As top executives at Charter Communications Inc. and Time Warner
Cable Inc. laid out their vision Tuesday for the cable companies'
planned merger, their pitch seemed aimed as much at Washington as
at Wall Street.
Charter Chief Executive Tom Rutledge, speaking on a conference
call after the company announced a $55 billion agreement to acquire
Time Warner Cable, pledged to invest in new broadband products and
refrain from the sorts of pricing tactics that have triggered a
backlash from regulators.
Charter's deal, which also includes a merger with smaller
operator Bright House Networks, would create a new U.S. cable giant
with about 24 million total customers, second in size to Comcast
Corp. The company is trying to avoid the fate of Comcast's proposed
merger with Time Warner Cable, which fell apart last month when it
became clear regulators had strong reservations about it.
Mr. Rutledge said Charter won't impose caps on the data
consumers can use and won't institute usage-based broadband
pricing. Regardless of whether the Federal Communications
Commission's new tough Internet rules get tossed out after a court
challenge, he said, Charter has no plans to block any Internet
traffic or engage in paid prioritization on its pipes.
Such promises highlight how much the regulatory landscape has
shifted over the past year and a half. Many analysts and industry
executives predicted Comcast's deal would go through and were
surprised when it didn't. Now, any companies proposing a big cable
merger are likely to tread carefully and be especially sensitive to
the concerns regulators laid out in the Comcast deal.
"Through Charter we'll offer consumers a broadband product that
makes watching online video, gaming and engaging in other
data-hungry applications a great experience, including at peak
times," Mr. Rutledge said.
Both Mr. Rutledge and Time Warner Cable Chief Executive Rob
Marcus sought to make the case that the combined company shouldn't
stoke the same fears that led to regulators resisting the
Comcast-Time Warner Cable deal, because it won't have as much clout
in the broadband marketplace.
"We will not have market power in high-speed broadband or
video," Mr. Rutledge said. Charter will have less than 30% of the
market for Internet speeds above 25 megabits per second, which is
the FCC's new benchmark for broadband. Comcast-Time Warner Cable
would have controlled at least 57% of that market.
He said that Charter's minimum broadband speed tier is 60
megabits per second today—"considerably faster and less
expensive than Time Warner Cable's comparable tiers." Charter has
been rolling out these speeds as it has pursued a strategy to
convert analog TV transmission to digital, which frees up capacity
on the cable pipe for faster broadband speeds and more advanced
video services. He said Charter would expand these offerings across
its new footprint.
Charter and Time Warner Cable executives said a combined company
would be a "pure-play" cable company, without a major investment in
an entertainment arm like Comcast's NBCUniversal, which controls
cable channels and a TV and film studio.
"This is a very different transaction," Mr. Marcus said. "We're
talking about a resulting entity that's significantly smaller,
without any vertical integration concerns."
Mr. Rutledge emphasized that Charter invests "significantly" in
interconnection and capacity, so it would offer customers broadband
products that make streaming online video or gaming a "great
experience." Among the major concerns of regulators over the
Comcast deal was that the company would use its market power to
choke off new online-video services.
Charter executives also said increased scale can help the
company serve business customers better and expand deployment of
Wi-Fi access points.
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com
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