New Charter Conditions Not Seen as Road Map for Comcast/TWC Success
That Comcast would have fared better in its failed attempt to buy Time Warner Cable if it had taken an approach like Charter Communications is unlikely, industry experts tell us. Since Comcast/TWC would have created a company with incentive for stifling competition, "the best path was still denial instead of specific conditions," said John Bergmayer, Public Knowledge senior staff attorney. The FCC and Justice Department Monday made public potential conditions on Charter's purchases of Bright House Networks and TWC (see 1604250039).
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Comcast/TWC was unlikely to pass regulatory muster regardless of conditions, especially since none of the conditions being proposed in Charter/TWC/BHN is particularly unusual or creative and thus would have represented some breakthrough in consideration of Comcast/TWC, one lawyer with deal review experience at the FCC told us. In the Comcast/TWC case, "there wasn't a remedy," the lawyer said.
Charter obviously saw what didn't work for Comcast and offered conditions that company didn't right out of the gate, such as no data caps and free interconnection, one communications lawyer with transactions experience and who has represented multichannel video programming distributor clients told us Tuesday. Whether that voluntary approach also would have made a difference or if Comcast/TWC would inherently be too big to pass is impossible to say, the lawyer said. Comcast didn't comment.
The FCC likely will be seeing pushes from various parties trying to influence those conditions, with a focus especially on Commissioners Mignon Clyburn and Jessica Rosenworcel because they potentially could be open to conditions that line up with their particular interests, such as programming diversity in Clyburn's case, said the communications lawyer. The two GOP commissioners likely are going to be less amenable to more or different conditions, the lawyer said. Whether any tweaks can be made to the FCC's conditions depends on how much Clyburn and Rosenworcel have been kept in the loop as Chairman Tom Wheeler's office was crafting the proposed conditions or whether they first found out the details Monday, the lawyer said. But the lawyer with deal review experience disagreed, saying the terms put together by Wheeler's office are probably baked in now.
New Charter would be blocked from any retaliatory move against any programmer that makes its content available to online video distributors, including retiering and rate reductions, under the DOJ-proposed final judgment (in Pacer). The DOJ proposal said nothing would block New Charter from any exclusivity agreements in which programming can't be sold to other MVPDs or OVDs or from prohibiting a video programmer from making its content freely available on the Internet within the first 30 days after New Charter shows that content to its paying customers. The DOJ proposal also makes clear New Charter is free to sign agreements including most-favored-nation clauses. With that approach, the DOJ seems to be finding ways for Charter to have exclusive content yet not single out new entrant OVDs, Bergmayer said.
The proposed terms have both fans and critics. Consumers Union, which like PK is a member of the Stop Mega Cable coalition that opposed Charter/TWC/BHN, said in a statement: "The conditions put forth by the government are all aimed at protecting competition and consumer choice, along with providing other public-interest benefits to consumers." Given the history of companies trying to work around deal conditions, it said: "We hope the members of the FCC will take a careful look at the Chairman's proposed order, and consider what additional protections might help ensure that the final order does all it can to protect us from the combined firm abusing its new power."
Incompas, which had pushed for conditions requiring New Charter join a video programming purchasing cooperative and that its interconnection policy be extended to seven years (see 1603280039), said in a statement: "On the surface, the emergence of a larger cable company is counter to those desires, but by imposing a seven-year, settlement-free interconnection condition, one of the longest and strongest interconnection terms in recent history, Chairman Wheeler is keeping a critical bridge to competition open. Interconnection is the first amendment of competition policy, and we are please[d] that Chairman Wheeler has justified it as such in his conditional approval of the merger.”
TechFreedom called the FCC-proposed conditions a "gangster tactic" and "reverse-Robin Hood forms of price control for broadband." So-called "‘data caps’ are really just basic tiers," it said in a statement. "If big ISPs use them at all, they’re set so high that only a miniscule percentage of customers exceed them. Requiring Charter to give Netflix free interconnection means basically the same thing: those who hardly stream video will have to bear the cost of the infrastructure required to deliver it. The FCC’s regulation-by-extortion will benefit the 1% of power users at the expense of the 99%"