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Charter-Time Warner Cable Merger and The $170M "Five" (5) 
By L.A. Ortega
March 1, 2016
 
The monopolistic nature of the Charter merger:
The creation of a monopoly by itself is reason enough to stop a merger. But when it is a monopoly over the Internet, you are now talking about total control of information, sliced, diced, filtered, blocked and throttled whichever way the monopolizer sees most profitable. Forget about getting at the truth, facts or diverse perspectives. It was too much power for one company to have when it was Comcast attempting to merge with Time Warner Cable (TWC) and it's too much power now with the Charter proposal to merge with TWC.
 
The Office of Ratepayer Advocates (ORA) did an excellent job in pointing out that Charter and TWC (the merger applicants) failed miserably at identifying any "public benefit", which is mandatory for regulatory approval. ORA concludes there is no public benefit.

"Astroturf" Movement (support)
There were 100 plus minority led organizations represented by their leadership at the CPUC hearing conducted a few weeks ago on the matter of the Charter merger. Over 90% said the same scripted verse, Charter's proposal to bring discounted Internet service to low income families was why they supported the merger, clearly misunderstanding the negative consequences of a monopoly over the Internet.

As a technology and implementation expert in this area, a promise of bringing broadband technology to low income households sounds marvelous, however, none of these promises are ever fulfilled to any degree of significance. In 2011, I welcomed Comcast's proposal of discounted Internet service when they merged with NBC/Universal. Five (5) years later Comcast, on their promise, has a criminal 1% penetration into low income households in California. My expert opinion on the Charter/TWC promise to deliver discounted Internet service is that even if Charter did 1,000% better than Comcast, they would still have only served 1 in 10 families.
 
But the real story is that Charter's promise to deliver discounted Internet service is non-implementable by Charter from where they currently stand.
  • Charter nor Time Warner have ever implemented such a plan to provide discounted Internet Service
  • Charter nor Time Warner have staff to implement a discounted Internet plan
  • Charter nor Time Warner Board of Directors have, to the best of our knowledge, any idea on what a successful discounted Internet plan looks like and therefore would most likely offer no support to its implementation, regardless of any MOU that may be drafted.
There is absolutely nothing that community can do to force execution of MOU's post-merger. One need look no further than the Comcast - NBC/Universal failure to deliver on merger promises.

Philosophically Speaking regarding Monopolies:
Senator John Sherman (author of Sherman Anti-Trust Act) himself wrote in 1890:

"If the concentrated powers of [a] combination are intrusted to a single man, it is a kingly prerogative, inconsistent with our form of government, and should be subject to the strong resistance of the State and national authorities. If anything is wrong, this is wrong. If we will not endure a king of political power we should not endure a king over the production, transportation, and sale of the necessities of life," [e.g. the Internet].

Financially Speaking: Merger puts Charter upside-down
This merger deal sets up a bailout situation given that Charter would be the sole provider of cable Internet, leveraging debt beyond their current financial capacity. The ORA writes that Charter will have no option but to raise rates on consumers given the amount of debt they will incur through the financing of the merger deal.

The incurrence of additional debt to finance the transaction will result in a more highly leveraged post-merger entity. p13

The increased debt service payment obligations to which New Charter will be subject may actually exceed the net increase in annual Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) that the Joint Applicants attribute to the transaction. p19

One component of the increase in EBITDA that the Joint Applicants anticipate may be the result of post-merger price increases for services that confront little or no effective competition. p20
 
Add that 5 TWC Executives will receive a collective $170M check at the close of the merger and you got the public being taken for a serious financial ride, leaving us holding the proverbial bailout bag, either by increased monthly cable rates, or by tax dollars used to bailout the monopolistic Charter.

Finally, the ORA throughout their testimony cite that most of what Charter contends is a public benefit cannot be or is not supported by actual data, i.e. are mere unsubstantiated words. For all these reasons we are asking our local elected leadership to join us in opposing the merger. Or alternatively, provide rationale as to why the Charter merger should be supported, absent facts and true public benefit.

By L.A. Ortega:
Cyber Civil Rights Activist
Founder One Million NIU (New Internet Users)
Community IT Implementation Specialist

 
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