Charter bid to buy Time Warner could widen California’s digital divide

by Steve Blum • , , , ,

If Charter Communications is successful in its attempt to buy Time Warner Cable and Bright House Communications, it will control about half of the Californian broadband market, and low income households will make up a disproportionately high share of that expanded customer base.

Comcast’s failed attempt to buy Time Warner (including Time Warner’s ownership interest in Bright House) and swap markets with Charter would have given it control of 84% of the broadband market in California, according to an analysis done by the California Public Utilities Commission’s office of ratepayer advocates (ORA). That’s up from its current 34% share. In other words, Charter, Bright House and Time Warner’s combined share is 50%, plus a little more – Charter would have hung onto its systems in the Lake Tahoe area.

An economist hired by ORA – Lee Selwyn – ran the numbers on the proposed merger, and concluded that the “lowest income households [are] most vulnerable to future rate increases”…

Providers of broadband services at each speed tier are focusing their resources on more affluent areas and customers. Dr. Selwyn found that “the weighted average median household income is consistently greater for every speed tier in census blocks where one or more competitors offer service than for those census blocks where the Joint Applicants [i.e. the four cable companies involved] are the only source [of] broadband access at that speed.”

Dr. Selwyn determined that TWC, Charter and Bright House currently serve areas with much lower average household incomes than those Comcast serves. He also noted that TWC, Charter and Bright House have significantly lower broadband subscriber penetration rates than Comcast. In addition, where there are competitors to Joint Applicants, those competitors appear to be serving more affluent customers.

This raises a public policy issue for the CPUC as it has been committed to eliminating the “digital divide” in California.

There are differences between the original Comcast-led merger and the current three-way hook up, but the core issue is the same: would it give one company effective monopoly control of California’s broadband market, or at least within enough of it to make it dangerous? Up to this point, the CPUC’s answer is yes regarding the original mega-deal. The Charter – Bright House – Time Warner deal isn’t quite as huge, but it’s still big, still would create a cable giant in California, and is still just as troubling.