'Here We Go Again': Cable Mega-Merger Redux as Charter Bids for Time Warner Cable
If approved, the mega-merger would make Charter second in size only to Comcast, which itself recently abandoned an attempt to acquire TWC after a groundswell of public opposition
Charter Communications, currently the fourth-largest cable television company in the United States, has confirmed a deal that would see it purchase Time Warner Cable, the nation's second-largest cable and internet company, for approximately $55 billion in cash and stock.
As Bloomberg notes, if the deal is ultimately allowed to go through, it would allow "Charter, whose largest shareholder is billionaire John Malone, to almost quadruple its number of cable subscribers, gaining 12 million customers in cities including New York, Los Angeles and Dallas." Charter also confirmed that as part of its acquisition place it plans to buy a smaller cable company, Bright House Networks, for $10.4 billion.
If approved, the mega-merger would make Charter second in size only to Comcast, which itself recently abandoned an attempt to acquire TWC after a groundswell of public opposition and strong signals from federal anti-trust officials and the Federal Communications Commission that such a large company would present monopoly concerns and violate the public interest.
Responding to the news, the media watchdog group Free Press on Tuesday said there is little difference between Charter's bid and that consumers will see no benefit at all from its purchase of TWC.
“Ultimately, this merger is yet another example of the poor incentives Wall Street’s quarterly-result mentality creates," said S. Derek Turner, the group's research director. "Charter would rather take on an enormous amount of debt to pay a premium for Time Warner Cable than build fiber infrastructure, improve service for its existing customers or bring competition into new communities."
According to the Washington Post:
Regulators had moved to block Comcast’s merger with Time Warner Cable because of concern over the market for broadband Internet service. Together, Comcast and Time Warner Cable would have controlled more than 50 percent of all broadband connections in the United States, with more than 34 million subscribers. Charter’s purchase of Time Warner Cable would create a bigger cable firm, and a stronger rival to Comcast and a combined AT&T and DirecTV.
Comcast’s ownership of vast media properties through NBC Universal also posed problems for regulators. Critics were also concerned about Comcast’s bid for Time Warner Cable because of the company’s potential ability to use its powerful hold on so many home subscribers to create a disadvantage for online video rivals such as Netflix and YouTube that compete with its cable TV and media properties.
“It appears much less of an antitrust concern than the Comcast deal,” said Gene Kimmelman, a former senior antitrust official for the Justice Department and current president of Public Knowledge, a nonprofit group. “It is more likely to face [Federal Communications Commission] scrutiny for how it actually promotes the public interest.”
In an initial tweet expressing exasperation with the such mega-mergers, Free Press said on Monday:
Though public outrage, led by groups like Free Press and Public Knowledge, played a key role in blocking the Comcast/TWC deal, there's no guarantee that this latest attempt to create a new cable giant will ultimately be frowned upon by government regulators. As the Wall Street Journal reports:
The backlash to Comcast’s bid for Time Warner Cable at the Federal Communications Commission and Justice Department left many cable executives and investors wondering whether any transformational cable-industry deal could withstand regulatory review.
FCC Chairman Tom Wheeler called cable executives including Time Warner Cable’s Mr. Marcus and Charter CEO Tom Rutledge in recent days to convey that they shouldn’t assume the agency is against any and all future deals just because of what happened with Comcast, according to a person familiar with the matter.
However, Free Press' Turner said that his group will oppose the deal with the same gusto as it did Comcast's.
"Charter will have a tough time making a credible argument that consolidating local monopoly power on a nationwide basis will benefit consumers," said Turner. "Indeed, the issue of the cable industry's power to harm online video competition, which is what ultimately sank Comcast’s consolidation plans, are very much at play in this deal."
A chief argument for those opposing the deal, in fact, will be that bigger does not mean better when it comes to providing quality cable and internet service. "Charter needs to explain why this consolidation will improve competition," concluded Turner, "and a simple argument of scale won’t work here. Charter’s network is already superior to TWC’s and that of other large cable companies, which proves that you don’t need to become a colossus to succeed in this business."