Economic Analyses Becoming Focal Point of Charter's, Opponents' Arguments
Economists have become the ammunition of choice as Charter Communications and opponents battle over public interest benefits of Charter buying Bright House Networks and Time Warner Cable. Comcast's aborted attempt to buy Time Warner Cable involved so many outside economists that the FCC hosted an economists roundtable at one point. It's unlikely other interested parties will bring in their own at this point, multichannel video programming distributor industry lawyers told us.
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In a filing Monday, Charter included a 24-page analysis by Michael Katz, director-Center for Telecommunications and Digital Convergence at the University of California-Berkeley, in response to Global Economics Group Chairman David Evans' analysis for Incompas (see 1601220017). Katz in his reply said he and Evans agree Charter/TWC/BHN will result in deal-specific savings that pass on to consumers. But Evans provides no proof of his assertion the programming cost savings will hurt consumers or competition, Katz said. "Cost savings generally promote competition unless they are obtained through anti competitive means," Katz said. "There is no evidence the proposed transactions' programming cost savings will arise from harm to competition. It is not surprising that those members of Incompas competing with New Charter would prefer it to have less -- rather than more -- attractive offerings even though more-attractive offerings will benefit consumers," Katz said. Charter didn't comment.
Charter/TWC/BHN also was criticized in NTCA comments posted Monday. NTCA pointed to Evans' comments "confirm[ing] NTCA's fears that the Transaction would significantly harm smaller competitors and new entrants." New Charter's increased market power over video programmers "would discourage entry and expansion by smaller broadband providers that would otherwise compete against Charter or Time Warner Cable for customers," NTCA said. It urged the FCC to deny approval. Even if New Charter's savings passed through to its customers, it said, competition would still suffer because smaller MVPDs and new entrants would have less affordable access to video programming. "A less competitive market translates to less pressure on the fewer, larger companies to pass along any of the savings realized as a result of a merger to the benefit of consumers."
In response, a Charter spokeswoman pointed to a company blog post last month on similar arguments raised by Incompas. That post said the group's "attempts to argue that these savings are harmful are incorrect and illogical."
AT&T and Dish Network also have used outside economists to bolster their arguments against Charter/TWC/BHN (see 1601200043 and 1511130021). Use of such economists in major transactions is commonplace, though it would be unlikely at this stage -- with the FCC's 180-day shot clock on Monday at Day 128 -- for more to be brought in, one MVPD lawyer told us.
Meanwhile, Charter/TWC/BHN is seeing some repeated support from Netflix. In an ex parte filing Monday, Netflix -- which has publicly applauded Charter's interconnection policy previously (see 1507150038) -- said it was "a welcome departure from the efforts of some ISPs -- including Time Warner Cable -- to collect tolls on the Internet" and that extending this policy across New Charter is in the public interest. "An enforceable and long-standing condition will support growing demand for online services and ensure [New Charter customers] receive the fast connection speeds they pay for," it said. The ex parte filing recapped a meeting between Netflix executives and staffers from the Wireline and Media bureaus and Office of General Counsel, including Owen Kendler, who's heading the FCC working team overseeing the deals' review.
Charter/TWC/BHN also is no longer facing opposition from Entravision. In a filing Friday, Entravision said it withdrew its petition to deny (see 1511130021). Entravision didn't comment.