Why the latest cable merger won’t crash and burn like Comcast
Is Charter Communications Inc (CHTR) bold or foolish? The cable company announced it will acquire rival Time Warner Cable Inc (TWC) – even though Comcast’s (CMCSA) attempt to pull off the same deal foundered just weeks ago on anticompetitive concerns.
Comcast, recall, struck out after spending 14 months and $336 million on legal and lobbying bills. The price of failure for Charter would be even steeper: It has agreed to pay Time Warner Cable a $2 billion break-up fee in the event the deal doesn’t go through. But, for now at least, merger fans have little to worry about.
Even though the deal, which also involves Charter swallowing another small operator called Bright House Networks, would create a broadband behemoth, it would not be on the scale of the proposed Comcast-TWC merger. (The latter deal would have given Comcast exclusive control of over half the high-speed broadband connections in the country; the figure in the Charter deal will be closer to one quarter).
That scale difference alone is likely to quell anticompetitive concerns. While FCC Chair Tom Wheeler is already making noise about the need for the deal to “benefit” consumers, this likely means the agency will try to extract a few promises from Charter rather than erecting full-blown roadblocks.
Also aiding Charter is that, unlike Comcast, it doesn’t own content verticals like NBC. In the view of regulators, this reduces the chances of major mischief in the form of the merged company favoring some type of broadband content over others.
One more good sign for Charter is that public interest groups, which promptly threw a fit after Comcast announced its merger plans in early 2014, are so far keeping their powder dry. The president of Public Knowledge, for instance, said that his group is still assessing the implications.
“No, we have to review all details,” said Gene Kimmelman in response to an email asking if his group plans to oppose the merger. “And it must be shown to benefit the public in the FCC review, which is certainly not clear at this point in time. We may oppose unless certain public interest protections are put in place.”
Finally, Charter’s chances are improved by the simple fact that it is not named Comcast. As Fortune editor Alan Murray recently explained, Comcast’s rotten customer service helped it achieve a singular infamy, even by the low standards of America’s little-loved cable companies. This ensured that consumers and regulators alike were determined to stop Comcast from growing bigger.
All this is why the Charter deal, while no slam-dunk, is likely to go through with relatively few hitches.