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New Charter’s pitch to regulators: it’s not that big

Tom Rutledge, president and ceo, Charter Communications

Charter wasted no time making its pitch to regulators. The merged company just won’t be that big executives argued in a Tuesday conference call with investors.

Through a series of deals that will merge Charter Communications, Time Warner Cable and Bright House Networks into a new company, “New Charter” will be the third largest multichannel video provider, behind Comcast and AT&T-DirecTV (assuming regulators approve that deal.) Charter will serve less than 17 percent of the multichannel video subscribers nationally. It will be the second largest broadband provider but have just under 30 percent of high-speed broadband customers, using the Federal Communications Commission’s new threshold of 25 Mbps.

The deal, Charter and Time Warner Cable CEOs told investors, is nothing like the Comcast-Time Warner Cable deal that regulators would have blocked.

“I’m confident our proposed our transaction will obtain approval from regulators,” Tom Rutledge, president and CEO of Charter, who will head up New Charter said in a conference call with investors.

“The public inrterest case is consistent with what regulators have said publicly they’re looking for in these types of transactions,” Rutledge added in an interview on CNBC.

Rob Marcus, chairman and CEO of Time Warner Cable added the deal was “significantly smaller without any vertical integration concerns” than the Comcast-Time Warner Cable deal.

The merged company has committed to bring Charter’s faster broadband of 60 Mbps downstream across the entire footprint with cheaper rates and no data caps or usage-based pricing. The company also said it will continue to invest in interconnection to “minimize the likelihood of congestion.”

Regardless of the the cable industry’s lawsuit against the FCC’s open Internet order that would reclassify broadband as a common carrier, Rutledge said that the new company would honor the key principles of net neutrality.

“We have no plans to block, throttle or engage in paid prioritization because our customers demand an open Internet,” Rutledge said.

Another plus: The merged company plans to create 20,000 new jobs, some by bringing back from overseas Time Warner Cable’s customer care jobs.

“The net of all this is, while there will be some dislocation, there will be more jobs tomorrow than there are today,” Rutledge told CNBC.

Although Federal Communications Commission chairman Tom Wheeler chatted with both executives last week, he didn’t make any promises.

In an unusual pre-merger statement Tuesday morning, Wheeler said the commission “reviews every merger on its merits and determines whether it would be in the public interest.  In applying the public interest test, an absence of harm is not sufficient. The commission will look to see how American consumers would benefit if the deal were to be approved.”

Industry analyst Craig Moffett of MoffetNathanson, isn’t sure that Charter’s arguments will necessarily sway regulators.

“Simply being smaller than Comcast may not be safe harbor,” wrote Moffett.  “It is our understanding that the Comcast deal was blocked because….Comcast would have both the ability and the incentive to foreclose on over-the-top video competition; whether or not they had ever revealed any intent to do so was not relevant.”

The FCC or DOJ may not buy that New Charter would not have the ability to foreclose on OTT competitors. Moffett gives the deal 80/20 odds (which is how he first rated the odds of the Comcast – Time Warner Cable a year ago.)

The companies expect to close the deal by the end of the year.