Charter-Time Warner merger under fire

Opponents of Charter Communications’ merger with Time Warner Cable are firing their first major salvos after a quiet summer.
 
This week brought the first deadline in a Federal Communications Commission comments process for the $65 billion deal that would combine the St. Louis-based Charter with Time Warner Cable and small operator Bright House Networks.
 
Public interest groups and competitors warn the deal would enable the combined company to push other video services out of the marketplace. They also drew a comparison to Comcast’s ill-fated acquisition of Time Warner, shot down by regulators earlier this year.
 
Opponents of the deal contend that the new Charter will have so much control over the market for broadband that it could impair independent video providers, or  “over-the-top” services, with which its own cable packages compete.
 
“All the exciting things are happening with over-the-top … that’s a positive thing for consumers and for innovation, but it’s a threat to Charter and Time Warner because they want people buying their bundle of broadband and video so the development and growth of over-the-top is something that competes with them and they have an incentive to sabotage over-the-top.” said Jeff Blum, a senior vice president at Dish, which filed a petition against the merger. “Unfortunately, they have the means to.”
 
AT&T said that while it was not opposed to the deal, it supported regulators applying “critical scrutiny of cable coordination, both in this merger proceeding and more broadly.”
 
Public interest groups, which are skeptical of consolidation in the media marketplace, also came out against the deal.

“The motivation for this wasteful deal is clear: leveraging monopoly power,” wrote Free Press in its filing. “Further consolidation of the vertically integrated multichannel video programming distribution market would enhance each distributor’s market power and their ability to utilize that market power to stifle competition from online video distributors.”
 
Advocacy group Public Knowledge also filed its own petition to deny the merger, and was joined on the filing by Consumers Union, Common Cause and Open MIC.
 
Charter denies that an expansion of its services would be bad for streaming video providers. Alex Dudley,Charter’s Senior Vice President of Communications, said that “that over-the-top video providers have no better friend than Charter broadband.”
 
He laid out a list of policies he said would make the company’s service a boon for streaming video: he said it does not cap data, does not make customers sign contracts and has never slowed traffic.
 
“So, if you add all that up, that’s a home run for an over-the-top video provider,” he said.
 
Opponents of the deal have also said that, though some of the players involved are different, the deal could have essentially the same effect as the proposed merger of Comcast and Time Warner.

That could be a potent line of attack, since regulators at the commission and the Department of Justice killed the deal after a significant public outcry about the idea of America’s two largest cable providers becoming a behemoth. At the time, then-Attorney General Eric Holder called it the “best outcome for American consumers.”
 
“This [deal] would make the new Charter about as big as Comcast is now, and Comcast already has a lot of market power,” said Matt Wood, policy director at Free Press. “So, not to be too flippant about it, but if one Comcast is bad why would two be better?”
 
“A duopoly like that on a nationwide basis, we think, is disadvantaging to the potential for online video competition as the Comcast-Time Warner Cable national monopoly would have been.”
 
The opponents argue that the merger would set up a market with two players — Comcast and Charter — who could act in similar ways and ultimately push back against programming and video providers.
 
“We are a different company than Comcast,” Dudley said when asked about the argument, while noting that even the combined company would not be as large as Comcast, which owns NBCUniversal. “We don’t own any national programming interests, so that aspect of it is completely non-existent.”
 
So far, however, the public at large has not expressed the level of outrage to the merger that damaged the Comcast deal.
 
Wood said that “Charter is just less well known than Comcast because they start out smaller, so I think there’s been less of a visceral reaction.”
 
Lawmakers have also been quieter about the deal, though Sen. Al Franken (D-Minn.) has urged regulators to aggressively vet the transaction.
 
“I believe it’s crucial that federal regulators examine the proposed deal with the highest level of scrutiny,” he said in a statement. “I’ve long been troubled by the high degree of concentration in the telecommunications industry, and I’m concerned about how mergers like this will affect consumer choice, and ultimately consumers’ bills.”
 
The deal has its supporters as well. Foremost among them is streaming service Netflix, which is supportive of the deal because Charter has pledged not to charge for access to its network as part of the deal.
 
“Netflix believes that this new policy and the commitment to apply it across the ‘New Charter’ footprint is a substantial public interest benefit and will support scaling the Internet to meet consumers’ growing demand for online services and help foster continued innovation across the Internet ecosystem,” the company said in a July filing with the FCC.
 
A range of community non-profits, some of them beneficiaries of Charter’s philanthropic work, are also backing the deal. Charter says that the support from organizations it had donated to is evidence of its engagement in the communities it serves.

The company has also said it will stick to other commitments as part of the merger, including abiding by parts of the FCC’s net neutrality rules for three years regardless of whether the courts strike them down. They have also committed to not cap data on their broadband plans for three years, Dudley said.

Now, the company has until November 2 to submit its responses to its detractors. Ultimately, though, it is the opponents who will get the last word: their last round of comments are officially due on November 12.