’s largest provider of Latino and multicultural television packages, with a distribution platform that delivers more than 60 Latino networks," the company said in a statement.

This dispute and others illustrate the challenges facing Comcast and Time Warner in winning approval for the merger. On Tuesday, analyst Craig Moffett of Moffett Nathanson Research lowered the odds that the deal would get done.

"We still believe the deal is more likely than not to be approved, but we are cutting our probability of approval (again) to 60/40," he wrote in a research note.

Experts say it is not clear-cut whether Comcast is being unfair to Estrella or if Estrella is seizing on regulatory scrutiny to squeeze Comcast for revenue.

Estrella "definitely" has an antitrust case, said an antitrust expert who knows telecoms, but he added: "I don't see it as a bomb thrown into the Comcast merger."

(Reporting by Diane Bartz, additional reporting by Alina Selyukh; Editing by Kevin Drawbaugh, Soyoung Kim and David Gregorio)

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