Charter-Time Warner merger: Good for consumers?

The US Justice Department today approved Charter Communications's $65.5 billion bid to buy Time Warner Cable and Bright House Networks.

The Federal Communications Commission (FCC) has yet to sign off on the merger, but if the purchase goes through, the so-called “New Charter” will become the country’s second-largest broadband provider with 19.4 million users, and the third-largest cable television provider with 17.4 million customers, as The New York Times reports.

Already, three companies – Comcast, Charter, and Altice, a European company that's in the process of buying Cablevision – now control 80 to 90 percent of all broadband access and thus the content transmitted, as a result of massive cable consolidations in recent years.

Federal regulators are framing the deal as a boon to consumers, saying that restrictions ("conditions") on New Charter will encourage broadband competition.  But consumer advocacy groups are skeptical. 

“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,” said FCC chairman Tom Wheeler in a statement Monday. Mr. Wheeler has approved the deal and recommended that the five FCC commissioners vote in favor of it.

Groups such as Consumers Union, an independent consumer advocacy organization, say that history shows that the politically powerful conglomerate, already among the lowest-ranked companies for customer service, is unlikely to keep its promises.

"Since day one, we've been very skeptical of this deal and the power it could give one company to become a cable and broadband giant," said George Slover, senior policy counsel for the Union, in a statement Monday. 

In approving the deal, the Justice Department seems to have tried to assuage consumer anxieties by requiring that Charter not charge their customers extra fees based on the amount of data they use for streaming videos and other activities. It also required the company to expand Internet access to two million more homes, and to offer a cheaper broadband service to low-income households.

To maintain a level of competition in the shrinking industry, the Justice Department has asked the company not to negotiate special deals with with TV networks. The biggest fear is that Comcast will negotiate exclusive deals with networks such as Bravo, for instance, that would prohibit them from selling content to streaming services such as Hulu and Amazon Video.

The conditions will apply for seven years and include an independent monitor intended to ensure that New Charter is following the rules.  

The Consumers Union, which had advocated for federal regulators to impose such conditions in the first place, called the steps “promising” in a statement, though the organization doesn’t go so far as to support the merger.

"The conditions put forth by the government are all aimed at protecting competition and consumer choice, along with providing other public-interest benefits to consumers,” said George Slover, senior policy counsel for the Union, in a statement. “But history has shown us how powerful companies look for every angle to avoid or weaken the conditions imposed on their mergers, so the government is going to have to have back up these tough conditions with tough enforcement,” he said.

In 2015, when the country’s biggest cable company, Comcast, was working to buy Time Warner Cable (ultimately unsuccessfully), the Consumers Union outlined examples when imposing conditions on cable mergers had not been effective in the past:

Comcast was allowed to buy NBC/Universal (in 2011), but only after pledging not to hoard content. Comcast promised it would give other video program distributors fair access to its programs, and agreed to other conditions that were supposed to ensure that. But sure enough, after the merger was approved, when Project Concord, a start-up online video distributor, tried to get NBC/Universal programs, Comcast refused, and fought tooth and nail. In the words of Project Concord, Comcast “used the very first test of the online video Conditions to send a chilling message to the marketplace – any attempt to enforce the Conditions would be met with a scorched earth resistance strategy that only a multi-billion dollar conglomerate can mount.”

Some reports claim that New Charter and Comcast together will control access to 70 to 90 percent of the high-speed broadband connections in the country, including some of the biggest markets, such as Los Angeles and New York City.

FCC members have yet to vote on the deal, and there is no date set for the vote.