On Friday, May 16th, Charter Spectrum and Cox Communications announced a $34.5B merger deal where Charter would acquire Cox Enterprise’s residential cable business, commercial fiber business, and managed IT and cloud businesses. Under the proposed deal, the combined company would take Cox Communications name, but use the Spectrum brand for its consumer-facing services. Current Cox markets would receive new products under the Spectrum brand, including Advanced Wi-Fi, Spectrum Mobile, Spectrum TV, and Xumo.

Examining the impact on residential broadband, Charter Spectrum and Cox Communications are the second and sixth largest residential ISPs according to Parks Associates’ estimates. Charter reports 28M residential broadband customers while Cox has an estimated 6.1M. A merger of these two companies would put them into the number one spot, ahead of Comcast, with a combined residential base of 34.1M residential internet subscribers.

Notably, these two companies have distinct footprints that do not overlap. In terms of technology, they are also a fit – they both operate hybrid fiber/cable networks (often abbreviated as HFC) and use Verizon for their MVNO mobile services. The timing is also right, with a merger-friendly environment and the FCC promising to smooth the way for service providers.

The two companies, as well as cable internet overall, face a significant challenge – an increasingly competitive residential market driven by the low prices and wide availability of 5G FWA internet service on the low end, and the speed and reliability of fiber overbuilders on the high end. Both companies have been investing into network upgrades, following the path of virtualization and re-allocating network spectrum away from pay-TV and towards internet services – allowing them to offer symmetrical speeds and multigig services.

Parks Associates consumer surveys find that bundling additional services is a winning strategy for ISPs. These bundles include traditional valued services such as mobile or streaming video, but also services such as smart physical security, whole-home cybersecurity, and home internet backup, among others.

This merger creates new opportunities for the combined company with regards to new service bundles – Charter is a leader in MVNO mobile lines with roughly 9.6M residential mobile lines, as per the company. Charter also is turning to new video streaming bundles and offers, with its TV and video strategy centered around its Xumo Stream Box – which also serves as its set-top box replacement. Bundles incorporating mobile service, streaming video options, and advanced Wi-Fi – paired with new high speed tiers – are highly popular among today’s consumers.

For more analysis of the broadband market, see Parks Associates’ Broadband Market Tracker.