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Lower Prices Really Mean Lower Prices

January 19, 2016

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“Given the recent filing by trade association INCOMPAS, we want to explain the true consequences of our pending transactions, and how they will affect programming costs and the associated public interest benefits. Our deal with Time Warner Cable and Bright House Networks will indeed result in modest programming savings for New Charter. And that’s a good thing for customers.

INCOMPAS’ attempts to argue that these savings are harmful are incorrect and illogical. First, it claims that lower programming prices paid by distributors like New Charter are in fact price increases for programmers. The FCC already determined otherwise in its decision in the recent AT&T/DirecTV merger, finding that lower programming prices are in fact a merger benefit because they benefit consumers. By paying relatively less for programming and being able to offer lower prices than we otherwise could, New Charter’s customers will benefit from this through a more competitive subscriber fee, as well as increased investment in infrastructure and innovation.

Second, INCOMPAS makes the classic merger analysis mistake of confusing harm to New Charter’s competitors with harm to competition. According to INCOMPAS, New Charter’s competitors will invest less in broadband deployment because New Charter can offer lower prices. But aren’t lower prices good for consumers and competition? By INCOMPAS’ logic, mergers would be good if they result in higher prices because that would encourage investment by new entrants. That kind of spin does not pass the laugh test.

Finally, let’s keep an eye on the big picture. Time Warner Cable already buys programming for Bright House Networks, and Charter has about four million subscribers. After the transaction, it will simply be as if Time Warner Cable is buying programming for an additional four million subscribers. That is an additional 4% of the MVPD marketplace – not an overwhelming increase by any measure.  While that additional volume will bring a modest benefit to New Charter, it is small compared to the 100 million MVPD home marketplace, and the much larger positions of AT&T and Comcast.

We understand that reliable, fast broadband is a critical component of future success in America.  That is why we are committed to expanding the reach of our broadband network to unserved homes within the New Charter footprint. Specifically, we will build one million line extensions within four years at speeds of up to 300 Mbps. The merger would also result in at least $2.5 billion for new commercial networks, creating additional, much-needed competition in the commercial sector.

In short, INCOMPAS’ claims lack merit and should not distract from the widespread support for New Charter and the many benefits that put these transactions squarely in the public interest.”