Five lessons from approval for Charter-Time Warner Cable deal

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The $70 billion plus deal between Charter and Time Warner Cable has received the approval from both the FCC and the U.S. Department of Justice.

The approval came with several significant conditions. Comcast earlier faced immense pressure and later pulled out of the deal to buy TWC.

First, FCC and the Justice Department tried to ensure that the video market eco-system will not suffer due to the near monopoly of the new Charter.

The settlement denies the merged company, dubbed as New Charter, from taking part in or enforcing agreements that will rise the complexity for online video distributors (OVDs) to obtain video content from programmers.

Charter agreed to acquire New York-based Time Warner Cable and Bright House, a cable company based in Syracuse, New York, for $55.1 billion and $10.4 billion, respectively in May, 2015. The deal was planned after Comcast’s plan to buy Time Warner Cable failed last year after protest from the Justice Department and the FCC over Comcast’s nationwide control of broadband.

Second, the US government aims to protect the online video streaming market and has taken action to prevent cable companies from using their control over broadband to prevent the distribution of content by entertainment companies over the Internet.

The new Charter will not be able to enter into agreements with programmers. This would make it troublesome for streaming services like Netflix to obtain content, conveyed the Justice Department in a statement on Monday.

Federal Communications Commission Chairman Tom Wheeler said on Monday that he would vote in favor of the deal for Charter Communications’ $71-billion-plus acquisition of Time Warner Cable and Bright House Networks.

Third, FCC tried to ensure the continuation of competition in video market.

The government said that with more subscribers, Charter would have more to gain from imposing contractual provisions that make online video services less competitive.

Fourth, U.S. Justice Department said it would approve the deal since the transaction did not violate antitrust laws in the U.S.

“Online video distributors offer consumers greater choices for video services,” said Renata Hesse, the head of the Justice Department’s antitrust division. “This merger would have threatened competition by increasing the merged company’s leverage to demand that programmers limit their licensing to these online providers.”

Fifth, Justice Department wanted a settlement with Charter that would restrict the company from trying to exploit the ability of online video distributors, to gain video content from TV programmers.

The New Charter, which includes the Bright House Networks, and the Time Warner Cable will add 13 million customers to its current customer base, making the total to be 23.9 million customers.

Vina Krishnan
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