FCC Issues Order Setting Conditions on Charter-TWC-BHN Deals

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By Timothy McElgunn

May 10 — The Federal Communications Commission May 10 issued its order approving the acquisition by Charter Communications Inc. of two other cable companies and laying out its conditions for the deals to proceed.

The agency voted 4-1 May 5 to approve Charter's takeovers of Time Warner Cable Inc. and Bright House Networks LLC. The combination “as proposed would likely cause public interest harms but may also produce modest public interest benefits,” the commission said in a memorandum accompanying its order.

In the order, the agency laid out the conditions it has imposed in return for its approval of the deals. The conditions largely mirror the conditions that Charter, in its merger and acquisition proposal, voluntarily committed to abide by for three years, but extend that period by four years.

The conditions imposed by the FCC, all of which are in place for seven years from the date of the order, include:

  •  Settlement-free interconnection between New Charter's network and those of other network operators.
  •  A ban on New Charter imposing data caps—limiting the amount of bandwidth residential customers can consume in a given period without paying additional fees or having their usage restricted in any way—or introducing usage-based pricing whereby customers pay different monthly fees depending on how much data they consume.
  •   Continued support for CableCard devices that allow third-party set-top boxes to receive Charter's television signals—thus allowing customers to choose another supplier for that equipment and to avoid leasing that equipment from Charter.
  •   A ban on discriminatory programming agreements—the FCC and the Department of Justice prohibit New Charter from entering or enforcing contractual terms that inhibit content owners form distributing their content online.
  •   A requirement that Charter will extend its network to pass 2 million homes not currently passed by its facilities and offer services to those homes.
  •   Requirements for periodic reports covering each of these conditions, as well as describing New Charter's plan to manage cybersecurity risks as it combines three disparate systems.
  •   A requirement that New Charter retain both an internal company compliance officer and an independent, external compliance officer that will report and monitor, respectively, the combined entity's compliance in accordance with the terms of the FCC Order.


Dissenting Views

Republican FCC commissioners Ajit Pai and Michael O'Rielly both took issue with a number of the conditions included in the order, with Pai dissenting and O'Rielly approving in part, concurring in part, and dissenting in part.

“It is quite clear the Commission's majority does not believe that the merger of Charter, Time Warner Cable, and Bright House is in the public interest,” Pai wrote in his dissent. “This Order spends over 100 pages detailing the harms that would allegedly result from the transaction. And when the discussion turns to the merger's purported benefits, the words ‘modest' and ‘minimal' are used over and over again.” Pai said that the commission approved the merger despite those concerns because, “it has turned the transaction into a vehicle for advancing its ambitious agenda to micromanage the Internet economy.”

Pai called on Congress to step in and change how the FCC reviews such mergers.

“Given how badly broken the current merger review process has become at the FCC—how rife it is with fact-free, dilatory, politically motivated, non-transparent decision-making—I believe Congress should implement major reforms of the procedural and/or substantive rules governing the Commission's assessment of transactions,” Pai wrote. “The ideologically inspired extortion has to end.”

Clyburn Wanted More

Democratic commissioner Mignon Clyburn took an opposing view. In her statement concurring with the commission's order, Clyburn said the requirement to pass 2 million new homes is insufficient.

“As the soon-to-be second largest provider of broadband Internet access, with service to approximately one-fifth of households, I believe that New Charter should be required to build out to more households with a specific focus on reaching those homes deemed ‘unserved,'” Clyburn wrote.

To contact the reporter on this story: Tim McElgunn in Cherry Hill at tmcelgunn@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com