Charter acquires Time Warner Cable: The Modern David and Goliath

 

You really can’t keep track of everything in the tech world, there’s just too much to possibly see, hear, and read it all. This, however, how did I miss this?

I was helping a friend shut down a local office and he asked if I would mind calling Charter on his behalf. So I call them up, go through the security questionnaire, place the cancellation order, and then Charter rep does the normal  scripted “Please don’t leave! Why are you leaving? I can be better! Are you moving this office to another location to which we can move the service?” “No, the office was combined with another office and they already have a Time Warner contract at that location.” “Oh, well that’s good to hear Since we recently acquired Time Warner.” Suddenly my heart’s skipping beats, I break out in a cold sweat, and I can’t catch my breath as I utter “oh, ok…” and try to get off the phone quickly.

I used to work in ISP tech support, so I know the acquisition rumor-wheel well enough; I cling to the hope that it’s all a sick joke. Nope. Reuters, LA Times, Business Weekly, etc. They all say the same thing. Charter has acquired Time Warner Cable, and many smaller ISPs as well. Oh yeah, and this all happened in the last two months while I was blissfully ignorant.

I’m shocked and scared. Charter has disappointed me with fragile infrastructure, terribly inconsistent line tech and premises tech resolutions for the same issue (5 different guys, 5 different problems?), and the fact that after I punch in an account number on their IVR the support person still asks me for the number again. It’s like five hundred digits long! Yes, this is anecdotal, I know.

Time Warner, on the other hand, oh my dear sweet Time Warner. Okay, so I’ve actually only worked with them 3 times, so grain-of-salt warning. Two were run-of-the-mill: one IP address issue and one truck roll with the line tech arriving within a half hour of my call (yeah, I know he was probably just around the corner). Now, what really impressed, I had a business issue that required collaboration with Time Warner engineering, and an engineer called me within five minutes of placing the request, spent half on hour on the line without every sounding frustrated or annoyed, and seriously had the knowledge-base of like a CCNP/CCIE.

But Charter has gobbled them up, positioning themselves as the second largest digital cable/data provider, for subscriber count. What does this even mean? My personal experiences aside, let’s break this down.

In this corner, the heavyweight champion, Comcast Xfinity!

Comcast is huge and expensive, even more-so than Donald Trump’s hands. Comcast pioneered the aggressive tactics that allowed it to eat up so many cute little small/medium sized ISPs. This put them in the position to collaborate with AT&T to form a lobbying Goliath who could stomp out any attempt to form WISPs or municipal ISPs. The strategy of legislatively emaciating competition while buying up the little guys has lent Comcast the opportunity to slowly deprecate their lower-bandwidth packages without lowering prices. AT&T picks up the scraps with their data packages typically below 12Mbps (the limit of unbonded DSL) and Comcast gets to keep raising the cost.

But, you’re paying for more bits, so you should pay more, right? Sort-of. We are conditioned to think that getting more of something means paying more for it, but the issue is more complex than that. ISP level networking infrastructure seems comparable in price for the last 15 years. The big boxes process more bandwidth with less latency, but their overall cost is typically about the same just because that’s how computing evolves over time: more data processed with less power, materials, and expenses. So over time, the actual cost to move a bit of data (ha) drops like a rock, courtesy of Moore’s Law and the wave of “efficiency” that is Software-Defined Networking, while Comcast raises package prices. The other ISPs see the ridiculous profit margin and follow suit.  Comcast has set atop the golden throne that is high bandwidth for too long. Enter David.

And the Contender, Charter Spectrum!

I don’t like Charter, but as a man of science, I reserve the right to change my mind based on breaking or better quality information. Charter is putting itself in a position to do just that.

Worst case scenario first. Should Charter team up with the lobbying supergiants, we end up with a situation in which Goliath pummels congress and consumer with right fist Comcast and left fist AT&T, all the while Charter, our David, slings lobbyist after lobbyist into the mayhem from atop Goliath’s shoulders. Should things go that way, it’s gonna get ugly.

But, I don’t think it will. Charter has already agreed to place nice with consumers and content providers alike in exchange for antitrust approval from the DOJ. “Charter would not be permitted to charge usage-based prices or impose data caps and would be prohibited from charging interconnection fees, including to online video providers…” Upon further research, it turns capping seems not to carry much weight in Charter’s strategy. This agreement, however, addresses a Time Warner strategy reminiscent of cellular data plans. Further clarification from Artechnica “…Charter doesn’t impose data caps and overage fees on its Internet customers, TWC offers optional plans with limits of 5GB or 30GB a month. The plans ostensibly provide discounts of $5 to $8 a month, but customers who go over the limits can be charged another $25 per month. Charter said it would get rid of these overage fees, pledging that the merged Charter/TWC would not impose any data caps.

Charter plays ball with the Dept of Justice and becomes a giant of it’s own.

What does this mean for us?

Bandwidth is stupid expensive. Comcast is setting the bar for rates, and they have no real competition. Had. Charter doesn’t even need to slash prices. I think they should just hold off on price hikes for a few years. Now that Charter and Comcast share many large cities, they are going to have to duke it out. I imagine Comcast will attempt to use legislation and community investment to throw the heavy right hook while Charter pummels the giant with a storm of low prices. Who will win in the end? Hopefully us. I would be perfectly happy with one dollar per Mbps and that’s still like a 50% profit margin. Businesses and consumers alike would be able to redirect those savings into, well, stuff. Buying stuff is good for the economy. Therefore, Charter’s acquisition of Time Warner is good for the economy*.

*I’m not an economist and yes I am aware of the composition logical fallacy. I’m trying to be an optimist. Don’t take this from me.

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