CPUC should allow the Charter-Cox merger to proceed

California’s Public Utilities Commission is reviewing the proposed merger of cable companies Charter and Cox. The CPUC should not marginalize California residents by standing in the way of a merger that is likely to succeed at the federal level and benefit the other 49 states.

The size of the Golden State’s population and economy lends her government considerable power to frustrate major transactions like this one, even when federal regulators find no issue with a proposed deal. The Department of Justice’s Antitrust Division, the Federal Communications Commission, and the Federal Trade Commission must all sign off on the deal for it to succeed, and all seem inclined to do so.

On the merits, there is no real case against letting this merger move forward: Charter estimates an annual savings of $500 million over the next two years, with even more savings to come as cloud, IT, and sales operations are merged over the coming years. Indeed, internet service prices have been declining, despite the inflation of the last few years, for nearly two decades. The proposed merger will be a direct benefit to consumers in better service at lower prices. The CPUC should welcome this if it claims to act in the interest of consumers.

If California’s government stands in the way, one of two things will happen: either the merger will move forward in the other 49 states with federal approval and Californians will be deprived of these consumer benefits, or the state’s economic clout will prevent the merger from happening at all, depriving everyone of said benefits. There is no scenario where California blocking the deal benefits Californians.

Furthermore, competition would not be meaningfully harmed by the merger because the two companies’ customer bases do not overlap. Charter’s 30 million customers are nationally diffused while Cox has deliberately targeted markets Charter has not penetrated. This is why Charter’s Spectrum internet service is more common in Los Angeles County while Cox has more subscribers in Irvine and coastal Orange County.

This is the case with the entire cable industry, which was for decades treated as a “natural monopoly.” It was not considered feasible for municipalities to host multiple, overlapping wires on their telephone poles or under their streets. Infrastructure limitations meant only one cable franchise could be established in a given town or county, so monopolies were allowed to form with strict government oversight to protect consumers. They also meant that today’s local cable monopolies do not compete with one another.

But this is a 20th century business model. As the cable industry has pivoted from television to internet service, they now compete with satellite and fixed terrestrial wireless ISPs. No overlapping markets means that Charter is not absorbing a direct competitor but consolidating an industry nationally to better compete with other technologies. The real question is whether the 36.6 million customers in the new conglomerate constitute some sort of monopoly in the internet service market.

By any reasonable standard, the answer is no. T-Mobile has 8 million wireless internet subscribers, having added half a million last quarter. Starlink has 2 million US subscribers (out of 10 million globally), doubling just last year. Verizon has 7 million fiber and 5.7 million 5G Home Internet customers. The other major cable player, Comcast, has around 30 million subscribers of its own.

A merger between Charter and Cox can only be seen as an anti-competitive move if you gerrymander the market definition to exclude different technologies delivering the same service into separate markets when they obviously compete with one another. Whether you receive your internet connection from a wire under the ground or a radio wave through the air has no impact on whether you buy the service – the quality and price of the different offerings are what drive your decision. Charter and Cox do not compete with each other as much as they do with Starlink and T-Mobile.

The wireline internet, mobile, and video marketplace has never been more competitive, and this merger will help solidify competition by providing a superior product to consumers at a lower cost. Far from raising antitrust concerns, this merger simultaneously serves consumer and provider interests. If the CPUC stands in the way, they will only exclude California residents from the benefits of the deal.

California should not make itself an outlier when it comes to internet service. If federal regulators have no objections to the proposed Charter-Cox merger, the state government should not go out of its way to find some.

James Erwin is the director of innovation policy at Americans for Tax Reform and a Young Voices Contributor.