Two of America's largest cable providers announced a $10.4 billion merger last Tuesday. Charter Communications Inc., the nation’s fourth-largest cable operator, announced that it has agreed to acquire Bright House Networks, the the sixth-largest U.S. cable operator. The acquisition is subject to the successful closing the deal Charter currently has in the works with Comcast Corp. If the deal gains regulatory committee approval, the combined business will enter into a partnership, with Charter owning 73.7 percent and Bright House’s parent company, Advance/Newhouse, owning 26.3 percent.
“We think the combination with Charter gives our employees, our customers and Advance/Newhouse the strongest prospects for the future," said Bright House CEO Steven Miron.
Although Charter’s deal with Bright House can only move forward if regulators approve the proposed merger between Comcast and Time Warner Cable, because Time Warner Cable currently has a contract with Bright House that gives the company the right to make the first purchase offer for Bright House. The exclusivity contract would be nullified if the Comcast-Timer Warner merger goes through.
Consumer advocacy groups are concerned that aggregated businesses will have too much power, and won't have incentive to lower fees or improve their customer service. However, according to John Bergmayer, senior staff attorney for the consumer advocacy group Public Knowledge, the merger between Charter and Brighthouse is “relatively small” compared to other mergers that were previously approved by regulators, and was therefore not an immediate cause for concern. “Generally speaking, these cable deals trouble me when there’s either a loss of head-to-head competition or an accumulation of too much gatekeeper power," Bergmayer said. "I don’t see much to suggest either is the case here.”
The Federal Communications Commission and the Department of Justice are already in the process of reviewing two mergers that could change the face of the information technology industry. Last February, Comcast proposed a $45 billion bid to merge with Time Warner Cable, and in May of last year, AT&T offered to buy DirecTV for $48.5 billion. Although the deals were each expected to garner government approval, the outcome of the two proposals remains uncertain because regulators have not yet reached a decision regarding the mergers.
The Federal Communications Commission analyzes mergers based on the public interest and consumer benefits. This analysis usually takes about 180 days, but the review can be extended if officials feel they need more time to review a proposal, which the commission has done because because of concerns that the companies involved in both mergers have not been transparent enough about their programming contracts. The Department of Justice also reviews proposed mergers to check for any antitrust concerns, and they will make an independent decision regarding the deals.
Comcast remains optimistic about the chances for the approval of their merger, but executive vice president, David Cohen said that he does not expect the FCC to reach a decision on the merger until sometime in “the middle of the year.”