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Editorial:  Charter-Time Warner Cable deal: We’ll get the Dodgers, but what else?

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The real winner of the failed Comcast-Time Warner Cable deal became abundantly clear Tuesday: It was Time Warner Cable. Federal regulators opposed Comcast’s $45-billion acquisition on the grounds that combining the first- and second-largest cable TV operators would threaten competition in the emerging market for online video services, among other concerns. But when Comcast dropped its bid, that opened the door for Time Warner to sell itself to Charter Communications for $57 billion in cash and stock — 25% more than Comcast was prepared to pay.

Whether this is a good thing for anyone else, however, is an open question. The merger would create a company about half the size of the one Comcast tried to create, and neither Charter nor Time Warner Cable owns a major Hollywood studio (unlike Comcast). That means the new company would have less ability or incentive to compete unfairly with online video providers. But as Federal Communications Commission Chairman Tom Wheeler said Tuesday, “an absence of harm is not sufficient.” Under the FCC’s public interest test, the commission will want to see benefits for consumers too.

So what might those be? In a presentation to investors, Charter said consumers stood to gain upgraded broadband networks offering faster speeds at lower prices, as well as unspecified innovations, improved customer service and more Wi-Fi connections for customers away from home. It also pledged to extend its networks into new areas — to serve business customers, who already have plenty of broadband options, not consumers, who don’t.

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The FCC has a poor record of making sure companies carry out the promises they make to upgrade and extend networks. And market pressures have led Time Warner Cable to spend heavily on capital improvements, with or without a buyout offer. Nevertheless, the faster, cheaper broadband promised by Charter would be a welcome change, as would better customer service. Meanwhile, Charter disclosed that it will soon carry SportsNet LA, the high-priced Dodgers channel managed by Time Warner Cable, and said it was committed to striking deals with all other area cable and satellite TV services to carry the channel once the merger was approved. There was no indication how much the new channel would end up costing, though; Time Warner Cable had reportedly been asking more than $4 per month per subscriber, regardless of whether they watched it.

Ideally, Charter would try to grow in Los Angeles and across the country by competing with Time Warner Cable. Instead, it is seeking regulators’ approval for a shortcut, which is why it needs to show a public benefit. The deal may not raise red flags as quickly as Comcast’s, but Charter still has to deliver a real, measurable payoff to consumers — not just to Time Warner Cable’s shareholders.

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