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It's crunch time for Comcast-Time Warner Cable

The drama over Comcast's (CMCSA) $45.2 billion acquisition of Time Warner Cable (TWC) is reaching a fever pitch as executives of the world's largest cable company are making a last-minute lobbying push to dissuade the U.S. Department of Justice from blocking the deal.

According to reports in Bloomberg News and elsewhere, Justice Department attorneys have raised concerns that the merger would give the Philadelphia-based company between 35 percent and 50 percent of the nation's broadband Internet market, depending on how it's measured. In the view of critics, that would give the new entity too much power over an increasingly important service. Comcast and the Justice Department are due to meet on Wednesday.

While these developments aren't good news for Comcast, they don't necessarily signal a death knell for the deal.

Comcast, Time Warner executives make case for merger

The higher-ups at the Department of Justice don't always follow the staff's recommendation and may wind up approving the deal under certain conditions, such as making Comcast agree to be bound by the Federal Communication Commission's (FCC) recently passed and highly controversial Net neutrality rule, according to Herbert Hovencamp, a professor of law at the University of Iowa.

"They tend to make their own assessments," he said in an interview with CBS MoneyWatch. "The staff attorneys -- they tend to be younger. ... The senior staff is more measured. They don't move as quickly."

The Net neutrality rules include provisions preventing carriers from providing speedier Internet access to content providers that pay extra for it. The National Cable Telecommunications Association, a trade group that counts Comcast and Time Warner Cable among its members, is among the parties that have filed suit to block Net neutrality.

Shares of Comcast, which also owns the NBCUniversal media and entertainment conglomerate, rose 5 cents on Monday to $58.47 and have barely budged this year. Time Warner Cable gained $1.26 to $150.87 on Monday.

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According to Bloomberg, the Justice Department is particularly looking into if Comcast tried to thwart the sale of Hulu, a video-streaming service backed by media companies including 21st Century Fox (FOX) and Walt Disney (DIS).

A spokesperson for the Justice Department declined to comment for this story. A Comcast spokesman didn't return an email seeking comment.

The deal needs approval from both the DOJ, which must determine if the merger would harm competition, and the FCC, which will review the transaction to make sure it's in the public interest.

Regulators may demand conditions that are so stringent, such as divesting subscribers, that Comcast might walk away from the deal, a tactic that could be an easy out because no break-up fee is associated with the transaction, which is a common feature of most mergers.

If regulators decide to file suit to block the merger, the odds of Comcast overturning the decision in court are slim. "It's a war of attrition that you always wind up losing," said Lee Charles, a partner with Baker Botts in an interview.

Scuttling the deal would surely be a blow for Comcast, which has argued that the merger with Time Warner Cable doesn't raise antitrust issues because the two companies don't directly compete.

In the end, whether the merger goes through could depend on how badly Comcast wants to get it done.

"I don't think that the Justice Department will let this go with no conditions," said Charles, adding that if the deal is quashed it will lead to another wave of consolidation in the cable industry. "The question," he said, "is who will be the consolidators and who will be consolidated?"