The new deal: Charter poised to swallow Comcast Chattanooga customers

CURRENT SUBSCRIBERS NATIONWIDE• 1. Comcast subscribers - 22.6 million• 2. Time Warner Cable subscribers - 11.2 million• 3. Charter subscribers - 4.4 million• 4. Cox subscribers - 4.4 millionPROPOSED SUBSCRIBERS AFTER RESTRUCTURING NATIONWIDE• 1. Comcast subscribers - 30 million*• 2. Charter subscribers - 5.7 million-"SpinCo" subscribers - 2.5 million• 3. Cox subscribers - 4.4 million* includes Time Warner Cable subscribers, minus assets given to Charter and SpinCo SpinCo is effectively controlled and owned by CharterA THREE-WAY DEAL IN FIVE STEPS• 1. Comcast buys Time Warner Cable for $45 billion, growing to 33.8 million customers.• 2. Comcast sells 1.4 million customers to Charter to $7.3 billion in cash.• 3. Comcast and Charter swap about 1.6 Comcast customers for 1.6 Charter customers to streamline operations.• 4. Comcast spins off 2.5 million customers into a new publicly-traded company controlled by Charter.• 5. Divesting 3.9 million customers brings Comcast down to 29.9 million customers, clearing way for regulatory approvalSource: Comcast/Charter

photo Comcast may leave the Chattanooga market, selling its subscribers to Charter Communications.

Comcast is preparing to abandon the competitive Chattanooga market under a three-way deal the cable giant has struck with rival Charter Communications, if a plan to purchase Time Warner Cable is approved by regulators.

That deal would effectively transfer an estimated 100,000 residential customers in the Chattanooga area from Comcast to Charter, though it remains unclear what immediate changes, if any, customers would experience as a result of the transaction.

Including Chattanooga's customer base, Comcast will spin off 2.5 million customers nationwide into a new, as-yet-unnamed company currently dubbed "SpinCo," after it completes the purchase of Time Warner Cable.

"Comcast systems in Chattanooga and [the] Tri-Cities will be transitioned into a new, publicly-traded company that is being created," said Brian Farley, vice president of public relations for Comcast Central Division.

Charter would manage SpinCo, control its board and own one-third of its stock outright, meaning that SpinCo customers would effectively become Charter customers.

"Comcast Chattanooga will be part of this, while Charter customers will remain Charter customers," said Alex Dudley, a spokesman for Charter.

Currently, Comcast in Chattanooga is locked in a battle for subscribers with city-owned EPB, which has poached tens of thousands of paying customers from the largest cable company in the U.S.

EPB has grown to 57,100 fiber-optic subscribers since launching its gigabit-capable service in 2009, and now controls about 40 percent of the Chattanooga market, said spokesman John Pless.

While Comcast has struggled to effectively compete with EPB in Chattanooga, the combination of Comcast and Charter's customers in the region could create a much larger regional player that would serve more customers more efficiently. Charter could potentially save money here by consolidating two local headquarters into one, creating a central operations center, and paring down staff and other resources.

At a national level, Comcast hopes that by ridding itself of millions of customers in certain markets and strengthen the hand of rival Charter, regulators won't see Comcast's absorption of onetime competitor Time Warner Cable as a monopolistic move. Comcast believes that it must stay below 30 million subscribers to prevent authorities from blocking the deal.

Seperately, Charter will directly absorb 1.4 million customers from Comcast across the U.S. for approximately $7.3 billion in cash, and the two cable rivals will each transfer an additional 1.6 million customers to the other to make their service areas more efficient.

When taken together, the transfers will give Charter, which currently has 4.4 million customers, a total of 8.2 million customers that it owns or manages.

Cable companies long ago carved up the U.S. landscape into a patchwork quilt of local monopolies, signing franchise agreements with cities like Chattanooga to protect the large capital investment required to connect homes with underground cables. Comcast entered the Chattanooga market in 1995 when it bought the former Chattanooga Cable TV Co. from a subsidiary of E.W. Scripps Co. and the cable system adopted the Comcast name locally in 1997.

Charter currently operates in Northwest Georgia and Bradley County, while Comcast currently operates throughout much of the rest of the Chattanooga area. Some counties, like Walker and Catoosa, include areas served by both Comcast and Charter.

Contact staff writer Ellis Smith at 423-757-6315 or with tips and documents.