Charter/Cox Seen Not Raising Anticompetitive Red Flags
Charter Communications' proposed $34.5 billion purchase of Cox Communications, announced in May (see 2505160060), isn't expected to raise anticompetitive concerns at the FCC. If it faces headwinds from the agency, they are more likely to come from the companies' diversity, equity and inclusion policies, cable executives, agency watchers and others tell us. FCC Chairman Brendan Carr has repeatedly said the agency won't approve acquisitions involving companies practicing "invidious forms of DEI discrimination" (see 2503210049), which Carr has defined as cases "where people are discriminating based on race and gender."
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New Charter will enjoy a mix of Charter's "proven operating strategy [with Cox's] enterprise acumen and community commitment ... enhancing the combined company’s ability to innovate and to provide high-value, high-quality products that deliver more choice and savings to American families and businesses," Charter and Cox said in a public interest statement filing posted Tuesday alongside their application for approval of transfer of control of Cox to Charter. They said Charter will offer Cox subscribers "faster broadband, lower prices, more choice and value in video, and higher-quality mobile service." New Charter will be "a stronger competitor across all markets in the crowded communications landscape," they added. Charter and Cox said Cox's customer service functions will be reshored back to the U.S., and Charter's $20 hourly starting wage policy will extend to Cox workers.
“On paper, this is kind of a no-brainer” when it comes to antitrust and competition issues, Eric Fruits, International Center for Law & Economics senior scholar, told us. He said if there are bumps in the road, they would come from the FCC moving from a standard antitrust analysis to a more populist antitrust approach with concerns about consolidation and bigness.
New Charter would have 33.6 million residential fixed broadband subscribers, the two companies told the FCC. Comcast ended Q1 of this year with 29.2 million residential broadband subscribers. While New Charter would be the nation's largest cable company, fixed broadband isn't the only way to get broadband and there are numerous alternatives to cable for video service, Fruits noted.
Former FCC Commissioner Nathan Simington told us that given the heavy competition in the ISP industry, including competitors to cable such as low earth orbit satellite and fixed wireless access, it's hard to see where consumers would be damaged by price and choice due to Charter/Cox.
Simington, now a visiting fellow at Hudson Institute's Center for the Economics of the Internet, said while there's concern about FCC mission creep or rulemaking without going through Administrative Procedure Act steps, companies probably have had unconstitutional DEI programs, with the current administration being the one stepping up and saying so. Viewing transactions through a DEI lens could be akin to looking at whether a company has a history of civil rights-violating practices. If Carr wanted to push back on unconstitutional DEI practices, on principle he has grounds, Simington said.
Jeff Heynen, Dell'Oro Group vice president of broadband access and home networking, emailed that FCC headwinds on Charter/Cox would be unexpected given the limited overlap of their cable footprints. In addition, he said both partner with Verizon on their mobile offerings, and so far there hasn't been regulatory pushback based on mobile virtual network operator relationships "because those actually increase competition in markets." DOJ not opposing Charter/Cox could trigger additional cable combinations, he said, as it would signal that cable mergers no longer will be limited by concerns around holding monopolies in select markets. With broadband subscribers lost to fiber and fixed wireless, and video subscribers departing for streaming platforms, cable operators have an argument that merging lets them compete more effectively with wireless carriers, Heynen said.
Pointing to T-Mobile telling the FCC earlier this month it had eliminated the last vestiges of its DEI programs (see 2507090034), Fruits said DEI activity at Charter and Cox will surely be a consideration. The T-Mobile notification was in the context of the commission's review of the company's UScellular and MetroNet deals. Nowhere does the Charter-Cox public interest statement discuss DEI concerns.
In their application Tuesday, Charter and Cox said they operate "in geographically distinct markets and fundamentally do not compete," so the deal causes no anticompetitive harms. They said the communications landscape is vastly different from 2015, when Charter announced its Time Warner Cable/Bright House Networks deal, with T-Mobile going from having no fixed broadband product to having the nation's largest fixed broadband footprint, SpaceX emerging and Charter launching its Spectrum Mobile service.
Asked about DEI policies, Cox and the FCC didn't comment. Charter said it's “always looking to improve and evolve to best serve our 100% U.S.-based employees, customers, and communities.” It remains "focused on delivering high-quality products and services that exceed our customers’ expectations and foster a merit-based environment where all of our employees can succeed and build long-term careers with our company.”