The Charter-Time Warner Cable Merger Will Benefit Execs, Burden the Rest of Us

Washington, DC (freepress) – Like any merger, the Charter-Time Warner Cable deal is about the consolidation of power. But it’s also the story of three men.

Time Warner Cable CEO Robert Marcus wants to jump ship — and will pocket $85 million if the deal goes through and he leaves the company. Charter CEO Tom Rutledge is getting his second shot at Time Warner Cable after being thwarted last year when Comcast jumped in and made its own bid.

And then there’s John Malone — aka the “king of cable” — who helped build the cable industry in the ’80s and ’90s, owns everything from Sirius XM to the Atlanta Braves, and invested in Charter two years ago. “Though Mr. Malone does not officially control Charter,” writes David Gelles in the New York Times, “he is widely understood to be guiding the company’s aggressive acquisition strategy.”

You can bet your bottom dollar that Malone (pictured) knows the Charter deal would harm competition. Consider this anecdote recounted in a 2011 Deadline piece:

Talking to Wall Street analysts about the growing number of consumers who buy high-speed Internet services from cable companies, Malone said that ‘cable is pretty much a monopoly now’ in broadband. Oops. The executive who once was considered such a monopolist in cable TV that Al Gore referred to him as Darth Vader caught himself, adding, ‘I don’t want to use that word.’

The market is that much more consolidated now than it was in 2011. And as Malone and his fellow masters of the universe wheel and deal, customers suffer the consequences.

“These potential mergers won’t make Charter as massive as a merged Comcast-Time Warner Cable would have been, but they raise similar public interest concerns,” said Free Press Research Director S. Derek Turner. “Charter will have a tough time making a credible argument that consolidating local monopoly power on a nationwide basis will benefit consumers.”

Just how big will a combined Charter-Time Warner Cable be? This deal is a case of a goldfish swallowing a grouper — an all-too-rare instance of a smaller company buying up a bigger one. If the merger and Charter’s other pending deal go through — the company is also trying to buy cable operator Bright House Networks — Charter will have 24 million customers, creating the nation’s second largest cable provider behind Comcast.

According to Free Press estimates, the merger would give Charter control over nearly one-quarter of the nation’s broadband customers. Charter and Comcast would control nearly two-thirds of the nation’s high-speed broadband customers, raising the prospect of coordinated anti-competitive behavior between these and the market’s other leading providers. (The largest companies have historically carved up the market into non-competing territories to boost their respective positions.)

Time Warner Arena Image Source: Daniel Barcelona

Time Warner Arena
Image Source: Daniel Barcelona

None of this spells good news for consumers. “This merger is yet another example of the poor incentives Wall Street’s quarterly-result mentality creates,” said Turner. “Charter would rather take on an enormous amount of debt to pay a premium for Time Warner Cable than build fiber infrastructure, improve service for its existing customers or bring competition into new communities.”

Written by Amy Kroin for FreePress.net