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Time Warner Finds New Suitor, Regulatory Concerns Remain

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By Casey C. Sullivan, Esq. on May 27, 2015 12:54 PM

Shortly after its planned merger with Comcast fell through, Time Warner Cable may soon be purchased by Charter Communications for $55 billion dollars. After a messy break up, that's quite the rebound for the cable and broadband company.

The merger between the two companies is spurred largely by Charter's desire to expand its broadband holdings, according to The New York Times. As consumers move away from traditional cable to online streaming services such as Hulu and Netflix, Internet provision has become one of the most important parts of many cable packages. Though the merged company would be smaller than proposed Comcast-TWC deal, it could raise similar concerns.

Consolidating Markets

When Comcast and Time Warner Cable proposed merging in February, 2014, worries about market consolidation helped scuttle the plan. Under the failed $45 billion merger, Comcast-TWC would have controlled 30 percent of the country's cable subscribers and 35 to 50 percent of its broadband Internet service.

TWC's merger with Charter would result in less consolidation, but still faces regulatory scrutiny. The merged company would control about one-fifth of the broadband market, according to Reuters. It would also lead to localized geographic control in cable markets, such as in New York City's market, controlled by TWC, and neighboring Connecticut and Massachusetts markets dominated by Charter.

The merger will almost quadruple Charter's customer base to 24 million. That's near Comcast's 27 million, a point Charter is bound to emphasize to the FCC, arguing that the merged company will better serve customers by providing more resources to innovate and compete against larger players.

Critics Remain Skeptical

In a reminder that there are plenty of legal and P.R. hurdles yet to be overcome, critics have already begun to speak out against the proposed deal. Despite the smaller size of the merged company, several critics remain skeptical as to whether any merger would be in the public interest. The cable company has never been the most popular service provider and TWC and Charter both do poorly on customer satisfaction surveys. Consumer advocates warn that any promises of innovation should be taken with "a healthy dose of skepticism."

Senator Al Franken, who fought Comcast's deal with TWC, has called on the FCC and Justice Department to carefully review the merger. Whether that review will result in similar obstacles as the Comcast merger remains to be seen. Even if the plan ends up not going through, though, TWC remains in a better position -- the deal comes with a $2 billion fee should to plan fall apart.

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