Verizon And Charter Romance Heats Up; Could Merger Marriage Be On Horizon?

Earlier this month, it was reported that Verizon has a thing for big cable companies that begin with the letter “C,” and that it really wants to make out under the bleachers with either Comcast or Charter. Now comes news that Big V has actually begun the courting process with the latter.

This is according to the Wall Street Journal’s anonymous sources, who claim that Verizon CEO Lowell McAdam has sent the corporate equivalent of a mash note to Charter, and that his closest executive pals are trying to figure out if the two companies should go steady.

Until recently, Charter was the ugly duckling of the cable biggies, relegated to sitting at the table with other mid-size players like Cox and Cablevision while Comcast, Time Warner Cable, DirecTV, and Dish got all the attention.

Then the Connecticut-based company scored a popularity coup when it acquired the much-larger Time Warner Cable in 2016, resulting in a merged business that now rivals Comcast for cable and broadband customers.

Aside from its large customer base, Charter also brings with it coverage in two highly coveted markets — Los Angeles and New York City — where the company became the dominant cable and broadband provider after acquiring TWC.

Additionally, a Charter acquisition would give Verizon the opportunity to step on some of the landline footprint of its biggest telecom competitor, AT&T. For example, AT&T has landline coverage in much of the Los Angeles area. Through Charter, Verizon could offer pay-TV, internet, and phone service in markets where it can’t currently run FiOS lines.

Speaking of FiOS, a Charter merger would raise significant questions of competition in New York City. The city has accused Verizon of defaulting on its agreement to make FiOS available as an option citywide.

Acquiring Charter would — on one hand — allow Verizon to reach virtually everyone in NYC, but at the same time it would mean that there is no longer any competition for broadband in the market. The reason the city agreed to let Verizon build out FiOS in NYC was to provide an alternative to Time Warner Cable, but if Verizon buys the company that bought TWC, then some sort of telecom singularity occurs and Matthew McConaughey begins rattling a bookshelf somewhere in outer space or something.

While the new-look FCC, led by pro-merger new Chairman Ajit Pai, might choose to focus solely on the issue of overlapping licenses, the Justice Department’s Antitrust Division would still need to consider competition and potential over-consolidation in its review.

Additionally, state- and city-level regulators can try to block mergers by denying applications to transfer franchise agreements from one provider to the other.

Beyond any regulatory issues, the Journal notes that Charter’s got a complicated ownership structure that would require Verizon do its wooing on multiple fronts.

While the company is publicly traded, billionaire John Malone’s Liberty Broadband Corp. owns about 20% of Charter. Another 13% of the company is now owned by the Newhouse family whose Bright House Networks business was acquired simultaneously with the Time Warner Cable deal.