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By Tim McElgunn
Oct. 14 — In separate filings with the Federal Communications Commission, satellite TV provider Dish Network Corp. and a coalition of public interest advocacy groups petitioned the agency to deny Charter Communications, Inc.’s proposed acquisition of Time Warner Cable, Inc. and Bright House Networks unless they address specific concerns over potential competitive harms.
Both petitions focused on potential harms to broadband competition and, by extension, the online video market place.
Dish told the commission in its filing that, “The proposed transaction would be no better for the public interest than the one proposed between Comcast and Time Warner Cable,” creating a duopoly of Charter and Comcast that would control access to broadband for “about 90 percent” of American households.
As a result, Dish said, “The top two cable providers post-merger will not need to collude in order to bring their collective weight to bear on an online video distributor (OVD),” such as Dish's own Sling TV streaming service. If they were to decide independently to limit access to a given service, according to Dish, their combined market power would be enough to foreclose or degrade that service, “stifling a source of competition and innovation in the video industry.”
In their joint petition, Public Knowledge, Common Cause, and Open Media and Information Companies Initiative (Open MIC) decry a cable and broadband market “arms race where consolidation begets consolidation, where constant dealmaking increases the industry's debt-load, and where cost-cutting takes the place of innovation.”
In addition to sharing Dish Network's concerns about concentration and its potential effects on online video distributors (OVDs), the groups raised concerns about the combined company's ability to cross-subsidize its video business with revenue from broadband and other services, “for example, by offering broadband/video bundles that are cheaper than standalone MVPD service paired with standalone broadband.”
PK, CC and Open Mic also point to the potential to leverage control over set top boxes to foreclose competition, saying, that “unless the merged company agrees to work with the Commission in a cooperative way,” the merger is not likely to lead to lower prices, increased diversity of content, or new services for consumers.
And, the groups note, the high level of debt that Charter will take on to finance the deal would threaten to worsen already poor customer service. Citing a Consumeristreport, the groups said, “Time Warner Cable is not just the cable company with the worst customer service record, but the worst customer service record of any company—with Charter not faring much better.” If the high levels of debt lead to cost cutting pressure, the petition said, customer service could be negatively affected.
Finally, Public Knowledge, Common Cause and Open MIC raised concerns about vertical integration. While Charter, Time Warner Cable and Bright House Networks do not themselves own controlling stakes in content—an area of significant concern in regulators' evaluation of NBCUniversal owner Comcast's proposed TWC deal—the petition says that John Malone's overlapping stakes in Charter and cable channels Starz and Discovery Communications creates potential incentive to give preferential treatment to those and other Malone-controlled companies.
Unlike the failed attempt to combine Comcast and TWC, however, this cable merger has garnered support from some of the companies that will rely on the new Charter's networks to reach customers.
In asking for FCC approval of the deal, Charter has committed to follow the FCC's network neutrality rules, even if those rules are struck down in court challenges. By committing to follow the rules on technical blocking, discrimination, and paid prioritization, and to abide by other parts of the FCC's Open Internet order, the cable operator has garnered the support of Netflix, Cogent, and Level 3, all of which opposed the earlier deal.
While perhaps less impactful to the review, more than a dozen municipal and state government officials have expressed support for the proposed $55 billion merger transaction. In their own Oct. 13 filings with the FCC, the state and local officials said they believed the merger would help ensure their communities have fast and affordable Internet services.
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