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Meet the New Charter

Mari Silbey

The wait is almost over.

Nearly a full year after Charter Communications Inc. signed separate but related deals to acquire Time Warner Cable Inc. (NYSE: TWC) and Bright House Networks , the company has cleared its final hurdle on the way to closing both transactions. The California Public Utilities Commission was the last regulatory body that needed to sign off on the deals, and the CPUC handed down its approval today.

Light Reading has written extensively about Charter's pursuit of TWC and Bright House over the last year. But in case you missed it or need a recap, here's a briefing sheet covering the most important aspects of the landmark mega-deal.

Acquisition costs

  • Time Warner Cable - $56 billion
  • Bright House Networks - $10.4 billion
  • Subscriber Numbers
    Source: Data derived from companies' most recent earnings reports as well as numbers listed for Bright House Networks in Charter transaction materials.
    Source: Data derived from companies' most recent earnings reports as well as numbers listed for Bright House Networks in Charter transaction materials.

    Combined Footprint
    Source: Charter transaction materials
    Source: Charter transaction materials

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    Conditions imposed by regulators

    1. For seven years, Charter may not implement usage-based pricing or data caps for broadband services.
    2. Charter must continue to provide free interconnection services. More companies will qualify for free interconnection under new Federal Communications Commission (FCC) parameters.
    3. For seven years, Charter may not mandate against or penalize programming partners for streaming content online.
    4. Charter must build out high-speed broadband services to 2 million additional homes and institute a low-income broadband program.
    5. The FCC will adopt a system for monitoring Charter's compliance with all of the transaction conditions.

    Major impacts

  • Competing Pay-TV ecosystems: Comcast Corp. (Nasdaq: CMCSA, CMCSK) has created a dominating pay-TV ecosystem with initiatives like its X1 platform and the birth of the RDK set-top software stack. A new and larger Charter will create a significant competitive force to the Comcast technology and business approach in the cable market. (See Shaw Licenses X1, Proves Comcast's Influence.)

  • A strategic roadmap reapplied: Charter CEO Tom Rutledge has repeatedly said he plans to use the same strategies that he implemented successfully with legacy Charter in the newly acquired markets. These strategies include migrating systems to all-digital video delivery and extending the rollout of Charter's cloud-based Spectrum TV guide. (See Rutledge Sets Stage for New Charter.)

  • Business services boost: Time Warner Cable will give Charter a major boost in the business services market, bringing with it significant fiber deployments and connections to commercial buildings. Combined business services revenue for Time Warner Cable and legacy Charter was $4.4 billion in 2015. (See Charter Plans Business Services, Wireless Push .)

  • WiFi everywhere: Rutledge has committed to investing "significantly in out-of-home WiFi," and the combination of Time Warner Cable and Bright House Networks should immediately add close to 100,000 hotspots to Charter's existing footprint, if not more. Charter will also gain access to hundreds of thousands of hotspots through the CableWiFi consortium, and can take advantage of the same MVNO agreement with Verizon Communications Inc. (NYSE: VZ) that Comcast has already activated. (See Analysts More Than Bullish on Comcast MVNO.)

  • Reducing costs through restructuring: The price on Charter's acquisitions can only be supported with the help of cost-cutting measures. Among them, it appears Charter will shut down several Time Warner Cable facilities in: Charlotte, N.C.; Herndon, Va.; and Syracuse, N.Y. A Bright House Networks Network Operations Center in St. Petersburg, Fla. is reportedly also on the block. (See Charter Jumps Gun on TWC Restructuring.)

    — Mari Silbey, Senior Editor, Cable/Video, Light Reading

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    User Rank: Lightning
    10/7/2016 | 3:00:24 AM
    The data caps
    And that means. The data caps will be put in place. And soon. Your net speed will go to hell. 

    And your service will suck. If you really thought Charter was going to go by all the rules that were put in place. Your dreaming.  Charter new that the rules would not hold up. And would not have to go by them. 

    In English. This means the right people got payed off. But I can care less. 

    As soon as the data caps go in place. I will just drop my net. Go to the Library and check my E mail a few times a week. Are use my Cell lowongan kerja phone to check it.. I have Metro PCS... No Data Caps on it. And I will just use Netflix in the mail... And drop my online movie stuff. 
    User Rank: Light Beer
    7/16/2016 | 11:58:38 PM
    Re: Did any of you read the deal about Charter not having to go by what the FCC & FTC has put down.
    While it's no secret the government regulatory agencies generally can't keep huge monopolies in "line"  or make them keep their agreements/promises if they don't want to.  AT&T has broken everyone of theirs -- ie: With acquisition of Bellsouth AT&T was required to provide broadband (at that time 1-3 Mbps) to 100% of it's footprint.  They still have double digit percentages of their footprint that cannot receive internet.. and the majority of it's footprint/homes served/potentially can be served cannot receive Broadband as very conservatively defined by the FCC as 25Mbps.  

    Anyhow -- As for Charter and Data caps, usage caps -- That's their single 'advantage' they have over competitors (aside from lack of competition in many markets) -- They know this, and they are harnessing it as about their only real "PR" advantage.

    Data caps aren't needed for Charter to be profitable,.. which is obvious as they just bought two companies.. and increased their footprint by 400% literally overnight (I never like such deals.. we need more competition not less of it.)  

    Anyhow, Charter is actually, shockingly, going with the theory that heavily backing on NO Caps will net them a higher profit line.  They are going with being the 2nd largest MSO now, who SUPPORTS net neutrality (at least in this aspect) -- increasing their bottom line.    It's a very very smart move.  Especially as competition is creeping in at 10-250 times their current speeds from all sides and Charter is many years away from DOCSIS 3.1 rollout (~3 years ish) which is an eternity when AT&T will have 16+ Million homes covered in 1000/1000 Gigabit Fiber for cheaper pricing at that point,.. Google will have X Million covered, again, cheaper,.. plus smaller operators will increase their footprints, some cities will develop their own municiple fiber networks,.. and a company or two will come out of nowhere with something between now and then.

    To sort of 'prove" this point -- Charter hired the best/leading Net Neutrality expert / professional to literally write/chart Charter's Net Neutrality 'laws'/ self regulations -- which exceed the proposed regulations from the FCC.  

    Now, being the devil's advocate here:  Charter can of course shift it's internal policies at any time should they see other companies making substantial money by pissing off customers with Data caps, etc.  However, they are still banking on the fact that they will be one of the only major ISP's that do NOT do this -- and as people get screwed over by other MSO's.. they will turn to Charter for this very reason.

    There's definite money in the "Cellular cap / overages/ etc " business model for broadband -- but there is MORE money in appealing to what the customers WANT that other companies are not going to give them.   These are SERVICE industries,.. and they thrive by pleasing the constituency/customers -- The more competition the more the private sector regulates itself and the better customer service/services are -- the more innovation, upgrades, speeds, lower pricing, etc are.  We are seeing both monopolies growing and already large monopolies encroaching on Charter (and other ISP's) territory as well.  I hope the latter wins out.  

    As for enforcement,.. the FCC needs to be granted some REAL punitive power by our government (yes I know lobbying makes this hard) but it can be done -- And needs to be done.  If the FCC had the power to actually enforce anything it required of these companies,.. things would be quite different (esp. with people with Wheeler's mindset running things).  
    User Rank: Light Sabre
    5/12/2016 | 4:55:39 PM
    On balance...
    Rutledge likes to innovate, and he likes bringing out new services and new service features. Charter/TWC/BrightHouse subscribers will prosper by that measure. 

    Competition in the US remains a joke, however, which is how most US service providers can get away with prices and quality-of-experience that elicit the type of responses you see immediately below. (The heft of the combination might help mitigate future price increases; fees rarely if ever go down).

    So as consumers we all get to wait for another 10 years -- maybe 15 -- for 5G to maybe develop into a vehicle for competitive video and broadband. Maybe. That's on top of 20+ years since the '96 Telecom Act. You want better prices and better service? So sorry. That requires some political action, and too many of our fellow citizens think getting it before service providers want to give it to you is tantamount to communism or something.

    -- Brian Santo
    User Rank: Light Beer
    5/12/2016 | 3:53:03 PM
    Did any of you read the deal about Charter not having to go by what the FCC & FTC has put down.
    Has anyone read the deal that was put out yesterday. Saying the FTC has backed off on the rules they had put down on this train wreck sale. And saying that Charter does not have to go by the rules set in place.

    And that means. The data caps will be put in place. And soon. Your net speed will go to hell.

    And your service will suck. If you really thought Charter was going to go by all the rules that were put in place. Your dreaming.  Charter new that the rules would not hold up. And would not have to go by them.

    In English. This means the right people got payed off. But I can care less.

    As soon as the data caps go in place. I will just drop my net. Go to the Library and check my E mail a few times a week. Are use my Cell phone to check it.. I have Metro PCS... No Data Caps on it. And I will just use Netflix in the mail... And drop my online movie stuff.

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