The Wall Street Journal reports today that Verizon is exploring a merger with Charter Communications, less than a year after Charter successfully merged with Time Warner Cable.
The talks are still reportedly in the early stages. According to The Journal, there is “no guarantee” a deal will arise, and it’s “unclear whether Charter executives, including Chief Executive Tom Rutledge, would be open to a transaction.” But there has reportedly been speculation recently about such a merger since Verizon CEO Lowell McAdam said it would make “industrial sense.”
Charter is the second-largest cable provider in the US after Comcast. Last year, it merged with Time Warner Cable, giving it control of 34 percent of the US cable-broadband market, according to Business Insider. Time Warner Cable company was previously owned by Time Warner before being spun off in 2009; Time Warner itself is currently exploring a merger with AT&T, Verizon’s main rival in the wireless market. The Washington Post noted that a Verizon-Charter merger would make it competitive in size with Comcast:
Verizon serves 114 million cellphone subscribers, 4.6 million TV customers and 7 million Internet subscribers; Charter has 17 million TV customers and 21 million Internet subscribers. Together, the two companies’ high-speed Internet businesses would add up to more than Comcast’s 25 million broadband customers; at 21.6 million, their combined base of TV customers would be roughly on par with Comcast’s.
Many Americans still don’t have much choice of cable company or internet service provider, particularly at 25mbps speeds which is the Federal Communications Commission’s (FCC) definition of “broadband” (i.e., enough speed to stream video or use multiple devices). The latest FCC data shows 29 percent of developed census blocks (areas of the US that people actually live in) don’t have access to any provider that provides 25 mbps, and a further 47 percent only have access to one provider with that speed.
Matt Wood, policy director at the advocacy group Free Press, told Gizmodo:
A Charter/Verizon deal would be a disaster, sure to mean fewer choices and higher prices for customers already captive to the internet access monopoly. Verizon is one of the few companies competing against cable to provide high-speed wired broadband, at least in a few big cities where tens of millions of people have some semblance of choice between just Charter and Verizon today.
Verizon joining forces with cable would mean the end to any competition from FiOS in those few places where there’s any choice now. And it would end of any hope for competition between cable and Verizon as the nation’s largest wireless broadband provider.
It seems likely that the regulatory environment under Trump would be favorable to this deal. After all, the man loves deals. Meanwhile, the new FCC chair, Ajit Pai, worked at Verizon as a lawyer for two years and more recently worked for the law firm that later represented Charter in its Time Warner Cable merger.
Trump himself has been inconsistent on consolidation. At one point, Trump opposed to the AT&T-Time Warner merger on anti-trust grounds, saying it was “an example of the power structure I’m fighting” and “concentration of power in the hands of too few.” On January 18, Trump walked that back, saying he “hadn’t seen all the facts,” which may have had something to do with his January 12 meeting with AT&T CEO Randall Stephenson.
In addition to the FCC, a Verizon-Charter merger would need approval by the Federal Trade Commission (FTC) or the Department of Justice (DOJ). According to BuzzFeed News, Peter Thiel is leading the search for the top anti-trust officials at both these agencies. Thiel has previously praised monopolies, at least what he terms “creative monopolies,” arguing that “capitalism and competition are opposites.” BuzzFeed reports that insiders say Thiel is searching for a candidate who more closely matches Trump’s “campaign rhetoric” against monopolies than his own ideology. Although given Trump’s wavering on the AT&T merger and his general tendency to take multiple sides on every issue, this is not comforting.
House Republicans on the Energy and Commerce are also marking themselves in the pro-monopoly camp. Yesterday, they sent a letter to Pai asking him to close proceedings on the set-top box rule proposed last year, which would have required cable companies to provide access to their content on third-party set-top boxes and thus freed customers from having to rent their cable company’s proprietary box. The letter claimed the proposed rule had “cast a shadow over innovation and investment in traditional video programming delivery.”
If this merger goes through, it would only weaken the limited competition for wireless and cable TV and internet services. This would reduce these companies’ incentives to lower prices or provide faster access to the internet—which is fundamentally broken anyway. And if the only thing standing in the way of that are government agencies headed by Trump appointees, it’s hard to see how this turns out well for consumers.