Charter Communications' planned acquisition of Time Warner Cable faces a regulatory review by the same federal officials who were widely blamed for nixing the recent proposed merger of Time Warner with Comcast.
The $55 billion deal (plus $23 billion in debt) between TWC and Charter, announced Tuesday, led immediately to an unusual three-sentence challenge by Federal Communications Commission Chairman Tom Wheeler that succinctly stated: "The Commission will look to see how American consumers will benefit if the deal were to be approved."
Wheeler's statement also made it clear that the FCC reviews mergers on their merits to determine if they are in the public interest, noting somewhat ominously that "an absence of harm is not sufficient."
Apparently anticipating that kind of tough regulatory posture, Charter and TWC laid out their case for regulatory approval in a conference call, noting that consumers would benefit from the merger with fast broadband services for online video and gaming.
Charter's first attempt to buy TWC in 2014 was a failed hostile bid, then Comcast entered a bid last year to buy TWC for $45 billion. Comcast's bid was withdrawn in April after the FCC called for a judicial hearing, amid reports the U.S. Department of Justice would oppose the Comcast deal on antitrust grounds.
The promises laid out by the new Charter company should sound pleasing to consumers, if not the FCC and DOJ regulators. Cable companies in general have been criticized for poor customer care and, in some instances, throttling of Internet speeds.
Instead, the new Charter company said it would deliver "superior customer care," which will include bringing back TWC customer care jobs from overseas, and training of new employees to provide customer service in the U.S.
Also in its conference call, officials from TWC and Charter said that regardless of industry litigation attacking net neutrality reforms by the FCC, "we have no plans to block, throttle or engage in paid prioritization because our customers demand an open Internet."
The new Charter would continue to provide Charter's slowest existing Internet speed tier of 60 Mbps downstream, which is faster and less expensive than TWC's comparable tiers, and has the added advantage of no data caps or usage-based pricing, the companies said.
Also, the new Charter would adopt TWC's rollout of a fast 300 Mbps broadband tier. The proposed entity also promised continued investments in Wi-Fi outside of homes and in fiber-optic cable connections.
In an attempt to show the new Charter would not be a monopoly in certain areas of the U.S., the two companies declared their merger would "not reduce any competition in any market." The combined companies would serve fewer than 30% of broadband customers who receive 25 Mbps or greater Internet speeds, they said. Also, the new company would the largest cable TV provider in just five of the top 20 metro areas.
A coverage map provided by the companies seems to indicate little overlap, with Time Warner heavily concentrated in areas east of Ohio and in parts of Texas and California. Charter, meanwhile, has a broad swath of coverage from the Northwest to the Southeast states.
The map also indicates a dense concentration of coverage by Bright House Networks in Florida and Alabama. Charter is also buying Bright House for $10.4 billion.
Tuesday's proposed acquisition underlines the longstanding move by cable TV operators to find ways to support fast Internet services that include video programming from companies like Netflix, Amazon and Hulu. Having greater financial scale with a bigger geographical footprint will drive more product development and innovation, TWC and Charter said.
The new Charter would also provide fast Internet to business users in areas where businesses aren't well served today, Charter CEO Thomas Rutledge said in the conference call. Rutledge would head the new company as CEO and chairman. The new company's board would have 13 directors, including the chairman.
Shareholders of both Charter and TWC must approve the deal, as well as federal regulators.
The new Charter would have nearly 24 million customers in 41 states, of which 19 million would be wired Internet customers and 17 million would be cable TV customers. Comcast will still remain the largest cable TV and Internet provider with about 27 million cable TV and Internet customers. TWC and Charter are the second and third largest.
Even with the cautionary statement from FCC's Wheeler, analyst Jack Gold of J. Gold Associates predicted the Charter-TWC deal has a "pretty good chance of going through." He noted that Comcast would still have the most Internet customers, at about 22 million in all.
"Still, it is possible that the FCC and DOJ will play hardball and say no," Gold added.
This story, "Charter-Time Warner deal would get tough regulatory scrutiny" was originally published by Computerworld.