Wall Street is increasingly pessimistic about Comcast and Time Warner Cable pulling off their merger deal as regulators stop the clock to take a closer look at the transaction.

The Capitol Forum, an in-depth news and analysis service dedicated to informing policymakers, investors, and industry stakeholders on how policy affects market competition, specializes in examining marketplace mergers and their potential impact on American consumers and the general economy. The group has shared a copy of their assessment — “Comcast/Time Warner Cable: A Closer Look at FCC, DOJ Decision Processes; Merits and Politics May Drive Merger Challenge, Especially as Wheeler Unlikely to Embrace Title II Regulation for Net Neutrality” — with Stop the Cap! and we’re sharing a summary of the report with our readers.

The two most important government agencies reviewing the merger proposal are the Federal Communications Commission and the Department of Justice. The FCC is responsible for overseeing telecommunications in the United States and is also tasked with reviewing telecom industry mergers to verify if they are in the public interest. The Department of Justice becomes involved in big mergers as well, concerned with compliance with antitrust and other laws.

In many instances, the two agencies work separately and independently to review merger proposals, but not so with Comcast and Time Warner Cable.

Sources tell Capitol Forum there is a high level of coordination and information sharing between DOJ and the FCC, potentially positioning the two agencies in a stronger legal position if they jointly challenge the merger. Readers may recall AT&T’s attempt to buy T-Mobile was thwarted in 2011 when the FCC followed the DOJ’s lead in jointly challenging the merger on competition and antitrust grounds. With a united front against the deal in Washington, AT&T quickly capitulated.

Despite a blizzard of Comcast talking points claiming the cable industry is fiercely competitive, Capitol Forum’s report indicates the DOJ staff level believes the cable industry suffers dearly from a lack of competition already, and allowing further marketplace concentration would exacerbate an already difficult problem.

Capitol Forum reports the DOJ’s staff is inclined to “take an aggressive posture with regards to [antitrust] enforcement.”

The DOJ would certainly not be walking the beltway plank to its political doom if it ultimately decides to oppose the merger.

Few on Capitol Hill are likely to fiercely advocate for a cable company generally despised by their constituents. The Capitol Forum report notes that Comcast faces powerful opposition and its political support is overstated. Comcast’s lobbying efforts and ties to President Obama and several high level Democrats have also been widely exposed in the media, which makes it more difficult for D.C.’s powerful to be seen carrying Comcast’s water.

In fact, the report indicates a regulatory challenge against Comcast and Time Warner Cable would face considerably less political opposition than what the FCC faces if it reclassifies broadband as a “telecommunications service,” protecting Net Neutrality and exposing the industry to stronger regulatory oversight.

The report suggests FCC Chairman Thomas Wheeler, who seems intent on opposing reclassification of broadband under Title II, may appease his critics by taking a stronger stance on the Comcast/Time Warner deal instead.

Wheeler has already expressed concern about the state of competitiveness of American broadband. He considers providers capable of delivering at least 25Mbps part of broadband’s key market, which in many communities means a monopoly for the local cable operator.

Understanding “The Public Interest” and the Implications of a Combined Comcast/Time Warner Cable on Competition

The FCC will review the transaction pursuant to Sections 214 and 310(d) of the Communications Act of 1934, in order to ensure that “public interest, convenience, and necessity will be served thereby.”

The merger proposal must also demonstrate it does not violate antitrust laws.

It is here that merger opponents have a wealth of arguments to use against Comcast and Time Warner Cable.

Despite Comcast’s insistence the deal would have no competitive implications, the Capitol Forum reports the merger’s potential anticompetitive effects are “widely recognized and evidence from the investigation could provide DOJ and FCC with a solid foundation to challenge the merger.”

Although the two cable companies don’t directly compete with each other (itself a warning sign of an already noncompetitive marketplace), the report finds “a wide array of anti-competitive effects and several antitrust theories” that would implicate the cable company in a Clayton Act violation.

Comcast is betting heavily on its surface argument that by the very fact customers will not see any change in the number of competitors delivering service to their area, the merger should easily clear any antitrust hurdles. That argument makes it more difficult for the DOJ to fall back on the usual market concentration precedents that would prevent such a colossal merger deal. To argue excessive horizontal integration — the enlarging of Comcast’s territory — the DOJ would first have to prove Comcast’s size in comparison with other cable companies is a reason for the courts to shoot down the deal. Or it could bypass Comcast’s favorite argument and move to the issue of vertical integration — one company’s ability to control not just the pipes that deliver content, but also the content itself.

Here the examples of potential abuse are plentiful:

• Comcast would enjoy increased power to force cable programmers to favor Comcast in cable programming pricing and policies while allowing it to demand restrictions on competitive online video competitors or restrict access to popular cable programming;
• Comcast could impose data caps and usage-based pricing to deter online viewing while exempting its own content by delivering it over a Wi-Fi enabled gateway, game console or set top box, claiming all are unrelated to Comcast’s broadband Internet service or network;
• Force consumers to use Comcast set top boxes that would not support competing providers’ online video;
• Use interconnection agreements as a clever way to bypass the paid prioritization Net Neutrality debate. Netflix and other content producers would be forced to compensate Comcast for reliable access to its broadband customers;
• Noting AT&T has declared U-verse can not effectively succeed in the cable television business without combining its customer base with DirecTV to qualify for better volume discounts, there is clear evidence that a super-sized Comcast could command discounts new entrants like Google Fiber could never hope to get, putting them at a distinct price disadvantage.

The FCC’s scrutiny of Comcast’s merger deal has already uncovered evidence previously unavailable because of non-disclosure agreements which show Comcast’s heavy hand already at work.

The report notes Michael Mooney, a senior vice president and group general counsel at Level 3, told the Capitol Forum the dispute earlier this year between Netflix and Comcast could have been resolved in about five minutes had Comcast added a port to relieve congestion at an interconnection point. The cost? Just $5,000. Had Comcast been willing to spend the money, millions of Comcast customers would have never experienced problems using Netflix.

Whether Comcast is ultimately deemed too large to permit another consolidating merger or whether it is given conditional approval to absorb Time Warner Cable remains a close call, according to the Capitol Forum, despite the fact consumers have urged regulators for something slightly more concrete – a single sentence, total denial of its application.

[flv]http://www.phillipdampier.com/video/Capitol Forum The Consumer Welfare Test.mp4[/flv]

The Capitol Forum broadly explores how the “consumer welfare standard” has become a part of the antitrust review process over the last 30 years. Sometimes, a strict antitrust test is not sufficient to protect “the public interest” of consumers, and allows the dominant player(s) to harm competition. In the digital economy, corporate mergers that empower companies to restrict innovation can prove far more damaging than classic monopoly abuse. (15:52)

A Tennessee man is facing $1,300 in unauthorized cable charges and ruined credit after at least one Comcast employee allegedly stole his identity and provided it to an outside vendor who signed up new Comcast customers who never had any intention of paying their bills.

Ricky McClure of Murfreesboro first learned about the fraud when collection agencies working for Comcast sent him collection notices demanding payment of a combined $1,300 in unpaid charges made in his name in Shreveport, La.

McClure is already a Comcast customer, and he does not pay his cable bill late, so he called Comcast over what he thought was a simple billing error and ran into a customer service buzz saw.

“Comcast basically said the name and social matches what we have on record so this is your account. You need to pay the money and we’re not going to pull it back from collections,” McClure told WKRN-TV.

McClure was left investigating the mysterious charges on his own and discovered the extra accounts on his credit report, both using his Social Security number, and opened without his permission. Even more disturbing, the service addresses on file were in a city McClure has no ties to.

“Where is our money, lady?”

“It’s very alarming. You don’t know who is going to be calling you next,” said McClure.

Comcast’s customer service seemed unconcerned McClure’s identity was stolen. They simply wanted to clear up the matter of the $1,300 in unpaid charges. In fact, Comcast reserves the right to terminate an identity theft victim’s own service until the billing matter is settled or the fraud verified.

An isolated incident? Not quite.

Stop the Cap! reader John Spencer (not his complete real name at his request) in Nashville was also a victim of Comcast fraud. He wrote to share the story of McClure, which he recognized only too well. He faced over $2,000 in Comcast bills sent to collections for another “customer” in Shreveport. This time, the thieves were smart enough to submit a change of address for the bills headed for Louisiana, claiming it was a vacation property. The collection agency finally connected the Social Security number to Spencer’s address in Nashville and commenced collection activity that dropped his FICO score by more than 90 points, which now hovers around 600. Spencer’s damage went far beyond dealing with persistent collection calls. Alarmed credit card issuers running periodic credit checks suspended or slashed Spencer’s credit lines because he was suddenly a credit risk, and Verizon wants him to pay a deposit on his new cell phone account. His car insurance even went up $65 semi-annually, the insurance company explained, because his credit score necessitated a re-evaluation of his rate.

It took over three months for Comcast to finally get the negative information off his credit report, and nine months later he is still trying to get his former credit reputation back. While credit card companies did restore his former credit lines, they made new credit inquiries before granting his request, which has cost him 40 points on his restored FICO score for “excessive credit inquiries.” Verizon won’t budge on demanding a deposit, and his insurance company will reconsider his rate only after it comes up for renewal.

Comcast’s identify theft reporting form runs six pages and requires a police report, a notarized signature, and copies of your valuable photo ID.

Identity theft has become pervasive enough at Comcast that the company dedicates a special section of its website to accept reports from customers victimized by unauthorized charges.

Comcast doesn’t offer much of a shoulder to cry on either, sternly telling victims they must complete and sign a notarized affidavit, attach a police report for the claim, and prove to Comcast’s satisfaction where they actually live.

Some customers already victimized by Comcast once aren’t too happy about another requirement – providing a copy of a valid government-issued photo ID like a driver’s license or passport. If Comcast employees were willing to peddle your Social Security number for quick cash, imagine what they can get for a copy of your driver’s license.

Don’t expect the collection calls to end immediately either. Comcast warns it considers all accounts valid and payable amounts due until proven otherwise.

San Francisco area customer Tammerlin Drummond was also a victim of a rogue Comcast employee who sold her Social Security number and address to an unknown third-party who opened an account and collected a bounty of cable equipment.

Comcast billed Drummond $442.13 for service at an address she had nothing to do with. Ironically, Comcast sent Drummond a separate letter claiming that the security of her account was “a top priority at Comcast” and included a PIN number.

Comcast doesn’t like to break a sweat investigating these scams and kept the fraudulent account open while putting Drummond on its customer fraud treadmill, insisting she do all the work completing the aforementioned affidavit. Another representative even suggested visit a Comcast store in Oakland because people associated with the fraudulent account were recently there to pick up more cable equipment.

“She gave me the ID of the rep who had handled the transaction and suggested I might go to the store to ask if he remembered anything,” Drummond wrote in a column published by the Contra Costa Times. “She said there was a lot of activity connected to my Social Security number and that it was an obvious case of fraud. It smelled like an inside job to me, and I told her so.”

Comcast admitted in all three cases different employees used their positions at the cable company to access customers’ Social Security numbers and other personal information and resell it to other criminals that offer “free” cable service or tell customers to pay them, not Comcast, for “discounted service.”

The two cases in Shreveport were never uncovered by Comcast. It took the initiative of the Shreveport Police Department to launch an investigation last March. Comcast first learned about it not from customers, but from the police department who contacted the cable company about the problem.

Victims were eventually sent letters from Comcast explaining what happened:

“Based on what we know at this time, a small group of individuals employed by a third-party vendor and a former Comcast employee were engaged in identity theft and theft of Comcast services. These individuals may have used your information, including your name and/or social security number, for these unauthorized purposes.”

The letter goes on to say the company is offering a complimentary identity protection plan for a year.

But identity protection may not help much if Comcast can’t secure its customers private, personal information.

Out in San Francisco, Comcast spokesman Bryan Byrd told Drummond a Comcast employee had opened the fraudulent account and that “he has been dealt with.”

Comcast has closed the account, erased the bill and removed the mess from her credit report. Because Drummond was a victim, anyone (including her) will now need to show ID and proof of residence before opening a Comcast account — provisions that would likely protect every Comcast customer from identity theft if broadly enforced.

“It makes you wonder how protected one’s personal data is,” Drummond complained. “How many others did this rogue employee target?”

Comcast says these are all isolated incidents and not a pattern to a wider problem. But apologies are not forthcoming to Mr. McClure or Spencer.

Alex Horwitz, a Comcast spokesperson in Tennessee released the following statement:

“We take this matter very seriously and, out of an abundance of caution, we have contacted a small number of people whose information may have been used to create unauthorized accounts and are providing them with credit monitoring services. We have no evidence that this was an online system breach or that any additional personal information was obtained or used for any other purpose. We are continuing to cooperate with law enforcement and are conducting our own internal investigation. The individuals involved in this are no longer working on our behalf, and we have reinforced our privacy and security policies with employees and third-party vendors.”

Comcast won’t comment on how many cases of identity theft it deals with annually.

[flv]http://www.phillipdampier.com/video/WKRN Nashville Man gets 1-3K in Comcast bills 10-15-14.mp4[/flv]

Several mid-Tennessee Comcast customers have been victims of identity theft, discovering unpaid Comcast bills run up in their names for service several states away. WKRN in Nashville shares the story of Ricky McClure, who faced $1,300 in Comcast charges sent to collections he didn’t owe. (2:41)

Notice the word “may”

AT&T has promised an undisclosed number of customers in Chicago, Ill., and Atlanta, Decatur, and Newnan, Ga., will eventually get GigaPower upgrades to AT&T’s U-verse service, after moving customers to an all-fiber network that will deliver up to 1Gbps service.

“As a city that prides itself on creating a favorable environment for investment and innovation, I am happy to see AT&T bringing its ultra-high speed fiber network to the City of Atlanta,” said Atlanta Mayor Kasim Reed. “This is a great opportunity for our residents, businesses and visitors, who all stand to benefit from this new service. The City of Atlanta is one of the fastest growing tech hubs in the United States and a hotbed for entrepreneurial activity.  U-verse with AT&T GigaPower service will complement this engine of economic growth and help pave the way for future opportunities.”

But before the mayor gets too excited, he should consider AT&T’s track record for GigaPower upgrades in other cities where the service is offered. Customers complain the gigabit upgrade is difficult to get in single family homes, with most of the upgrades targeting multi-dwelling units like large condos or apartment blocks or new housing developments.

Customers in Austin complain to Stop the Cap! AT&T GigaPower looks more like a demonstration project than a serious effort at expanding super fast fiber broadband. Although pockets of service are established in some upscale areas, nobody at AT&T is willing to answer customers’ questions about exactly when service will arrive in unserved neighborhoods. Technicians are privately telling readers it will take more than a year for serious expansion efforts to begin across Austin.

While AT&T drags its feet on fiber expansion, it has no trouble hurrying out press releases suggesting cities including Atlanta, Augusta, Charlotte, Chicago, Cleveland, Fort Worth, Fort Lauderdale, Greensboro, Houston, Jacksonville, Kansas City, Los Angeles, Miami, Nashville, Oakland, Orlando, San Antonio, San Diego, St. Louis, San Francisco, and San Jose will soon see GigaPower in their areas. But AT&T isn’t putting much money where its mouth is, failing to significantly increase capital spending to upgrade the U-verse network.

In fact, AT&T executives have repeatedly reassured investors the company has no plans for a significant uptick in wireline capital spending — exactly what would be required to complete the gigabit expansion effort AT&T promises in press releases. In contrast, AT&T’s 2012 $14 billion Project Velocity IP (or VIP) was the company’s most visible and ambitious network build out initiative in wired service since the introduction of U-verse. Project VIP delivered a clear expansion of U-verse into new areas and brought new fiber connections to buildings, many that are now in use to offer GigaPower service in Austin.

Fiber broadband expansion is not cheap, and even after AT&T committed $14 billion to its expansion effort two years ago, the results are modest for U-verse because a considerable portion of the funds spent were invested in AT&T’s wireless network instead — always a priority:

Chart courtesy: FierceTelecom

Data compiled from publicly released company information.

Reflecting on the numbers, it would take an investment at least equal, if not greater, than AT&T spent on Project VIP for AT&T to significantly upgrade the communities it claims will soon have access to GigaPower. Instead, it is more likely AT&T will introduce a handful of gigabit show projects and then incrementally upgrade selected neighborhoods over the next 3-5 years.

Existing competition makes all the difference as to what customers will pay for gigabit service from AT&T, assuming they can buy it at any price. As Google Fiber tears up the streets of Austin, it is clear Google will deliver real competition in that city, forcing AT&T to price its gigabit service at $70 a month (for customers willing to have their online activities tracked by AT&T). In nearby Dallas, where competition isn’t as robust, customers will have to pay at least $120 a month for the service.

While AT&T and Verizon argue over an FCC proposal that would set 10Mbps as America’s new minimum speed to qualify as “broadband,” South Korea is positioning itself to introduce 10Gbps fiber service.

SK Broadband will introduce its new 10 gigabit per second Internet service at the Oct. 20 Plenipotentiary Conference of the International Telecommunications Union to be held at Busan’s BEXCO Center, in partnership with the Ministry of Science, ICT and Future Planning and the National Information Society Agency.

With the latest advances in broadband technology coming mostly from Asian countries like Japan and South Korea, citizens of both countries are proud of the fact they are way ahead of the United States.

“In the 1960s the world watched NASA send men to the moon and many of us grew up amazed at the constant advancements of the Americans,” said Natsuki Kumagai. “Now the Americans watch us.”

“In my travels to the United States, it is very plain they have lost their way in advancing broadband technology,” said Pyon Seo-Ju. “Internet access is terribly slow and expensive because American politicians have sacrificed Americas’s technology leadership to protect conglomerates and allow them to flourish. Although unfortunate for America, this has given Korea a chance to promote our own industry and enhance the success of companies like Samsung that are well-known in the United States today.”

SK Broadband says its 10Gbps will be 100 times faster than Korea’s current average broadband speed of 100Mbps. Downloading a 1GB file takes 80 seconds with Korea’s average broadband connection today. SK’s new 10Gbps service will download the same file in 0.8 seconds.

The broadband company’s booth doesn’t hold back touting its global leadership in broadband, with the slogan “World’s Fastest, World’s First” seen throughout the conference center.

Seven staff members from the New York’s Public Service Commission privately met with representatives of Comcast and Time Warner Cable on April 10, April 24, and May 8, 2014 and the regulator is refusing to disclose exactly what was discussed.

Despite repeated requests from Common Cause NY, the PSC has been less than completely forthcoming releasing:

• Documents provided at the meetings by representatives of Comcast and Time Warner;
• Documents provided to Comcast or Time Warner representatives by the Department of Public Service;
• Minutes of the meetings;
• Notes taken by public officials or their staff in attendance.

NY PSC Secretary Kathleen Burgess did indicate “no documents were provided to or received from DPS staff, Comcast or Time Warner at the aforementioned meetings,” adding “no other records responsive to your request could be found in the possession of the department.”

That might have been the end of it had we not discovered that staff members created 31 pages of handwritten and typed impressions of the presentations offered by the two cable companies — vital clues about precisely what was discussed behind closed doors.

Despite a confirmation from Secretary Burgess that these notes do, in fact, exist, she has refused all requests to release them to the public.

“Because they are deliberative rather than ‘statistical or factual tabulations or data,’ they are not subject to disclosure under the intra agency exemption,” Burgess declared. “Accordingly, I deny your appeal.”

The public was not allowed to attend the meetings, one of which was attended by Public Service Commission chairwoman Audrey Zibelman and Commissioner Gregg Sayre. On April 10, they met with executives from the two cable companies, according to public schedules. They were joined by Allison Lee, a lobbyist for the firm representing Time Warner Cable and Tom Congdon, Gov. Andrew Cuomo’s Assistant Secretary for Energy. What was discussed has been kept secret to this day.

Time Warner Cable’s presence is well-felt in Albany. The cable operator is one of the state’s top lobbyists, spending nearly $500,000 on New York politicians in 2013 alone. Both Time Warner and Comcast have donated a combined $200,000 to Gov. Cuomo’s campaign accounts.

New York has put Comcast’s merger application on hold until November. Last week more than 99 percent of shares held by stockholders of both cable companies were voted in favor of the deal.