Malone Emerging as key Figure in Charter/TWC/BHN Review

Malone "has been prominent figure for a long time and certainly he has made some comments that are concerning over the years," John Bergmayer, senior staff attorney at Public Knowledge, told us Tuesday. "We would need to look carefully at anyone with business interests as varied as Malone's."

Despite Malone's owning a big stake in Starz and his plans to do likewise in New Charter, "Dr. Malone has neither the economic incentive nor ability to cause Starz to disadvantage its own interests in favor of New Charter's," Starz said in a filing aimed at red flags previously raised about the leverage New Charter might have over MVPDs due to its affiliation to Discovery and Starz (see 1510140009). And since program access rules would prevent that anyway, the network said, "No prophylactic conditions are warranted." Charter and Discovery made much the same arguments in their own filings -- that Malone has neither the means nor motive to restrict access to programming or stop New Charter from carrying competing content. "His interest in New Charter will be indirect, through a separate publicly traded company in which he has an interest, Liberty Broadband, which itself owns no content," Charter said in its 95-page response to comments and opposition to petitions to deny.

While it and New Charter would share common owners, Discovery said in its response that it "does not and will not coordinate carriage negotiations or other operations in any way" with Charter/TWC/BHN and that Discovery and New Charter "will not be part of a single operating entity nor will there be any vertical ownership relationship." There is no need to impose any conditions on Discovery as part of the deal, it said. Discovery also said neither it "nor Dr. Malone has an incentive to engage in anticompetitive behavior to favor New Charter, because doing so would cause each economic harm," while Malone, as partial owner of Discovery, "would bear the consequences of this harm and those losses could not possibly be offset from any incremental subscriber gains to New Charter." Discovery's corporate structure also blocks Malone from having it take part in any withholding or price negotiation behavior not in its own interest, it said. And its history with Charter and DirecTV -- where Malone used to be chairman -- demonstrates "that Dr. Malone does not use his ... ownership interest to advantage MVPDs in which he has an ownership interest or otherwise interfere with [Discovery’s] ability to act in its own best interest," it said.

While the deal faces some criticism, Charter said, almost all comments "seek conditions rather than outright denial, thus recognizing that at bottom this ... is in the public interest" by creating a "pro-broadband, pro-consumer, pro-OVD communications platform." Opposition to the deal hasn't given any good reasons why reductions in programming costs are anticompetitive, Charter said, saying since its broadband business "depends on the success of OVDs ... fears that New Charter will foreclose OVDs are unfounded." Its plans to do a million line extensions over the next four years and add at least 300,000 out-of-home Wi-Fi access points would be unlikely without the deals, Charter said. Any worries of a "collusive duopoly" with Comcast "are wholly implausible," it said, pointing to a statement by Fiona Scott Morgan, Yale professor of economics that also was filed Tuesday.

The deal raises other red flags with critics. Cable companies already seem to have decided to partner up instead of compete by extending their networks outside their local franchise areas, Granite Telecommunications said in a filing. That's undermines Charter claims about deals being needed to better serve multilocation customers with its telecom business, Granite said. Charter/TWC/BHN "claim the merger will help them avoid the problems inherent in partnering with other cable companies to compete; yet at the same time [they] are already parties to at least one wholesale agreement that provides for the very partnering the Applicants claim can only take place via merger," Granite said. It pointed to wholesale agreements Comcast has signed with a number of cable operators, including Charter and TWC. A New Charter "entry into the business telecommunications markets poses serious risks to competition as the result of collusion rather than competition among the cable companies," Granite said.

While it opposed the ultimately abandoned Comcast/TWC, the Parents Television Council (PTC) said it wasn't doing the same with Charter/TWC/BHN in large part because of the cable company's "demonstrated strong support for cable subscribers to have greater control over the network programming they receive and pay for." However, PTC's filing said the FCC should set conditions on the deal that give consumers "greater choice and control" over programming and protect small, independent, family-friendly programmers. One possible requirement might be a requirement of carrying existing family-friendly networks for at least five years, it said.

The information being sought by Nov. 16 from the three Liberty companies includes details on any entity of which the companies own 5 percent or more and a description of Malone's control in any fashion of Charter, TWC, DirecTV, Discovery Communications, Liberty Media, Liberty Broadband, Liberty Interactive, Liberty Cablevision of Puerto Rico, Liberty Global, Liberty Ventures Group, New Charter, Starz or any other MVPD. It also said it wants a breakdown of Malone's ownership and management rights and voting and veto powers as well as information and documents on any plans to provide video programming to any affiliated MVPD or unaffiliated OVD.