Is Charter's Bid for Time Warner Any Better for Consumers?
Ever since Comcast announced plans to purchase Time Warner last February, consumers had protested that this deal wasn't going to be good news for consumers. After all, according to a 2014 Customer Satisfaction Report by the American Customer Satisfaction Index, Time Warner and Comcast were the two worst-rated cable TV companies in the industry that year (and the year before it as well). Merging these two "wrongs" wouldn't likely make a right -- only a bigger wrong.
And so, great was the rejoicing in April, when Comcast announced that it was, in fact, not going through with the merger. Objections from the Justice Department and Federal Communications Commission had apparently scotched the deal. But no sooner had that news broken than another announcement came out:
Comcast (CMCSA) may not be buying Time Warner (TWC), but Charter Communications (CHTR) is.
Six on the One Hand, Half a Dozen on the Other
So is this good news? Well, it is at least better news. By ACSI's estimation, a merger between Time Warner and Charter will combine the worst cable company in America with the third-worst. That's at least a bit better than putting the two absolute worst companies in the same cable box.
And maybe, just maybe, an association with Charter will rub off on Time Warner and make the latter's customer service somewhat less horrible.
But the big question isn't what happens when bad cable provider Charter buys even worse cable provider Time Warner. It's what happens when the good folks at Bright House Networks get shoved into bed with both these giants.
Guilt by Association
You see, in addition to spending $78.7 billion to acquire Time Warner, Charter has also announced plans to buy Bright House for about $10.4 billion. Although unrated by ACSI, Bright House scores strongly among consumers polled by Consumer Reports, which rates Bright House seventh out of 24 rated "TV services" providers in its latest survey of the industry. With a score of 67 on a scale of 100, Bright House outperforms rivals Charter (59), Comcast (57) and Time Warner (54) as well.
In fact, Consumer Reports rates Bright House above even AT&T (T) U-Verse (66) in customer satisfaction -- and ACSI's survey had AT&T U-Verse rated the second-most-popular cable TV provider in the industry!
Two Wrongs Plus One Right Equals ... What?
And so the question facing consumers becomes: Will Charter's move to buy Bright House improve customer service at both Charter and Time Warner? Or will it be Bright House -- once subsumed within two other businesses that, combined, serve eight times as many customers as Bright House -- that gets worse instead? Is this three-way merged business going to sink to the lowest common denominator?
Whatever happens with regard to the quality of service, one thing seems certain: A merged Charter/Time Warner/Bright House is going to cost you more money next year than this. According to Consumer Reports, the price of cable has grown at twice the cost of inflation over the past two decades, and the price hikes show no signs of abating.
So in the best-case scenario, you can probably expect to be paying more money for slightly better service after this merger goes through. More likely, though, you'll be paying more money for... more of the same.
Motley Fool contributor Rich Smith doesn't own shares of any of the stocks mentioned above. (Nor does The Motley Fool.)
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