Category Archives: Amazon Prime

Time Warner Cable Mergers and Net Neutrality Expectations for Charter

Charter Communications and Time Warner Cable logos combined.

A little over two months ago a proposed merger between Comcast and Time Warner Cable (TWC) was called off. Almost no time passed before Charter Communications entered into an agreement to purchase TWC for roughly $57 billion. As the calendar turns to July, there remains a certain level of uncertainty surrounding the details of this proposed purchase, as well as how the FCC will respond to the bid.

 

Early after its announcement in 2014, the bid by Comcast to purchase TWC was considered a long shot. Claims from within the broadband community, consumer advocate groups, and the public all made it clear that they were concerned with the creation of what would have been the largest TV operator in the United States. Even the Chairman of the FCC, Tom Wheeler, expressed his opposition to the merger. Wheeler’s main point of contention, however, was that if the purchase were allowed to proceed, it would create an unfair competitive advantage for Comcast in the broadband market. In particular, the company would have enjoyed a controlling share of almost 60% among broadband providers. Ultimately it was this near monopoly, coupled with the lack of any penalty fee for ending the agreement, which caused Comcast to back out of the deal.

 

Drawing lessons from the failed deal between Comcast and TWC, Charter has begun to promote how its proposed purchase of TWC will not alter the television or broadband playing field on the national stage. The CEO of Charter, Tom Rutledge, has stressed that even if his company is successful in acquiring TWC and Bright House, the newly expanded company will still be only the second largest provider of cable and high speed internet services behind Comcast. At most, Charter would supply about 20% of all TV customers and 29% of all broadband customers. Another issue that Charter does not need to address is that unlike Comcast, which has a financial interest in Hulu, there is no concern that Charter may regulate speeds for video streaming services, such as Netflix or Amazon Prime.

 

Charter is also drawing on the FCC ruling which made broadband a Title II utility as a reason for why its proposed merger should be approved. Rutledge made clear that the footprint of the expanded company would not overlap geographically and that there would remain competition for broadband services offering 25 Mbps in all of its coverage areas. Additionally, he stated that since the majority of the company’s investment is in broadband, not television, it would encourage the expansion of Over the Top (OTT) streaming video services and not impose any sort of data cap on customers. Indeed, subscribers with the new Charter, if the merger is approved, could see significant savings on their broadband subscriptions as their speeds are tripled while their monthly bill is lowered.

 

While the merger works its way through regulatory checks, industry analysts appear confident that the deal will occur. The latest suggestions are that there is a 75% chance that the deal is approved. The FCC has announced that they hope to have this process decided, in favor or opposition of the merger, by the end of 2015.

 

Video Streaming Services Cut into Cable Subscriptions

Hulu Plus and Netflix logos

The way that consumers watch television and movies is changing. For the last few years attention has focused on the members of the ‘cord cutting generation’ who do not want to pay for cable television service. To fill in this void there have been two major developments: Subscription Video on Demand (SVOD) services, like Netflix and Amazon Prime, and Advertising Video on Demand (AVOD) services, like Hulu. Although these are the services most people are familiar with, there are other providers in the ever-growing Over The Top (OTT) service industry. Recent statistics related to this burgeoning industry suggest that cable companies need to act quickly and change the way they present their future content if they want to remain viable in the face of OTT competition.

 

Cable providers have looked cautiously at the latest  quarterly earnings release for the industry which the Leichtman Research firm says provides no concrete evidence that consumers are preparing to switch over completely to OTT and leave behind pay TV. However,  other experts claim that these findings undervalue the record low customer growth of only 10,000 across all the major cable companies. Parks Associates, another research firm, believes it has evidence that cord cutting has reached a new level. The latest estimates are that around 7 percent of American households, approximately 8.5 million homes, have high speed internet and OTT services, yet they are not subscribed to a pay TV service. With this number set to increase there is little wonder that upwards of 84% of all internet usage in the United States by 2019 will involve video streaming. Further supporting the belief that cord cutting is a growing trend, Limelight found in a recent survey that over 50% of the 1220 people they interviewed were willing to go completely OTT and cancel their cable subscriptions.

 

It comes as no surprise in light of all of these recent polls and studies that cable providers are attempting to find new ways to engage with this cord cutting generation. Although TV Everywhere systems have been developing for the last half decade, new providers are throwing their hats into the ring, including Sky, Rogers Communication, and Dish Network. The hope of these companies is that they will be able to tap into the OTT market while recent changes in local regulatory practices will allow them to lure some consumers back to traditional cable packages. With less overview necessitating uniform programming packages in the same geographic region, it is possible that cable providers will create even smaller, more focused packages to convince people to not cut the cord. In the meantime, it is a prime market for consumers to shop around and determine what channels and programs are most important to them, whether or not they need a cable subscription, and if they can go fully OTT.