Anytime there’s a mega-merger of the kind that we saw with Charter and Time Warner Cable in 2016, there are bound to be underlying issues that take at least a few years to sort out. And that’s exactly what we’re seeing now. The mega-merger was finalized in May 2016, so we’ve had about 12 months to take a better view of how it will change the competitive landscape for cable TV and Internet services. Here are just a few of the issues involved.
#1: Monopoly and competition
The initial concern was that the Charter-Time Warner Cable combination was going to create a colossus – perhaps not as big as if Comcast had acquired TWC, but still a giant. The new Charter Spectrum is now the second-largest cable TV and Internet provider in the world, trailing only Comcast.
On a combined basis, Charter Spectrum and Comcast are huge. It’s not overstating things to call Comcast and Charter Spectrum a near-duopoly. On a combined basis, the two companies reach 80% of U.S. homes, and their competitive footprints are both national, stretching from California to Texas to New York and Florida. Chances are, wherever you live in America, you are within the service area of one of these 2 companies.
And that still has some people very concerned. Back in 2014-2015, as Charter started to put together its bid for Time Warner Cable, this was one of the biggest issues to address. Consumers feared that the behemoth cable provider would decrease competition, and potentially put an end to true innovation. Instead, skeptics said, the combined company would simply try to wring additional profits out of existing infrastructure and products.
#2: Net neutrality
On a related note, there was also concern about how the new merger would impact net neutrality. The fundamental principle of net neutrality is that the Internet should be a free and open place, where there is no “fast lane” and “slow lane” for traffic. In other words, the big cable providers shouldn’t get to determine that certain traffic will be “throttled” – or that some edge providers (like Netflix) should be forced to pay fees to connect their customers. As a condition of the merger, Charter promised that it would not charge companies like Netflix for improved delivery of content.
And, indeed, one of the big issues that came up during the Charter-TWC merger was how well Charter would respect these principles of net neutrality. Thus far, the signs have been favorable. In fact, Charter has signed a three-year agreement to respect net neutrality and the open Internet. And, at least publicly, Charter has commented on how important Netflix is to its future growth. Of course, Netflix helped to stymie the Comcast-TWC deal a year earlier, so it’s easy to see why Charter is bending over backwards to “play nice” with Netflix.
#3: Customer service
One of the key selling points of the merger was that it was going to dramatically improve customer service. That’s because Time Warner Cable was routinely cited as having poor customer service. People loved to hate TWC and comment on how old and inefficient everything about the company was. Even worse, TWC had pushed a lot of its customer call centers offshore, and that angered customers even more. In customer satisfaction surveys, TWC always performed poorly.
That’s why Charter has been very upfront and direct about improving customer service. Charter pledged to move all the customer call centers back to the U.S. AND hire as many as 20,000 new customer service representatives. That might sound like a very expensive endeavor, but as Charter explains, it’s crucial to reduce the churn in customers. And it also improves the company’s ability to up-sell customers into higher-priced offerings. For example, with good customer service, a call that might have ended previously with loud disagreements and shouting might now end with the customer happily moving into a higher-priced package.
#4: Rebranding as Spectrum
People might not realize it, but Spectrum is a completely new brand that was created for the merger. One major goal of the Spectrum rebranding is to get every part of the company using the same logo and the same brand identity. It would be confusing to have one part of the company known as Charter, one part of the company known as Time Warner Cable, and one part of the company known as Bright House Networks.
And, to be honest, the new branding enables Charter to get rid of the Time Warner Cable name forever. That brand had been eroding in the minds of customers, and it still evoked the notion of “the cable guy.” People associated the brand name Time Warner Cable with poor service, long delays, poor quality and just a lot of problems. So Spectrum helps to gloss over the fact that it’s still the same company. If you think about it, Charter bought Time Warner Cable as much for its existing customer base as for its existing infrastructure.
There are a lot of changes planned to make every part of the company very efficient and customer-friendly, and it all starts with the rebranding as Spectrum. This rebranding will impact every customer touch point. For example, it will change the names and logos on billing, screen guides and advertising. In New York City, you used to see Time Warner Cable trucks heading uptown and downtown – now you’ll see trucks with the Charter Spectrum branding on them. At first, it may take some getting used to, but it’s all part of creating one, unified brand identity across all geographies.
#5: Development of improved national broadband infrastructure
Going forward, a major goal of the merger will be to completely overhaul Time Warner Cable’s aging infrastructure. The near-term goal is to create an all-digital operation by getting rid of any analog infrastructure. That will enable the company to offer more innovative services, including the build out of the much-touted 5G infrastructure. In Florida, for example, Charter Spectrum plans to start 5G field trials in Florida, making it the first U.S. cable company to lay the groundwork for 5G.
For the customer, all of these changes are a positive. For example, Charter Spectrum pledged that it would boost the minimum speed for all of its customers to at least 60 Mbps. And, going forward, Spectrum Internet will be able to offer even faster speeds. But first things first – the goal is to get all Time Warner Cable customers up to a minimum speed.
#6: Streamlined pricing and packaging offers
Another major issue of the Charter-Time Warner Cable mega-merger was rationalizing and streamlining all the pricing and packaging offers. If you think about, it’s pretty confusing to the end customer to have too many choices. With Time Warner Cable, there were prices and tiers for all different kinds of connection speeds. People in Florida might have a whole set of offers and tiers different from those in New York City.
That may not sound like a big deal – but consider the following theoretical example… What if a Starbucks in Florida served different drinks and had different names for those drinks than a Starbucks in Manhattan? It would get pretty confusing for customers any time they traveled. And it would be harder for Starbucks to deal with suppliers – the company would have to order certain cups and ingredients for one region, and a completely different set of cups and ingredients for another region. See? It would be pretty confusing, so for larger companies, it always makes sense to streamline and consolidate.
So, Charter set out from the beginning to collapse all the prices and tiers into three basic levels: Charter Spectrum Gold, Silver and Select. That would make it easier to explain to customers what their options were, and it would also make it easier for Spectrum to use a single set of advertising materials for any location in the nation. In a best-case scenario, those cost savings and efficiencies could be passed on to the consumer in the form of cheaper prices.
So, as you can see, this huge mega-merger created a number of different issues that are still being resolved today. Most importantly, there were issues related to competition and the risks of monopoly-like behavior, due to the combined market size of the new company.
To overcome this problem, Charter Spectrum sought to improve customer service dramatically and also improve the overall level of service quality. At the same time, the company worked on a re-branding, and began the process of overhauling its aging infrastructure acquired from Time Warner Cable. The company is also working to address the issue of net neutrality, which has once again entered the spotlight as an important issue impacting the future development of digital broadband services.
The next step is the most exciting step – and that’s the rollout of innovative new services and products, including those made possible by the development of 5G Internet infrastructure. In a best-case scenario, that will lead to faster speeds, which everyone agrees is necessary for the next generation of online video screening (as well as whatever comes next).
Of course, a big merger doesn’t occur overnight. There are a lot of important steps that need to be taken over the next 12 months. But 2017 is shaping up to be a very important year for Charter Spectrum, especially as it develops the next generation of digital services. Spectrum has the opportunity to become a brand synonymous with high quality, great customer service and innovative products, all offered at a price point that’s attractive to consumers.