By Shalini Ramachandran
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
TWC, 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 TWC, 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 TWC 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-TWC 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-TWC 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 TWC 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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