5 Things You Should Know About The Approved Merger Of Time Warner Cable & Charter

Earlier today — almost exactly a year after rejecting the merger of Time Warner Cable and Comcast — both the FCC and the Justice Department gave their blessing to the marriage of TWC and Charter. But what does that really mean for the millions of consumers who will be affected by the merger?

Here are some things to keep in mind as the two (really, three… more on that below) companies combine their operations.

1. Don’t Get Your Hopes Up

A number of Time Warner Cable customers — especially in the New York City and Los Angeles markets — who are fed up with the company’s notoriously bad customer service, billing, and tech issues have told us that they welcome the merger because the new leadership brought in by Charter can’t possibly be worse.

Given that the current TWC CEO Rob Marcus has effectively been a lame duck (in search of a gold-plated parachute) since before he ever started the job, it’s probably true that Charter can’t do much more to harm the situation for customers. But temper any hopes you might have by looking at what current Charter customers have said about their cable/broadband provider.

Charter, which only has about 6.7 million customers compared to TWC’s nearly 15 million subscribers, has fared just about the same or worse than its new dance partner across multiple customer satisfaction surveys.

Both companies ended up in the bottom half of the most recent ratings from our colleagues at Consumer Reports, with Charter’s broadband service edging out TWC’s, and both of them occupying the bottom five (of around 25) for pay-TV services.

According to the latest American Customer Satisfaction Index results, Charter and TWC are far below industry average for broadband, with only a couple of points separating them from last place. Charter’s pay-TV satisfaction number is higher than TWC’s, but still below industry leaders. Combining below-average with average rarely results in anything superior.

Speaking of which, in J.D. Power’s regional surveys of broadband providers, both companies are average or below average in almost every category in each region where they exist. Charter earned one “better than most” rating, for its customer service in the North Central region, but that was the highest mark for either company.

And let’s not forget that Charter stooped so low as to send out press releases with supposedly official surveys — sponsored by Charter — touting how great the merger would be for everyone. Any company that has to resort to that sort of tactic should be looked at skeptically.

We’ve had less experience over the years dealing with reader complaints that involve Charter, but that likely has at least something to do with its size relative to large-scale complaint machines like TWC and Comcast.

2. Don’t Forget About Bright House

Lost in all discussion about TWC and Charter was the third leg of this mérger à trois, Bright House. Why is the relatively small (around 2 million customers) provider part of this deal?

It’s an acquisition that actually predates the Charter/TWC hookup. Weeks before the TWC/Comcast wedding abruptly ended with Dustin Hoffman (in the form of the FCC and DOJ) yelling from behind the glass at the back of the church, Charter offered to pay more than $10 billion for Bright House.

However, that deal was contingent on the Comcast/TWC deal going through, because Charter was going to get its hands on a few million divested TWC subscribers, primarily in the form of a spun-off new company called GreatLand.

With all that swapping around and the revenue from its 1/3 stake in GreatLand, Charter was hoping the Bright House deal would help the company establish a presence in Florida. But then the Comcast deal fell through, and Charter decided to go ahead and buy both Bright House and TWC, giving the combined company the nation’s two largest markets, along with Florida and Charter’s existing Midwest footprint.

3. Another Comcast?

The TWC/Comcast merger failed, in part, because it would have resulted in a single company as the predominant TV/broadband provider in most of the major U.S. markets. However, the combination of TWC and Charter and Bright House results in another nearly nationwide behemoth.

Together, the three merger partners have around 23 million customers, about the same as Comcast. It’s fewer than the TV audience of the recently merged DirecTV/AT&T, but the majority of those customers are not yet getting home broadband from the company.

It’s cable companies’ control over broadband and TV access that had many parties concerned about the Charter merger.

Consumer advocates worried that, given the current lack of competition in the wired broadband market, Charter would have the leverage to charge a premium for other networks to connect to Charter’s network.

The good news is that, according to the FCC’s conditions on the Charter/TWC merger, the new company will be barred from charging these sort of interconnection fees.

This seven-year prohibition on interconnection fees extends to the streaming video market, where companies like Netflix have previously had to pay Comcast, TWC, Verizon, and others for better access to their networks.

4. No Data Caps

This was a condition that the merging companies had already agreed to before today’s news: The new Charter will not institute data caps — or establish usage-based pricing tiers — for at least seven years.

That stands in contrast to the trend that Comcast — and data cap proponents like FCC Chair-turned-industry-shill Michael “I Swear I Didn’t Get All My Jobs Because Of My Dad” Powell — who deny that broadband is a utility, but want to treat data as if it’s a limited resource.

5. California Must Approve

California public utility regulators still must sign off on the merger, as it affects many millions of TWC customers who will be handed off to Charter. That decision isn’t slated to happen until later this summer.

The California regulators were particularly critical of the Comcast/TWC merger before it failed, demanding that Comcast expand its low-cost Essentials broadband service, then calling for the deal to be rejected. Even after the deal fell apart, the state continued on with its review of the merger.

It’s not a slam dunk that California will sign off on the merger now that it’s national counterparts have. But rather than result in the deal falling apart, any state-level push-back will more likely lead to additional conditions being put on the merging companies.

The Stop Mega Cable Coalition — which includes our colleagues at Consumers Union — say that the conditions put on the merger by the FCC and DOJ are “an important first step towards protecting the interests of consumers and preserving competition in the cable and broadband marketplaces.”

However, the group says that the current draft order being circulated by the FCC falls short of addressing all of the threats to competition and consumers posed by this transaction.

“Among other things, the conditions proposed in the draft order do not fully prevent Charter from using its dominant position in the marketplace to thwart competition from over-the-top (OTT) streaming services and to stifle competitors in underserved, rural communities,” reads a statement from the coalition, which contends that Charter should be required to offer a stand-alone broadband service for potential cord-cutters.

“As the merger review proceeds at the FCC, our members urge the Commission to consider the public interest above all, and to impose conditions that truly solve for the competitive harms presented by this merger.”

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.