Charter Deal For TWC Looks Good To Go

The Justice Department has approved Charter’s $88 billion bid to buy Time Warner Cable and create another cable giant.

Buying Time Warner Cable and Bright House Networks will turn Charter Communications, a mid-size cable company, into the country’s No. 2 home Internet provider, after Comcast. The new Charter will be No. 3 in video, trailing Comcast and AT&T, which bought DirecTV last year.

Monday’s OK comes with conditions meant to preserve competition from online services.

Following the approval by Justice, FCC Chairman Tom Wheeler circulated among the other commissioners an order recommending that the FCC also green light the transaction “based on imposed conditions that will ensure a competitive video marketplace and increase broadband deployment.”

“As proposed, the order outlines a number of conditions in place for seven years that will directly benefit consumers by bringing and protecting competition to the video marketplace and increasing broadband deployment,” Wheeler said. “If the conditions are approved by my colleagues, an additional two million customer locations will have access to a high-speed connection.

“At least one million of those connections will be in competition with another high-speed broadband provider in the market served, bringing innovation and new choices for consumers, and demonstrate the viability of one broadband provider overbuilding another.

“In conjunction with the Department of Justice, specific FCC conditions will focus on removing unfair barriers to video competition.

• “First, New Charter will not be permitted to charge usage-based prices or impose data caps.
• “Second, New Charter will be prohibited from charging interconnection fees, including to online video providers, which deliver large volumes of internet traffic to broadband customers.
• “Additionally, the Department of Justice’s settlement with Charter both outlaws video programming terms that could harm OVDs and protects OVDs from retaliation — an outcome fully supported by the order I have circulated today.

“All three seven-year conditions will help consumers by benefitting OVD competition. The cumulative impact of these conditions will be to provide additional protection for new forms of video programming services offered over the internet. Thus, we continue our close working relationship with the Department of Justice on this review.

“Importantly, we will require an independent monitor to help ensure compliance with these and other proposed conditions. These strong measures will protect consumers, expand high-speed broadband availability, and increase competition.”

Public-interest groups have protested industry consolidation, saying it has led to high prices and will give big companies the power to undermine online video rivals. But opposition to Charter’s deal was muted compared with the backlash in recent years to Comcast’s failed bid for Time Warner Cable. That’s because a bigger Charter would still be smaller than Comcast. And Charter, learning from Comcast’s failures, has made several promises to address concerns.

What does this cable deal mean for consumers?

WHAT HAPPENS TO ME AS A TIME WARNER CABLE CUSTOMER?

Charter will continue Time Warner Cable’s efforts to increase Internet speeds. Over the next few years, Charter says it will raise the minimum Internet speeds in acquired markets to a minimum 60 megabits per second, which lets you download a high-definition movie in about 10 minutes. That costs $40 a month, for now.

Charter’s prices are cheaper than Time Warner’s overall, says UBS analyst John Hodulik. But Time Warner has some cheaper deals with slower Internet speeds; Charter will get rid of most of those for new customers.

There could possibly be better customer service. Charter says it will hire 20,000 people in the U.S., replacing Time Warner’s overseas customer service representatives and its use of contractors for technicians, to provide better support. It doesn’t give a timeframe for the hires.

WILL MY BILLS STILL GO UP?

Probably. Cable companies have been passing on to customers the higher prices they pay for rights to carry channels on cable lineups, and their costs are still rising. Still, Charter will use its bigger size to seek better deals with channel owners like Disney and Fox.

But the cable industry has been consolidating for decades, and bills have only gone up.

“Cost savings to the company don’t necessarily translate to cost savings to the customer unless the company has competition that forces them to offer it,” said John Bergmayer, staff attorney at public-interest group Public Knowledge. “I don’t see anything about this merger that changes that basic dynamic.”

Charter will be the only supplier of broadband speeds, as defined by the FCC, for two-thirds of the homes in areas where it operates, according to FCC data.

But even if bills still go up, Charter said they won’t be as high as they would have been as separate companies.

There will be a $15-a-month Internet service for some low-income households.