Charter Lays Out Case for Buying BHN, TWC
From cheaper residential Internet delivered unthrottled, to bringing outsourced customer service jobs back to the U.S., Charter Communications has a litany of reasons why its proposed buys of Bright House Networks and Time Warner Cable should get FCC OK, said the public interest statement posted Thursday in docket 15-149. The deals worth $89.1 billion are expected to close by year end, giving Charter 19.4 million broadband, 17.3 million video and 9.4 million voice customers in 41 states, the companies said in May when they announced the deal (see 1505260047).
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Within a year of the deal's closing, the minimum broadband speed across the post-deals footprint would be 60 Mbps, which Charter largely offers now to its own customers, and it will offer cheaper Charter pricing than BHN and TWC charge for comparable products, Charter said. Those broadband services would come as stand-alone or bundled products "without data caps, usage-based pricing, modem fees, or early termination fees," Charter said, saying it would also continue TWC's rollout of its 300 Mbps downstream package.
Regardless of how the courts decide on the FCC net neutrality order, Charter said it "will not block or throttle Internet traffic or engage in paid prioritization" or engage in usage-based billing for three years.
While TWC is about half converted to digital in its footprint and BHN is only partially digital, Charter "will invest in an all-digital system ... completing the digitization within 30 months of closing, thereby freeing up capacity for high definition and on-demand channels and increased broadband speeds," the company said. The deal will make Charter more competitive with phone companies and help it cut fixed costs, Charter said. "Recognizing the negative view that many people have of cable customer service, we are focused on improving ... customer service" by adding thousands of call center and field technician workers, Charter said. "We will also return Time Warner Cable call center jobs to the United States."
The deals raise "no horizontal concerns" because the three companies don't compete in the same geographic markets and the company is focused primarily on its broadband business, meaning it "will not have the incentive to harm online video distributors, video programmers, or MVPDs," it said. Instead, Charter said it "will have every incentive to promote online video distributors and other edge providers, thereby increasing demand for broadband, which will expand broadband subscribership."
Other Charter pledges include spending a minimum of $2.5 billion within four years of deal completion on building out its network in commercial areas, as well as 1 million line extensions to homes in its franchise area and 300,000 additional out-of-home Wi-Fi access points. It said it wouldn't charge additional fees for third-party Internet applications or employ data caps for at least three years. It made a three-year pledge that any interconnection disputes would be submitted to the FCC for resolution, in line with the net neutrality order. BHN's broadband program for low-income consumers would get a higher-speed offering at a discount to be offered across Charter's footprint within three years, Charter said. And it promised what it called "innovative video services" in the form of its cloud-based Spectrum Guide user interface system that lets video subscribers manage and navigate their cable TV and on-demand subscriptions
Comcast's attempts earlier this year to buy TWC fell apart amid FCC and Justice Department concerns. Charter distanced itself from the Comcast deal, saying it would have "at least 2.5 million fewer broadband subscribers than Comcast serves today, serving approximately 21 percent of wireline broadband customers." Post-deals Charter also would have roughly 17 percent of the MVPD market, putting it behind Comcast's 22 percent and DirecTV's 20 percent. Charter also said that unlike the Comcast deal, it would have no notable interests in programming and thus no incentive to keep rival programmers away from its subscribers. "To the contrary, we will have an increased incentive to promote OVDs [online video providers] and other edge providers in order to encourage usage that expands subscribership to our broadband network. Our gross margin percentages on broadband will exceed those on our video business and OVDs are the primary driver of broadband usage," Charter said.
Smaller isn't necessarily less a danger to consumers, as a post-deals Charter would still have a very large share of the broadband market, said Matt Wood, Free Press policy director. "The first temptation for some people is 'This won't be as big as Comcast, ergo it's better.' That doesn't necessarily mean it's a better thing or a good thing at all." One of Free Press' first steps will be to look at the filing and determine whether the benefits Charter promises are dependent on a transaction. "When they say, 'We're going to abide by the Open Internet order,' that's the law of the land, 'We're bringing back call center jobs' -- that certainly sounds good. But do you have to have Time Warner Cable in the fold to do that?"