Charter pledges to make Internet affordable to the poor as merger gets debated

Charter Communications’ massive merger -- which would roll three cable companies into one -- cleared a hurdle Tuesday night when California regulators held a marathon hearing to gather public comment.

Charter’s $67-billion plan to buy Time Warner Cable and Bright House Networks -- two large California providers -- attracted dozens of enthusiastic supporters and some vocal critics at the four-hour hearing in downtown Los Angeles.

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No decision on the deal was reached. But dozens of community groups from Riverside County, San Bernardino County, Orange County, San Diego County, Long Beach and the San Fernando and San Gabriel valleys urged a PUC commissioner and an administrative law judge who is overseeing the matter to approve Charter’s take-over plans.

Charter has pledged to expand a program to provide affordable Internet service for some of Southern California’s poor residents -- a key selling point of the deal, particularly among community group leaders who showed up in force Tuesday.

“Last year, the United States was ranked 27th in math, and 28th in science among 34 developed countries,” said Liberty Naud, who was among the more than 100 speakers during the hearing.

She runs a group called Smart Education that serves the Coachella Valley.

“By 2018, we are going to be short 3 million science, technology, engineering and math jobs,” she said. “How many of our at-risk youth could fill those spots if they had the access that they needed?”

Naud’s group has received support in the past from Time Warner Cable, and she took a jab at the consumer advocacy groups and a representative of the Writers Guild of America, West, who lined up to oppose the deal at the lengthy hearing.

“Who brings those stories you write to life? Who does the editing and creates the equipment that makes it possible to film those ideas?” Naud said. “Technologists, engineers and sound scientists. We don’t just need this merger, it is a necessity.”

Charter last spring structured a deal to buy Time Warner Cable for $57 billion, and Bright House Networks, which is owned by Advance/Newhouse Communications, for $10.4 billion. The California Public Utilities Commission must approve the transfer of communications licenses now held by Time Warner Cable and Bright House before Charter can complete its transaction.

The PUC expects to reach a decision by June, but Charter has asked state regulators to speed up its deliberations.

Charter separately must secure the approvals of the Federal Communications Commission and the U.S. Department of Justice.

The FCC is expected to rule by late March.

With the new territories, Charter would become the nation’s third-largest pay-TV provider with more than 17 million video customers. It would become the second-largest broadband Internet provider with more than 19 million subscribers.

In Southern California, Charter would provide service to about 2 million households, including more than 1.5 million homes that are currently served by Time Warner Cable.

California Public Utilities Commissioner Michael Picker and PUC administrative law Judge Karl J. Bemesderfer attended Tuesday evening’s hearing in downtown Los Angeles, although Picker left after an hour to catch a flight back to San Francisco, where the agency is based.

“I want to tell you how much I appreciate that you took the time to come here and let us hear from you,” Bemesderfer told the crowd. “You are the people that we serve.”

Charter has pledged to begin offering some low-income residents -- students and seniors -- a $14.99-a-month high-speed Internet service plan within six months of the merger closing.

The proposed plan would offer Internet speeds at around 30 megabits per second, which is higher than what is typically offered in lower-priced Internet plans available to poor consumers.

But critics said the company should provide its low-cost Internet service to all low-income residents in the region.

“Who are they kidding?” Alex Nogales, chief executive of the National Hispanic Media Coalition, said as he left the hearing. “We have a lot of poor people in our community. A lot of them rely on their cellphones for the Internet, but there is no substitute for a home computer where you can do your homework or fill out an application for a job.”

Larry Ortega of Pomona, who runs the One Million New Internet Users program, also was skeptical that the Charter deal would bring affordable Internet access to a sufficient number of poor residents.

“I know this industry,” Ortega said. “They make promises and after the merger is complete, promises are not fulfilled and then we have no recourse.”

Another focus of the regulatory review is whether Charter would wield too much influence in shaping the high-speed Internet service market.

If the consolidation is approved, an estimated 69% of residents who live in Charter’s new service area in California would have only one choice -- Charter -- for Internet service delivered through a wired line and with speeds higher than 25 megabits per second.

Consumer rights advocates and the WGA, West, contend the increased market share would give Charter too much influence in the fast-evolving video streaming service business.

Consumer advocates say the company would have an incentive to encourage customers to pay for traditional bundles of cable TV channels and could adopt policies that put upstart streaming services at a disadvantage.

Last year, the California PUC helped put a nail in the coffin of Comcast’s failed bid for Time Warner Cable. Commissioner Mike Florio said in April that he would vote to block the Comcast merger, signaling that Comcast would have a particularly rough ride securing necessary approvals in California.

That deal collapsed, clearing the way for Charter to put together its own $57-billion deal to buy Time Warner Cable.

Several speakers Tuesday applauded Charter, saying its deal -- and the commitment to affordable broadband -- was more comprehensive than what Comcast had proposed. They also praised Charter’s commitment to close Time Warner Cable’s overseas call centers and bring those jobs back to the U.S.

But not everyone was convinced the deal would benefit consumers.

“Like many Californians, I am overcharged for Internet service,” said Marvin Vargas, who was the final speaker Tuesday, stepping up to the microphone a little before 10 p.m.

“Regardless of what promises this company will make, over the long term a monopoly or duopoly will charge higher rates, they will provide inferior service and they will lay off workers,” Vargas said. “The lack of competition is why people can’t afford broadband -- it’s not because these corporations aren’t large enough.”

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