The Federal Communications Commission (FCC) is reportedly about to give the green light to the proposed merger between Charter Communications Inc. (NASDAQ: CHTR) and Time Warner Cable Inc. (NYSE: TWC). Charter’s $55 billion bid for Time Warner was made last May after a proposed merger between Time Warner and Comcast Corp. (NASDAQ: CMCSA) was withdrawn when it became clear the U.S. Department of Justice was very likely to oppose the deal on antitrust grounds.
Charter also has a $10.4 billion offer on the table for Bright House Networks, a pay-TV operator currently owned by Advance/Newhouse, the sixth-largest cable company in the United States. The Bright House deal as it now stands depends on the completion of Charter’s acquisition of Time Warner.
While the pendulum has swung in favor the merger, there are sure to be plenty of conditions. The Wall Street Journal reported that one condition would prevent Charter from inserting clauses in its pay-TV contracts that would restrict a content provider from offering its programming to online companies or new entrants in the pay-TV market.
The FCC recently announced a rule that would require pay-TV providers to separate the proprietary set-top box from the information that the box provides to customers. The commission’s chairman, Tom Wheeler, has made his position on openness abundantly clear: competition is good for consumers and while he’s chairman, the FCC will favor competition over proprietary concerns. Wheeler’s even gone so far as to promote the idea that cable companies should compete outside their traditional (and near-monopoly) regions, competing against one another.
So, while the FCC apparently is satisfied with the deal, there are holdouts. In an opinion piece published in Variety, the Writers Guild of America summed up its position:
If this merger is not stopped we can expect a future that looks very much like the past, with the same cable gatekeepers controlling Internet-delivered video. Companies like Charter and Comcast can use the pricing of Internet service and proprietary set-top boxes to determine which online content is accessible and at what price to their customers; they can add data caps to make online video more expensive; or they can pick which video services can be watched through the company’s set-top box.
Last week the Leichtman Research Group reported that the top 13 pay-TV companies the top 13 pay-TV companies lost about 385,000 pay-TV subscribers in 2015, compared with a loss of about 150,000 in 2014 and a loss of about 100,000 in 2013. Major telcos like Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) that compete with the cable companies had their worst year for new subscriber additions since 2006. Cable operators have signed up 97% of the 6.1 million new broadband subscribers in the past two years.
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