$34.5B broadband merger: Charter and Cox's deal under review

Whether 'affordability' is a serious policy prescription or just a campaign buzzword remains to be seen, but California's Public Utilities Commission has a golden opportunity to make life a little less expensive at a hearing set for later this month.

Charter and Cox's $34.5B merger could reshape U.S. broadband by September

Charter and Cox Communications are trying to complete their $34.5 billion proposed merger which would make the new provider the largest in the nation. Federal authorities and other states have already blessed the union, but California is dragging its feet ahead of a September 15 deadline. If missed, another waiting period will be triggered and the cost to the companies will be in the millions. Most importantly, if California doesn't move swiftly to approve the merger, the state's consumers will be further delayed from the lower prices and upgraded services the merger is likely to produce.

And some Californians could really use the relief. According to a report last year by the California Public Advocates Office, 'from 2021 through 2023, prices for internet service delivered over legacy copper telephone lines in the 100 Mbps to 500 Mbps tier increased each year and were higher than comparable fiber and fixed wireless offerings.'

A merged Charter and Cox could help with that. Distributing the costs of fiber upgrades across a broader combined customer base will reduce costs per subscriber and encourage more private investment. The companies' expected $500 million per year in savings from various efficiencies of merging may also show up as lower subscription prices and improved customer service.

Enabling incentives for private investment in infrastructure, potentially lowering prices, and improving customer service are all no-brainers, but what about the risks of the merger?

The good news is, there aren't many. The new entity has little chance of harming beneficial competitive pressures because the two companies' service areas have very little overlap with each other. The number of customers that would experience this merger as one less available provider is more like a sliver than a slice. A utilities commission filing from last year showed only 16,485 locations where Charter and Cox have both overlapping coverage and were the sole option for 1 Gbps service. That's out of 10.7 million total broadband subscribers in California.

There are larger market forces at work that make a lack of beneficial competition unlikely too. Today's broadband market is facing competitive pressures from the expansion of fixed wireless (T-Mobile, Verizon, and AT&T), mobile wireless (including 5G offerings), and high-speed satellite options (Starlink, Amazon's Project Kuiper). All are increasingly viable options for consumers, and their looming presence won't allow price gouging from traditional broadband providers, no matter how big they are.

The Charter-Cox merger may make for more competition in mobile services too. Big wireless carriers are putting healthy pressure on broadband providers with programs like AT&T's 'Oneconnect' that offers fiber service to the home bundled with mobile plans. As wireless companies move into customer space once reserved for broadband companies, Charter's proposed acquisition of Cox highlights the same happening in the reverse direction. If the merger is approved, current Cox broadband customers will have access to Spectrum Mobile offerings, putting more competitive pressure on the big three wireless carriers. That kind of 'bundling war' is good for consumers in terms of downward price pressure and efforts to innovate new services.

With so much potential for lower prices, a fiercely competitive marketplace, and so many other likely benefits to consumers, California regulators should get out of the way and let residents start saving money and enjoying new services. An Endless Summer is one thing, but Californians deserve better than an endless regulatory delay.