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Charter Communications is within striking distance of finally capturing its prize.
As soon as this week, the cable company could get the green light from federal regulators on its pair of deals — totaling $67.1 billion — to acquire Time Warner Cable and Bright House Networks. The merger will create a powerful new force in the industry that will dramatically reshape the future of how people gain access to the Internet, watch televisionand much more.
Emily Steel, who covers media for The New York Times, and Cecilia Kang, who writes for The Times from Washington about technology policy, have been following the story since it broke in the summer of 2013.
EMILY STEEL: Hi, Cecilia. It’s hard to believe that this day is finally coming. What’s the latest that you’re hearing from regulators in Washington on the Charter deals?
CECILIA KANG: Hello from the seat of government, where corporations come to win hearts at the risk of getting theirs broken. In this case, it looks as if Charter, a small cable company with big ambitions, will find rare success. The Federal Communications Commission shot down two big mergers in the last five years but is about to approve Charter’s bid for Time Warner Cable and Bright House. The acquisitions will create the second-largest broadband provider, after Comcast, with 19.4 million subscribers, and the third-largest video provider, after Comcast and DirecTV, with 17.3 million customers. The combined company will span 40 states and include big markets such as Los Angeles and New York.
The creation of such a giant cable and Internet company upsets consumer advocacy groups, which say a lack of competition has led to increased prices and poor customer service. But the F.C.C. thinks the deal won’t harm consumers because the companies don’t really compete in the same markets. While Comcast made a similar argument in its failed bid for Time Warner Cable, the F.C.C. was more skeptical in that case because Comcast’s big media holdings with NBCUniversal held the potential for a conflict of interest.
Charter and Time Warner Cable have also persuaded regulators that together, they’ll be able to bring faster broadband to more households.
The big focus at the F.C.C. has been on how this deal will affect the fastest-growing area of media: video streaming. Emily, what do people in the media and tech industries think? Continue reading the main story
EMILY STEEL: Streaming has definitely been a hot topic. The big fear is that a gigantic Charter will have both the power and the incentive to hurt rival streaming services. It also could hinder the invention of other new offerings.
In the three years since Charter started circling Time Warner Cable, there has been an explosion of new options for cord cutters, who want to ditch their traditional cable subscriptions but keep feeding their TV addictions. HBO and Showtime, for example, both started à la carte streaming services. And Dish Network started a service called Sling TV that offers live and on-demand viewing for about two dozen channels. Those new services are usually cheaper than a typical cable TV offering (like what Charter sells) and also give people more choice to pay for what they want to watch, when they want to watch it. (I tried out Sling to watch my North Carolina Tar Heels in the March Madness college basketball tournament this year.) Continue reading the main story Continue reading the main story Creating a $67 Billion Empire
Charter Communications is expected to receive approval for its bid to acquire Time Warner Cable and Bright House Networks. The combined entity would become the second-largest cable company behind Comcast, in terms of number of subscribers.
Broadband provider service areas
Total video subscribers, in millions
As of June 30, 2014
Charter
CURRENT
AFTER MERGER
ESTIMATE
Time Warner Cable
Bright House
Comcast
22.3
22.3
Comcast
Time
Components
of merger
Warner
11.0
Cable
17.4
New Charter
Charter
4.4
Cox*
3.9
3.9
Cox
Cablevision
2.6
2.6
Cablevision
Bright House*
2.0
1.1
SuddenLink
SuddenLink
1.1
others
5.7
5.7
others
*estimated Sources: National Telecommunications and Information Administration (broadband map); MoffettNathanson (video subscribers)
By The New York Times
If Charter is selling traditional cable service, why would it want to ease the way for a new set of competitors? Both Dish and Time Warner, the parent company of HBO, have warned regulators that Charter’s takeover could alter the future of streaming.
How do you expect regulators to address that concern?
CECILIA KANG: As a condition of approval, the F.C.C. persuaded Charter to agree to a number of public interest commitments, including a promise that it will treat streaming services fairly. It’s possible that Charter will promise not to pressure programmers like Viacom and Disney to withhold shows from companies like Hulu and Netflix, which could siphon viewers away from Charter’s offerings. Arrangements to withhold programming, known as “most favored nation” clauses, are common but secret. But the F.C.C. and Department of Justice, which is also reviewing the deal, have made more noise about them in various speeches because they think such deals stifle streaming services by keeping the most popular shows exclusively in the cable bundle.
Tom Wheeler, chairman of the F.C.C., has talked a lot about his mission to ensure that nascent media and telecom services blossom during his tenure. After the agency rejected Comcast’s bid for Time Warner Cable last April, the F.C.C.’s top lawyer said that particular deal would have threatened streaming companies that competed with Comcast’s video service.
Which raises a question: Why would regulators say yes to Charter but no to Comcast?
EMILY STEEL: For one, this deal is not as big. The Comcast-Time Warner Cable merger would have united the country’s two largest cable companies into an entity that controlled as much as 57 percent of the nation’s broadband market and just under 30 percent of pay television. That would have put a lot of power in the hands of one company that several TV executives already described as a major bully. And while Charter’s deal has generated its share of critics, the opposition to the Comcast deal was much louder and came from a wider base of lawmakers, public interest groups and big companies like Netflix, Dish and Discovery Communications.
Comcast lashed out against its critics, calling some extortionists. Charter, on the other hand, has taken a more conciliatory approach, striking deals with potential opponents, like one in which it promised not to charge access fees to online content companies such as Netflix no matter how much traffic they create. (Charter has a major financial incentive to make the concessions necessary for approval: Time Warner Cable will receive a breakup fee of up to $2 billion if the deal falls apart.)
One other interesting point, I think, is the idea that regulators could be using the Charter deal to drive the industry to adopt new business models. Cecilia, what do you think the F.C.C. is hoping to achieve through the merger?
CECILIA KANG: This F.C.C. clearly wants to support streaming video services, and that push is seen in so many of its regulatory decisions. Its net neutrality rules — a condition of this deal that will be upheld even if the agency’s rules are overturned in federal court — would ensure that Netflix and Hulu are never slowed or blocked by Charter. The F.C.C. hopes that opening up the set-top-box market will allow companies like Google and Amazon to sell devices that blend cable programming with Hulu, YouTube and online video services.
Mergers are also used to spur broadband providers to extend service to more customers and offer cheaper plans for low-income households, a provision Charter has already volunteered to adopt. Other commitments could include the promise not to impose data caps or usage-based pricing for broadband customers.
And even if the deal gains approval from federal regulators, it has one more hurdle: Regulators in California are also reviewing the merger. But there is little indication it will be blocked by state commissioners.
The completion of one merger is near, Emily, but I’m sure another big cable, wireless or media merger will have us back here talking again very soon. Until then.