New Charter Conditions Include Some non-Deal Specific Requirements
FCC conditions for Charter Communications' buying Time Warner Cable and Bright House Networks include requiring New Charter to build out its broadband network by a million customer locations within four years of close and to offer a low-income broadband service. A number of the conditions the agency itself acknowledges aren't transaction specific. Despite that, the FCC said in its 348-page order Tuesday that buildout "would provide a substantial public interest benefit [and] spur competition, leading to lower prices and greater choice for consumers." That the order was coming was announced last week (see 1605060059).
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The deals worth about $90 billion when originally announced were approved in full only by FCC Chairman Tom Wheeler and Commissioner Jessica Rosenworcel. The two FCC Republicans dissented at least in part and Mignon Clyburn concurred in part. Those three commissioners with concerns issued statements, too.
The two Republican commissioners blasted the order for its non-transaction specific conditions and those seemingly signaling FCC intent to regulate usage-based broadband pricing and paid peering industrywide. "Not every restaurant is an all-you-can eat buffet," Commissioner Ajit Pai said in his full dissent. "But today, the Commission signals the beginning of the end of this concept in the online world."
The conditions include a requirement New Charter offer broadband of a minimum 60 Mbps download speed to at least 2 million additional mass market customer locations within five years of the deals' close, and 1 million of those must be in areas outside its footprint and where another provider offers 25 Mbps broadband. The FCC also said New Charter can't use Connect America Fund money for the buildout. The agency didn't give specifics of where that buildout should be, saying New Charter "will be in the best position to determine the specifics of its buildout plan -- within the parameters we establish."
The conditions also require that within six months of close, New Charter begin offering its 30 Mbps download/4 Mbps upload low-income broadband service throughout the company's footprint wherever 30 Mbps wireline broadband is available within a year. The $14.99/month service to eligible subscribers is to include an in-home Wi-Fi router for no more than $5 per month, and no installation and activation fees, the FCC said, saying New Charter is authorized for a $3 per month price hike after three years. The agency also set a goal of 525,000 households enrolled within 48 months of the deals' close.
In its order, the FCC acknowledges the low-income broadband offering isn't transaction specific, and Charter/TWC/BHN could offer it absent the transaction. But the FCC said "the public would benefit from programs designed to bridge the digital divide" and "a more robust low-income broadband commitment with accountability mechanisms will help address the digital needs of these consumers."
The conditions largely focus on broadband-related matters, with the FCC saying voluntary concessions by Charter on mobile video app deployment and video device and user interface innovation carry minimal to no weight as potential benefits. The agency did adopt a condition requiring New Charter submit a confidential filing within three months of the deals' close spelling out its cybersecurity risk management plans during the transition, calling it "not a checklist but a description of corporate security realignment [to] serve as a helpful guidepost for New Charter’s combined cybersecurity initiatives during the transition." The agency in the order also requires settlement-free interconnection and continuing support of CableCARD, plus bans on data caps or usage-based pricing for its residential broadband.
The conditions point to "some very disturbing directions," such as the order being decidedly against data caps and usage-based pricing as an industry practice, Commissioner Mike O'Rielly said in a statement on his partial approval, partial concurrence and partial dissent. "The Commission seems to suggest that any large cable company should be prevented from doing the same, an answer to a question which the record was not designed to resolve," he said. O'Rielly also criticized the FCC requirement of a low-income broadband offering as a non-transaction-specific benefit. "Why not just ask for cold hard cash?" he asked. "Is there any limitation to the counterweight calculation? Once delinked from the transaction itself, such conditions reside somewhere in the space between absurdity and corruption."
O'Rielly said the buildout requirement diverts money that New Charter could use for improving service to existing customers and artificially introduces competition. "Current subscribers are going to be forced to pay for the social experiment of government ordered competition," O'Rielly said.
Citing the lack of any condition requiring New Charter offer stand-alone broadband or add independently owned-and-operated networks not currently affiliated with it, Clyburn said in a statement she was approving the conditions and concurring on the underlying order.
Pai's dissent said the FCC "has turned the transaction into a vehicle for advancing its ambitious agenda to micromanage the Internet economy" through such steps as banning any usage-based pricing including even discounts for modest data consumers and regulating rates through the low-income broadband offering. Pai said that unlike AT&T's buy of DirecTV that he approved in part, the New Charter order "sets the stage for the Commission to target paid peering and usage-based pricing on an industry wide basis."