What cable deal could mean for consumers

31 May 2015 | Author: | No comments yet »

Cable merger is nothing to sweat in Dallas viewing area.

Whatever cable customers and regulators may think of Charter Communications’ plans to acquire Time Warner Cable for $56 billion, one small group of men has reason to celebrate.Just two years ago, the man who made a fortune building Tele-Communications into a US broadcasting titan was spending much of his time trying to repeat the trick in Europe through London-based Liberty Global. Through a mix of golden parachutes, advisory fees and investment returns, a handful of cable executives, traders and bankers stand to reap enormous profits when and if the transaction closes.

It’s puzzling because he’s right that monopolies are not something that we desire to have in our economy but when we talk about monopolies we have to be very careful indeed over what we’re identifying as a monopoly. Marcus’ compensation package includes $4.5 million in base salary, $15 million in continued bonus payments and stock awards valued at $57.3 million as of December 31, 2014, according to the New York-based company’s May 18 proxy filing.

Losing out to Comcast was considered a big blow to Malone after he tiptoed back into the US cable waters in 2013 by becoming the biggest shareholder in Charter. Ratings for the value provided in the TV and Internet components were especially awful: 38 out of the 39 Internet services, and 20 out of the 24 TV providers, received the lowest scores possible. Because he could well be terminated without cause after the deal closes — another way to say he would be leaving the company after selling it to a competitor — Mr. Today’s bid at $195.71 a share, 14 per cent more than Time Warner Cable’s May 22 close, would catapult Charter from the fourth-largest cable company to the No. 2 slot behind Comcast. All this pressures the industry to consolidate, cut costs and boost investment in broadband service, a segment in which cable operators still enjoy competitive advantages.

Sewage pipes in an area for example: there’s really no point at all in insisting that there should be two such sets of pipes so that we can have market competition. The business model of pay TV-Internet providers is one in which new customers are drawn in with low introductory rates, which escalate higher and higher the longer you’re a subscriber. He ultimately struck a deal with Comcast last year that also would have given him a billowing golden parachute worth $80 million, but that agreement fell apart last month.

Together, their U-verse and Fios networks have over a third of the pay-TV homes in D-FW, more than double the share in the rest of the nation. “If I had one of those, I’d be really happy,” said Tony Lenoir, media analyst for SNL Kagan, the research firm that provided data on local pay TV. These customer service agents might otherwise be providing, you know, actual customer service, but instead they focus on negotiating with subscribers who call to complain about rising monthly bills. After all, instead of tweaking the structure to eliminate complaints about pricing, the system all but encourages subscribers to complain, haggle, and threaten to drop the service in order to be treated fairly. One routinely complains and, amid lengthy, frustrating phone calls, is rewarded with monthly rates that are lower than they otherwise would have been. It has minimum Internet speeds of 60 megabits per second and is less expensive than comparable Time Warner tiers, he told analysts in a call last week. “For consumers, this transaction will mean better products at better prices,” Rutledge said, adding that cost savings from the merger would help fund some improvements.

It’s no surprise, then, that both of these categories of subscribers would give their providers extremely low satisfaction ratings and say that they are poor values. Because cable companies have regional monopolies, they don’t have much financial incentive to make things easier for customers, said John Bergmayer, senior staff attorney at Public Knowledge, a consumer advocacy group in Washington. In theory, golden parachutes are good for shareholders as well as executives, because they encourage C.E.O.s to strike deals instead of resisting to preserve their well-paid jobs. “It does provide appropriate incentives for the executives,” said David F. That may be true for broadband, but TV competition is surging, prompting cord shavers and cord cutters to reduce cable bills or drop cable altogether.

Far more important, in fact the only level that is important for our public policy reasons, is that the monopoly largely exists at the local level: Broadband policy discussions usually revolve around the U.S. government’s Federal Communications Commission (FCC ), yet it’s really our local governments and public utilities that impose the most significant barriers to entry. Although the cable and telephone companies spend huge sums of money on advertising trying to lure each others customers, they rarely compete on price. And to some extent (not entirely, high density areas will support more than one physical network, but the average US suburban area probably won’t) this is because service in a local area is a natural monopoly. Morgan Stanley, the lead adviser, will receive a larger slice, with Citigroup and two independent investment banks — Centerview Partners and Allen & Company — splitting the rest.

The only exceptions to this policy in the whole of the 32-nation Organization for Economic Co-operation and Development are the U.S., Mexico and the Slovak Republic, although the Slovaks have recently begun to open up their lines. Because LionTree has fewer than 100 employees, the deal — along with LionTree’s work on Charter’s related acquisition of Bright House Networks — will be a transformative payday for Mr. The other banks listed as advisers to Charter — including Guggenheim Partners, Bank of America Merrill Lynch and Credit Suisse — may receive little more than credit for the deal and a role in the financing.

Paulson paid for that stake, a filing in September 2013 showed that he had already bought about half of it when the stock was trading below $140 a share. To have competition we want the people in Denver and the people in Detroit to have companies competing for their custom actually in Denver and Detroit. Competition only works if consumers actually have a choice: so choice in each area is what is needed, not a worry about who owns what percentage of the local monopolies. My latest book is “The No Breakfast Fallacy, why the Club of Rome was wrong about us running out of resources.” Amazon and Amazon.co.uk. $6.99 and relevant prices in other currencies.

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