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Broadband at the Center of Charter-Time Warner Cable Deal

As customers increasingly stream videos through the Internet, cable providers have sought deals.Credit...Jeff Roberson/Associated Press and Mark Lennihan/Associated Press

When Charter Communications announced a pair of deals on Tuesday to acquire Time Warner Cable and Bright House Networks for a total of $67.1 billion, it put the focus squarely on the cable industry’s future: broadband.

Executives said the acquisitions would create a stronger national player that would offer faster services meant for watching online video and playing games, as well as new out-of-home wireless Internet options.

They even raised the possibility of introducing a national streaming television service that would not require a traditional cable subscription.

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Thomas M. Rutledge, Charter’s chief executive, says that the deal is very different from Comcast’s bid for Time Warner Cable and the cable powerhouse will still be relatively small.CreditCredit...CNBC

“It is not just the small screens or the large screens in the house, it is the mobile screens and more,” Thomas M. Rutledge, Charter’s chief executive, said in an interview.

“I am not sure how the services will evolve, whether they will be sold in a big pack, a little pack or individually,” he added. “As a true pure play, we are open to all of that.”

Charter’s promises underscored the features that it hopes will appeal to regulators and consumers alike: that Internet service now is the most important component of a cable package as the ultimate gateway to information and entertainment. And that Charter’s new heft — the acquisitions would approximately quadruple its customer base to about 24 million, compared with Comcast’s 27 million — will give it more resources and incentives to introduce innovation and competitive services.

In its comments, Charter appeared to be trying to draw a distinction between its bid and Comcast’s failed takeover of Time Warner Cable.

“It is a very different deal, and we do think it is quite possible to be approved,” Mr. Rutledge said.

The proposed deals — which would form the country’s second-largest cable operator behind Comcast — represent the latest in a flurry of takeovers in the cable sector as companies struggle to keep pace with how Americans watch and pay for television. AT&T’s $48.5 billion deal for the satellite television operator DirecTV is awaiting regulatory approval. This month, the European telecommunications company Altice acquired a controlling stake in Suddenlink, a regional cable provider.

Some analysts expect even more deals on the horizon, particularly among television groups that might consolidate to counter the increased influence that cable and satellite companies would have in negotiations over programming costs.

“You can imagine a scenario where you are going to have two large cable companies and two large wireless companies,” said Amy Yong, a media analyst with Macquarie. “Over time they are going to start converging services.”

Under the terms of the proposed deal, Charter offered investors in Time Warner Cable $195.71 for each share in the company in a cash-and-stock transaction. That values Time Warner Cable at $78.7 billion, roughly 14 percent higher than its closing stock price on Friday. Charter is paying $10.4 billion for Bright House.

Charter said it expected annual cost savings of up to $800 million to result from the merger.

If the deal is completed, the combined companies’ services will be sold under the brand name Spectrum. Mr. Rutledge will continue as chief executive.

Analysts agreed that the regulatory concerns — while significant — were different from those raised by Comcast’s bid for Time Warner Cable.

Last year, Comcast pitched its deal as a merger between two cable companies that did not compete for video customers in any local markets. But as video subscriptions slowed, and a proliferation of new streaming options emerged, it became clear that broadband was the much more important component of the deal. Federal regulators and consumer groups shifted their focus to the control Comcast would have gained over a majority of the country’s market for high-speed Internet, and with it the potential to harm new online video competitors.

The Charter acquisitions would give it control of less than 30 percent of the country’s high-speed Internet market, compared with 57 percent for Comcast.

Comcast also owns the entertainment group NBCUniversal, which presented some potential conflicts, with critics saying Comcast might favor its own content; that is not an issue for Charter.

Mr. Rutledge said the combined companies would not deter competition from online rivals like Netflix. He added that Charter had no plans to “block, throttle or engage in paid prioritization of Internet traffic.” Netflix, a vocal opponent of the Comcast takeover, declined to comment Tuesday on the Charter deal.

Still, critics remained skeptical. Charter and Time Warner Cable rank near the bottom in customer satisfaction surveys, and some questioned whether the combined company would follow through on the promises it made to improve service.

Michael Copps, a former Democratic member of the Federal Communications Commission and a special adviser to the Common Cause public interest group, said the government should apply “a healthy dose of skepticism” to the executives’ promises to innovate.

“We should be in a Golden Age of television with all of the new over-the-top services and online services,” Mr. Copps added. “We should be about enabling that, rather than enabling gatekeepers to squelch that.”

Others raised regulatory issues. Senator Al Franken, a Minnesota Democrat who vigorously opposed Comcast’s acquisition of Time Warner Cable, sent a letter to the F.C.C. and the Justice Department on Tuesday asking them to carefully review Charter’s deal. “I have long been concerned about the effects of consolidation in the telecommunications industry on American consumers,” he wrote. “Any deal of this size and scope warrants scrutiny.”

The multibillion-dollar offer also represents a culmination for Charter and its main backer, the 74-year-old billionaire media mogul John C. Malone, who has been a vocal advocate for industry consolidation and has joined Mr. Rutledge in a mission to transform Charter from a small operator born in St. Louis in 1993 into the country’s second-largest cable company.

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Time Warner Cable at the New York Stock Exchange on Tuesday. Charter’s deal would create the country’s No. 2 cable operator.Credit...Justin Lane/European Pressphoto Agency

For the last two years, Charter has tried to acquire Time Warner Cable to gain market share in America’s fast-consolidating cable and broadband sector. Yet last year, its hostile takeover appeared to have been thwarted by Comcast.

The collapse of the Comcast takeover last month provided a new opportunity for Charter to realize its grand plan. Almost immediately after Comcast announced that it was walking away from its Time Warner Cable deal, bankers representing the two companies started talking. And this time, the dealmaking was friendly, though the price tag was significantly higher.

As part of the deal, which is expected to close by the end of the year, Time Warner Cable shareholders will hold as much as 44 percent of the combined entity, according to the Charter statement. Investors in Advance/Newhouse, the parent company of Bright House Networks, will retain a stake of roughly 14 percent, and Liberty Broadband, which is part of the telecommunications conglomerate owned by Mr. Malone, will hold a 20 percent stake.

To help finance the deal, Charter said it would sell $5 billion worth of stock to Liberty Broadband.

Time Warner Cable will receive a breakup fee of up to $2 billion if the transaction falls apart. (It received nothing when Comcast withdrew its takeover bid.)

In a statement, Brian L. Roberts, chief executive of Comcast, congratulated his rivals. “This deal makes all the sense in the world,” he said.

Mark Scott contributed reporting.

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: Broadband at Center of Cable Deal. Order Reprints | Today’s Paper | Subscribe

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