Regulators weren’t too keen on the idea of Comcast, the nation’s largest cable provider, merging with behemoth Time Warner Cable, but they seem a bit more open to the idea of a smaller acquirer. The Wall Street Journal reports that Federal Communications Commission (FCC) Chairman Tom Wheeler is fully supportive of Charter Communication’s $55 billion bid to buy Time Warner Cable, and could circulate a draft order as soon as this week.
But Charter’s not exactly getting off scot-free. The order under consideration would prohibit Charter from making contracts with content providers that preclude those providers from offering their programming online, according to Wall Street Journal sources. It would require, too, that Charter both make investments to its current customers’ broadband services and expand the availability of those plans beyond the regions which it currently serves.
Beyond the above, it would ink Charter’s historical, three-year agreement with the FCC to adhere to a series of pro-consumer tenets regarding high-speed broadband. These include a promise not to charge content providers such as Netflix and YouTube for interconnection (arrangements which can have a noticeable impact on customers’ streaming speed and quality), a promise not to introduce usage-based Internet billing or data caps, and a promise to abide by the Net neutrality rules the FCC introduced last year even if they don’t pass legal muster.
The order as written is multifaceted, the Journal reports, but aimed primarily at leveling the playing field for Internet-based video platforms that compete with traditional pay-TV, a priority for Chairman Wheeler. Sling TV, a service of satellite company Dish Network, is projected to reach two million subscribers by the end of this year, and Sony’s PlayStation Vue launched nationwide in March.
The order’s secondary motivation is to foster broadband competition in regions served by incumbent phone companies. According to the Journal, the FCC may require Charter to offer Internet services in the service areas of carriers like Verizon and AT&T.
Many details have yet to be hashed out. It’s unclear for how long Charter would be bound to the terms of the arrangement, for example, and whether or not the company would retain an independent monitor in charge of evaluating Charter’s compliance (a common condition of such mergers). The cable provider may be subject to additional concessions before the order becomes binding, too — the order must undergo review by the FCC’s four other commissioners and California’s state regulator, all of which will have a say in its final form before it’s approved. Journal sources expect the process to take “a few weeks.”
The draft order represents a significant milestone for Charter, which began laying the groundwork for an acquisition of Time Warner Cable following its purchase of Bright House Networks last year. It launched a $15, 30Mbps Internet plan for low-income families in December of last year, made a promise in January to hire a chief diversity officer and add more minorities to its board of directors, and in May of 2015 secured the support of streaming services like Fuse Media and Netflix by, in part, agreeing to waive interconnection fees.
The moves have garnered Charter the goodwill of regulators, who’ve eyed the provider’s Time Warner Cable bid far less critically than Comcast’s attempted buy last year. Comcast pulled the plug on its plans when it became clear that the FCC and Justice Department, concerned about the merger’s potential impact on online video and broadband service, would move to block the deal in federal court.
Charter’s acquisition, if approved, would create America’s second-largest Internet provider behind Comcast. It would boost the company’s total customer count to 17.4 million pay-TV subscribers and 19.4 million Internet subscribers, representing a respective 35 percent and 36 percent share of those markets.
The bid faces opposition from industry and consumer advocacy groups including Dish Network, Public Knowledge, the Writers Guild of America, USTelecom One, and the Stop Mega Cable Coalition, which contend that the deal represents a threat to both broadband competition in markets without alternative choices in broadband and Internet-based video services that compete with Charter’s lucrative channel bundles. “Comcast was a category 5 hurricane; Charter is a category 4. It is still really bad,” Deputy General Counsel for Dish Network Jeff Blum told Variety.
Charter has dismissed those claims, calling them “baseless” and accusing opponents of the deal as “engaging in tired PR tactics to further their self interests.”
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