By Gautham Nagesh And Joe Flint
A Charter Communications Inc. merger with Time Warner Cable Inc.
stands a better shot at regulatory approval than Comcast's
ill-fated attempt to purchase the cable giant last year, according
to cable-industry analysts and executives.
Charter is nearing a $55 billion deal for Time Warner
Cable--just a month after Comcast backed out of its own bid for
Time Warner in the face of opposition from government regulators.
As part of the deal, Charter would also merge with smaller Bright
House Networks LLC, giving the new entity roughly 23 million total
customers--second only to Comcast's 27 million among cable
operators.
The deal must pass muster with antitrust officials and the
Federal Communications Commission, who were prepared to block the
Comcast-Time Warner Cable deal on the grounds the combined company
would have too much power over the broadband and online video
markets.
"The reason Comcast-Time Warner Cable was a problem for the
government was because they were going to have a dominant share of
the national broadband market," said Jonathan Chaplin, an analyst
at New Street Research.
Indeed, FCC Chairman Tom Wheeler said in April that the merger
"would have posed an unacceptable risk to competition."
One likely concern, said Mr. Chaplin, was that Comcast would
have used its market power in broadband to thwart the development
of competitors' online-video services.
A Comcast spokeswoman declined to comment.
That deal would have combined the two largest cable providers in
the country, together serving more than half of all households with
high-speed broadband access. A combined Charter-TWC-Bright House
would serve 20 million broadband customers, or roughly 24% of the
market.
Mr. Wheeler recently called both Time Warner Cable CEO Rob
Marcus and Charter CEO Tom Rutledge to assure them that the FCC is
still open to other cable deals, provided they are in the public
interest, according to a person familiar with the calls.
One possible advantage for Charter: It doesn't own marquee
national programming assets that it could potentially leverage
against other distributors, which was a concern for regulators with
Comcast which purchased NBCUniversal several years ago.
"The facts here are a lot more favorable to Charter than they
were to Comcast," said Former Justice Department antitrust official
Gene Kimmelman, now the head of the advocacy group Public
Knowledge.
Despite a mood of optimism, some cable-industry observers
emphasize caution. In sizing up the proposed merger, Craig Moffett,
an analyst with MoffettNathanson, said that with a combined 17
million subscribers, a combined Time Warner and Bright House
"starts looking a lot like Comcast."
Any deal is still likely to face a lengthy government review.
The online video market, in particular, has become a central focus
for regulators, as more consumers have cut the cable cord and begun
relying on Netflix and other on-demand services for video.
The FCC also has a broader mandate to decide whether it is in
the public interest. That could include whether consumers will see
their cable and broadband bills increase or decrease as a result of
a merger.
Write to Gautham Nagesh at gautham.nagesh@wsj.com and Joe Flint
at joe.flint@wsj.com
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