Bizarre Court Ruling Helps Cable Broadband Monopoly Charter Tap Dance Around Merger Conditions

from the our-courts-might-be-broken dept

Eager to impose higher rates on its mostly captive customers, Charter Communications (Spectrum) has been lobbying the FCC to kill merger conditions affixed to its 2015 merger with Time Warner Cable. The conditions, among other things, prohibited Charter from imposing nonsensical broadband caps and overage fees, or engaging in the kind of interconnection shenanigans you might recall caused Verizon customers' Netflix streams to slow to a crawl back in 2015. The conditions also involved some fairly modest broadband expansion requirements Charter initially tried to lie their way out of.

But with the GOP having neutered FCC authority over broadband providers (including the axing of net neutrality rules), Charter obviously is eager to take full advantage. So on one hand, they've been engaged in some fairly dodgy lobbying of the FCC to scuttle the conditions, which already had a seven year sunset provision (they expire in 2 years anyway). On the other hand, the telecom-backed Competitive Enterprise Institute (CEI) took a different tack, and filed suit against the conditions, somehow convincing four Charter customers to sue under the argument the conditions (not the merger) raised consumer prices.

This being America, the telecom-backed think tank last week scored a favorable ruling thanks to the US Court of Appeals for the District of Columbia Circuit. In its ruling (pdf), the court completely bought into the CEI's arguments that conditions crafted by consumer advocates, aimed at protecting consumers, somehow hurt consumers. As such, the court vacated two of the conditions -- one banning Charter from having to offer lower-cost broadband plans, and one prohibiting ISPs from engaging in dodgy behavior out at the edge of the network (interconnection).

In its ruling, the court proclaims that the restrictions on interconnection drove up consumer prices:

"To begin, the condition plainly caused New Charter to forgo revenue from edge providers. Before the merger, Time Warner, the largest broadband provider among the merging companies, raised substantial revenue from paid interconnection agreements. So did Bright House. But the merger condition prohibits New Charter from using those same revenue sources."

But that's a misrepresentation of what the conditions did. If you'll recall, networks of all kinds for years engaged in settlement free peering. As incumbent ISPs faced more competition from the likes of Netflix in the TV space, transit and streaming video companies alike accused ISPs like Verizon and Charter of intentionally letting their peering points get congested to force companies to pay significantly higher rates if they wanted their traffic to reach an incumbent ISP's customers. The FCC's net neutrality rules and the merger conditions were fairly mild restrictions designed to prevent ISPs from using interconnection as a way to drive up costs for their competitors.

Whether you like the rules or their implementation, the argument that they harmed consumers is nonsensical, and it's not being made in good faith. Telecom mergers as a whole generally drive up costs. History is very clear on this point. Yet here we have the telecom sector and its think tank allies trying to claim it was the attempts to mitigate merger harms...not the damn merger itself that was the problem.

One of the other major conditions, a seven year ban on bullshit usage caps, was also singled out by CEI as some bizarre affront to consumer welfare. But the court refused standing on caps under the bizarre claim that Charter has purportedly no interest in imposing such profitable restrictions:

"Nonetheless, the consumers have failed to prove causation because there is scant evidence that New Charter would offer usage-based pricing if allowed to do so. Before the merger, its predecessor companies rarely offered it. Charter had specifically rejected it. Time Warner offered one plan with usage-based pricing, but abandoned efforts to expand the practice after “significant public backlash.” Id. at 6363. Bright House never offered it. Given the lack of evidence that New Charter’s predecessor companies had offered usage-based pricing before the condition was imposed, or that New Charter would offer usage-based pricing if allowed to do so, the appellants have failed to show traceability or redressability.

For one, the company's name is "Time Warner Cable," not Time Warner. And while it's good the court rejected the CEI's attempts to scuttle the ban on broadband caps (which again expire in two years anyway), the logic here doesn't make much sense either. It's abundantly clear that Charter is lobbying to kill these conditions in large part because not having them would allow the monopoly to raise prices. That this is something that's even debated by the court shows they don't really even understand the motivations of the players here. The only reason Time Warner Cable didn't succeed in capping usage previously was historic public backlash.

In short, a telecom monopoly-linked think tank filed a lawsuit claiming that post-merger prices went up because of some pretty modest conditions specifically designed to try and prevent that. And the courts, which routinely reject consumer group lawsuits built on far-more concrete logic, bought into that reasoning entirely (in large part because the Trump FCC refused to defend them). Nowhere does the court even faintly recognize the lawsuit is in bad faith. Nor does the court recognize that Charter lied so frequently about its adherence to the merger conditions it was almost kicked out of New York State.

It's another example of why it's often far easier to just ban problematic mergers, instead of trying to rely on a bunch of conditions that are difficult to enforce, don't fix what they profess to, aren't permanent, or can't be enforced due to regulatory capture and a slow but steady erosion of the U.S. court system.

Filed Under: broadband, broadband caps, competition, data caps, fcc, interconnection, merger conditions, net neutrality, overage fees
Companies: charter spectrum, chater, time warner cable

Why Is The Boys And Girls Club Trying To Kill A Cable Monopoly's Merger Conditions?

from the with-friends-like-these dept

Earlier this month, we noted that Charter (Spectrum) had been lobbying the FCC to eliminate conditions affixed to its 2015 merger with Time Warner Cable. As part of those conditions Charter had to not only adhere to basic net neutrality (regardless of the fact that lobbyists had already killed FCC net neutrality rules), but it was also prohibited from imposing arbitrary, bullshit usage caps and overage fees, or engaging in the kind of "interconnection" shenanigans that caused Netflix streams to slow for Verizon customers earlier this decade. It also had to expand broadband coverage, which it failed utterly at.

Most of the conditions are fairly minor, expire in another few years anyway, and by and large protect consumers from the kind of behaviors cable and broadband monopolies are known for. As Charter lobbies the government, it's employing some... strange bedfellows in its quest to kill the conditions. In New York that apparently includes the Niagara Falls Boys and Girls Club, which wrote a letter to the FCC urging the regulator to prematurely axe the conditions:

In its letter, the Boys and Girls club insists that a recent $5,000 donation by Charter to the organization certainly helped it weather the COVID-19 storm, and that "lifting these conditions will level the playing field for Charter while having zero impact on the online video marketplace."

The organization did not respond to a request for comment as to why it's rushing to the defense of literally one of the least liked companies in America. Keep in mind, this is a company that lied to regulators so routinely about whether it had been meeting merger build out conditions, that the company was almost kicked out of New York State, something I've never seen in twenty years of covering telecom.

The organization's claims also aren't true. Usage caps aren't technically necessary, drive up costs for consumers (most notably low income communities), and are routinely abused anti-competitively by giant ISPs. They saddle consumers with additional, confusing costs, something that's not particularly helpful during a pandemic-induced economic crisis. While Charter's merger probably should have been blocked completely, the conditions actively protect the folks the Boys and Girls Club is supposed to be representing, and opposing them undermines the groups constituents.

Of course, corporations funding organizations in exchange for support for terrible policies is nothing new.

A wide variety of groups take telecom cash to repeat whatever they're told, whether it's rural Texas school associations, the U.S. Cattlemen's Association, civil rights advocacy organizations, or even balloonist clubs. Some of these groups are created specifically for this purpose. Other times, these groups are "co-opted" without fully understanding what they're actually supporting in a bid to keep funding flowing. For lobbyists the overall is simple: to create the illusion of broad support for bad ideas the actual public -- minority or otherwise -- actually oppose.

And, to be clear, most objective parties don't support eliminating some fairly modest merger conditions affixed to one of the most despised monopolies in America. Of course as the FCC fielded comments up until July 22, a lot of similar groups were doing the same thing hoping nobody notices:

Most of the time this kind of undocumented quid pro quo (we'll donate to a new event center if you support deregulation or our latest merger) simply involves making a few filings to the FCC that the broader public never sees (and the press never covers because this sort of thing doesn't exactly drive ad eyeballs). But the efforts still routinely undermine the constituents these groups are supposed to be representing, and groups should at least take the time to understand the positions they're taking before wading into the fray.

Filed Under: astroturf, competition, fcc, merger conditions, mergers
Companies: charter, charter spectrum, time warner cable

Charter Spectrum Lobbies FCC To Kill Time Warner Cable Merger Conditions

from the regulatory-capture dept

When Charter proposed its $79 billion acquisition of Time Warner Cable and Bright House Networks, former FCC boss Tom Wheeler brought in net neutrality advocate Marvin Ammori to help hammer out conditions that wound up actually being semi-meaningful, a rarity in the telecom space. Under the deal, Charter was banned from imposing usage caps, engaging in interconnection shenanigans with content providers like Netflix, or violating net neutrality (even if the rules themselves were killed) for a period of seven years. Charter was also required to expand broadband to 2 million additional locations.

Granted a lot has happened since those conditions were passed in 2016. That includes the FCC basically folding like wet cardboard under pressure from telecom lobbyists, and not only killing all meaningful net neutrality rules, but gutting its authority over telecom creating massive gaps in basic consumer protections. Obviously feeling unfairly excluded from all the corruption, Charter is now lobbying the FCC to eliminate most of the deal's conditions, claiming that because the streaming video market is just so damn competitive, the conditions have proven themselves unnecessary:

"[I]n the years since the Conditions were imposed, [online video distributors] are even more numerous, more popular, and more formidable today than they were in 2016," states the petition. " Seemingly insatiable consumer demand for content only bolsters their already strong interconnection negotiating positions."

But that misrepresents why those conditions were imposed in the first place: Charter's monopoly over broadband, not video. The restrictions on usage caps, which were to expire in 2023, were imposed because with no competitors for users to flee too, it's very easy to start abusing usage caps to hamper streaming competitors, which is what AT&T is already doing. If you use AT&T's broadband service, AT&T's streaming video service doesn't count against your cap, but using Netflix or a competing streaming platform does. Caps aren't technically necessary to manage congestion. They're glorified price hikes.

The other major restriction involved prohibiting Charter from using its power to drive up rates for streaming competitors in interconnection agreements. If you remember back to 2014, Netflix service began mysteriously slowing down for Verizon users. Consumer groups and companies like Netflix and Layer3 said Verizon was intentionally letting its peering points with partners get congested to force Netflix to pay higher rates simply to connect to the incumbent ISP network. This kind of anti-competitive gamesmanship was also prohibited for a reason, and has nothing to do with how competitive the streaming sector was.

With net neutrality dead, Charter now finds itself in a position where it has to adhere to standards its competitors don't, so it's understandable (from their end of the equation) why it's asking they be lifted. The problem is that none of the underlying justifications for those conditions have changed. In fact they've gotten worse as Charter secures a bigger monopoly over broadband as its telco competitors flee the fixed-line residential broadband market in many areas. Ideally you'd fix this problem with pro-competition policies instead of merger conditions or net neutrality rules, but the US has never had the political courage for such an effort.

The original rules included a provision requested by the FCC that lets them lobby to end the rules two years early, so that's what they're doing. The problem here is that Charter has been so terrible at adhering to many of the conditions, it almost resulted in the company getting kicked out of New York State for lying to regulators, something I'd never seen happen in 20 years of watching the sector. So it's not exactly like Charter should be given a break for good behavior, because its behavior has largely been terrible. The FCC probably will anyway, inevitably leading to higher bills for Charter Spectrum users.

It's another reason why instead of imposing conditions that are either ineffective, watered down, or simply ignored, it makes sense to block these kinds of industry-consolidating deals from the start. Something the Obama administration was urged to do, but ignored. Mindless consolidation has never served the telecom sector well, and you'd be hard pressed to find a single major telecom merger in the last 20 years that delivered even a fraction of its promised "synergies." Or for that matter, regulators from either party who've done a good job holding these companies to their promises years after the fact.

Filed Under: broadband, competition, conditions, fcc, mergers
Companies: charter spectrum, time warner cable

Megamergers Can't Help Charter Spectrum As Cord Cutting Exodus Continues

from the bigger-isn't-better dept

You might recall that in 2016 Charter merged with Time Warner Cable and Bright House Networks, promising that the new, combined company would offer a revolution in customer service, broadband speeds, and TV. Instead, what the company's customers got was a steady parade of rate hikes, and a company that has found itself under fire for repeatedly trying to kill or tap dance around merger obligations (like the one stating it can't cap broadband usage for six years). New York State deemed the company's service and behavior so atrocious, it seriously contemplated kicking the company out of the state.

Not too surprisingly, raising rates and offering terrible customer service continue to take a toll on the company. The company lost another 145,000 cable TV customers in the first quarter, as users (annoyed by price hikes) continue to flock to cheaper, more flexible TV options:

"The company posted net video subscriber losses totaling 145,000, compared to a net loss of 111,000 one year ago. The company lost 152,000 residential video subscribers this quarter, a 24% increase over the 121,000 residential subscribers it lost in the year-ago quarter."

Charter also lost 99,000 digital voice customers, as users who've gone wireless only also try to trim back their bloated monthly cable bill. It's odd in that these companies are facing intense new competition in the streaming space, and their first reaction is to double down on video price hikes. Part of that is an effort to recoup the massive debt load incurred by the mergers themselves, a problem AT&T is also struggling with. AT&T spent more than $150 billion on megamergers in recent years, only to face record subscriber defections thanks to endless rate hikes.

Granted cable giants like Charter Spectrum and Comcast have an ace in the hole: the lack of competition in broadband. As many US telcos retreat from upgrading their DSL lines, cable giants are enjoying a greater monopoly than ever. They're taking advantage of this lack of competition by jacking up the price of broadband. In Comcast's case that has included arbitrary, confusing, and punitive broadband usage caps, which not only act as a glorified price hike, but can help these cable giants simultaneously cash in on, and deter the use of, streaming video alternatives.

Charter may have lost video and phone subscribers last quarter, but it managed to add 428,000 residential and business broadband customers in the quarter. Given most of these users don't see an competition for faster speeds, Charter can hike prices at its leisure. And while the previous FCC banned Charter from imposing usage caps for six years, by 2022 those restrictions will be lifted. Between that and the death of net neutrality rules (assuming they're not restored by the ongoing lawsuit against the FCC), it's not hard to see how America's cable monopolies plan to impose all manner of creative nickel-and-dime restrictions on these captive customers.

Who's going to stop them? The current FCC is arguably beholden to the sector, meaning there's neither regulatory nor healthy competitive pressure capable of keeping these lumbering giants in line. The best hope is trying to shovel forth policies that actually bring more competition to underserved markets (including via community broadband or public/private partnerships), something Charter and Comcast's lobbying and policy folks work tirelessly to avoid.

Filed Under: broadband, consolidation, cord cutting, tv
Companies: bright house networks, charter, charter spectrum, time warner cable

New York State Threatens To Revoke Charter's Cable Franchise For Bullshitting

from the ill-communication dept

New York State and the nation's second biggest cable provider (Charter Spectrum) aren't getting along particularly well. Early last year, Charter Spectrum was sued by New York State for selling broadband speeds the company knew it couldn't deliver. According to the original complaint (pdf), Charter routinely misled consumers, refused to seriously upgrade its networks, and manipulated a system the FCC used to determine whether the company was delivering advertised broadband speeds to the company's subscribers (it wasn't).

Charter has tried to use the FCC's net neutrality repeal to claim that states can't hold it accountable for terrible service, but that hasn't been going particularly well.

Meanwhile, Charter is also facing heat from the state after the State Public Service Commission found that Charter routinely mislead regulators about its efforts to meet conditions affixed to its $89 billion acquisition of Time Warner Cable and Bright House Networks. As part of that deal, Charter was supposed to expand service to "145,000 unserved and underserved residential housing units and/or businesses within four years." But the company was fined $2 million after regulators found it repeatedly tried to pretend it had expanded services to areas that weren't actually upgraded.

Things have only gotten uglier from there. Last week, the NY PSC accused the company of gaslighting its customers after it repeatedly tried to tap dance around merger obligations despite repeated fines. The company promised a "universe of synergies" ahead of the deal, but consumers only received even higher prices and even worse customer service than the company was already known for:

"Charter's claims are simply false and the commission will not stand idly by while Charter deceives the public and its shareholders," (NY PSC Chairman John) Rhodes said. "Charter's own data shows a gaping hole between its commitments and its performance. New York will not tolerate Charter's gaslighting its own customers into believing it is meeting its promises."

The state PSC says Charter's deception may force it to take an almost-unheard of action, the revocation of the company's cable franchise agreement in the state:

"Not only has the company failed to meet its obligations to build out its cable system as required, it continues to make patently false and misleading claims to consumers that it has met those obligations without in any way acknowledging the findings of the Public Service Commission to the contrary," Rhodes said. "Our patience with Charter has come to an end and now we must move to take much stronger actions."

Historically, state legislatures and regulators are almost comical rubber stamps for regional broadband monopolies, one of several reasons why American broadband tends to be monumentally terrible in many parts of the country (regulatory apathy in the face of limited competition is a pretty fatal combination). But as we're seeing with state-level net neutrality efforts, the federal assault on broadband consumer protections and accountability appear to have resulted in at least a handful of states growing a spine and actually giving a damn.

Filed Under: cable franchise, misleading regulators, new york
Companies: charter, charter spectrum, time warner cable

Wall Street Merger Mania Is Driving Us Toward One Single, Horrible ISP - Probably Named Comcast

from the merge-ALL-the-things dept

Many consumers are still reeling from a Charter, Bright House Networks and Time Warner Cable merger that left users with slower speeds, worse service, and higher prices. Other broadband consumers are still struggling with a bungled Frontier acquisition of Verizon assets that left users with prolonged outages and even worse customer service than the shitshow they already enjoyed. As we've seen for decades, this kind of mindless consolidation traditionally only benefits the companies involved, particularly in a market where real competition is in short supply.

This growth for growth's sake is one of the major reasons Comcast -- and its horrible customer service (which didn't scale with the company's expansion because that would have cost money) -- exists. And Wall Street's relentless thirst for growth at all costs is a major reason these companies can't simply focus on being the best "dumb pipes" possible, instead focusing their attentions on expanding into markets they have little expertise in (see Verizon's ingenious plan to hoover up failed 90s brands and pander to Millennials). When they can't succeed because they're out of their depth, they try to tilt the playing field (killing net neutrality).

There's oodles of history lessons here, and there's every indication we intend to learn nothing from them. With the ink barely dry on Charter's troubled deal, and the Trump administration signaling that no merger is too big or too absurd, Wall Street analysts have been positively giddy this year pondering megamergers in telecom that had previously been unthinkable on anti-competitive or antitrust grounds. That has included heavy pushes for a Sprint acquisition of T-Mobile or a Verizon bid to buy Comcast -- the massive, obvious anti-competitive impact of both deals be damned.

This week, the merger mania du jour apparently involves a plan that would involve Comcast and French-owned Altice working in concert to buy Charter Communications, whose $180 billion asking price has proven too steep for any one company to contemplate alone (Verizon made a $100 billion offer and was rejected). Citigroup has floated the idea that after acquisition, Comcast could integrate the Time Warner Cable customers they were blocked by regulators from acquiring for anti-competitive reasons, leaving us with one giant cable company to rule us all:

"Charter is pretty much an equal rival in size and scope to Comcast at this point, at least with regards to subscriber numbers. Each company has somewhere in the neighborhood of 25 million customers. For the two to merge outright would leave one dominant cable company in the country, with about half of the entire nation’s subscribers — from coast to coast, and in many of the states in between — under a single umbrella."

Granted there's no guarantee such a deal will happen. Wall Street stock jocks often like to float rumors then profit off of the herk and jerk of stock prices caused by the half-truths they themselves create. But should Comcast be able to swing such a deal, we could be looking at a supernova of anti-competitive dysfunction, the likes of which made Comcast's well documented issues seem charming.

Consider that cable's monopoly was already blossoming thanks to the countless telcos which have effectively stopped trying to compete -- in large part because Wall Street thinks spending money to upgrade your networks is a fool's errand. Then ponder the fact that the current FCC is busy gutting any and all meaningful oversight of these companies, allowing them to inevitably engage in all manner of anti-competitive shenanigans, from arbitrary and punitive usage caps, to net neutrality and privacy violations.

This all may sound like hyperbole, but it's a future that's very much under construction. And the folks giddily contemplating the "looming synergies" of such monumental coagulation are building it with absolutely zero concern for the impact on consumers, startups, small businesses or the health of the internet. Telecom sector executives and the folks paid to cheer their every decision have every intention of taking the already dismal Comcast experience, injecting it with steroids, and setting it loose on a market with no organic competitive or regulatory checks and balances. And by the time most notice the negative repercussions, these same folks will already be hyping the next wave of mindless consolidation.

Filed Under: broadband, isp, mergers, wall street
Companies: altice, bright house, charter, comcast, time warner cable

FCC Kills Charter Merger Condition That Would Have Forced ISPs To Compete

from the let's-ignore-the-obvious dept

While FCC boss Ajit Pai has repeatedly claimed his top priority while running the FCC is eliminating the digital divide, his behavior in just the first few months of his term has made that claim utterly and indisuptably laughable. It doesn't take a sociology degree to realize that Pai's recent decisions to protect prison phone monopolies, protect the cable box monopoly, undermine efforts to bring broadband to the poor and dismantle net neutrality solely help one particular constituency: the telecom sector's biggest, wealthiest, and most powerful providers.

And while repealing a previous FCC's policies isn't entirely new or unexpected (especially from somebody with Pai's extremely mono/duopoly friendly voting record), Pai has been pushing his purview even further. Last week the FCC boss announced that he'd even begun stripping away at the conditions attached to Charter's $79 billion acquisition of Time Warner Cable and Bright House Networks.

While the FCC has a history of relatively toothless merger conditions (often proposed by the companies themselves), Wheeler's FCC went a little further with Charter -- not only banning the company from imposing usage caps and overage fees for seven years, but requiring that Charter continue adhering to FCC net neutrality rules -- even if those rules are killed (something Pai has repeatedly promised to do). But the FCC also mandated that Charter Communications expand its broadband footprint to two million additional locations -- one million of which needed to be in areas already served by cable competitors.

Former FCC boss Tom Wheeler had argued that this "overbuild" condition would specifically impose added competition on those regions, "bringing innovation and new choices for consumers, and demonstrate the viability of one broadband provider overbuilding another." But small and large cable company lobbyists had spent months lobbying to have all of the conditions killed, going so far as to threaten to freeze broadband investment if the conditions weren't eliminated (you know you're in a non-competitive market when you labor under the illusion that you get to choose when to compete).

Quickly rushing to the aid of these companies before they faced the dreaded specter of additional competition, Pai's office announced that the agency would be retroactively killing the overbuild condition. This was, Pai insisted in an FCC statement, yet another shining example of the FCC boss's relentless dedication to helping "the public interest":

"My top priority is making sure that any American who wants high-speed Internet access is able to get it. Today, we take another step toward achieving that goal.

Last year, Charter Communications agreed to build broadband out to two million new customers as part of its merger with Time Warner Cable and Bright House Networks. Unfortunately, the FCC appended an “overbuild” condition to the order, requiring that half of those new locations be already served by another provider. Since these one million overbuilt deployments would be credited against the total, it would substantially reduce buildout to unserved areas. This is like telling two people you will buy them dinner, ordering two entrées, and then sending both to just one of your companions.

This condition was not and is not in the public interest, and it runs directly against the goal of promoting greater Internet access for all Americans.

So one, to believe Pai you'd have to ignore not only his entire voting record, but the fact that he just began dismantling an FCC program specifically designed to help bring broadband to the poor.

That said, people should also understand that large ISPs (and those that kneel in fealty to them) like to keep the focus on an ambiguous dedication to "closing the digital divide" because it ignores the real problem: high prices and limited competition. According to NTIA data, there are about 26 million households left in the U.S. that aren't connected to the internet. If you look closely at the breakdown of why these homes aren't connected, the top three reasons either involve these users not giving a damn about being connected, or not being able to afford connectivity due to cost:

Because these companies obviously don't want people focused on the lack of competition, you've perhaps noticed that Pai (and the large ISPs that adore him) avoid ever acknowledging that lack of competition -- and the resulting high prices -- are a problem. In fact, it's often comedic to watch how desperately many of these folks (including the lion's share of hired ISP policy mouthpieces and think tankers) try and avoid the subject. Instead, apparently, we get odd metaphors about dinner entrees that don't really make much coherent sense in context.

Of course, then, the overbuild condition was axed because it did the unspeakable: actually forced a handful of companies to compete. Granted this overall lack of competition is what lets these companies impose arbitrary and unnecessary usage caps and overage fees -- which are little more than glorified rate hikes. And cable lobbying groups like the NCTA have been lobbying the FCC to get rid of the conditions banning Charter caps as well (pdf).

All told, much like the man that appointed him, FCC boss Ajit Pai likes to try and obfuscate his almost mindless dedication to protecting large legacy companies with an utterly phoney dedication to the downtrodden. The Charter merger, approved under the Obama administration, was admittedly a bad deal that has already resulted in higher prices and even worse customer service for impacted customers. But eliminating these conditions only serves to make an already bad deal, even worse. And the pretense that it's being done out of a love of America's downtrodden only adds insult to injury.

Filed Under: ajit pai, competition, fcc, merger conditions, overbuild
Companies: bright house networks, charter, time warner cable

AT&T Settles With DOJ Over LA Dodgers Channel Collusion Allegations

from the competitors-playing-too-nicely dept

In 2013, Time Warner Cable (since acquired by Charter Communications) struck an $8.35 billion deal with the LA Dodgers to create LA SportsNet, the exclusive home of LA Dodgers games. To recoup its investment, Time Warner Cable demanded exorbitant prices from competing cable providers if they wanted access to the channel. Unsurprisingly, all of Time Warner Cable's competitors in the region balked at the $5 per subscriber asking price.

Several years later, a massive portion of Los Angeles still can't watch their favorite baseball team, since Time Warner Cable's asking price not only kept competing cable operators from delivering the channel, but prohibited over-the-air broadcasts of the games.

Last November, a new wrinkle emerged in the standoff after the Department of Justice sued AT&T (now owner of DirecTV) for being a "ringleader" in a collusion effort involving the channel. The DOJ effectively claimed that DirecTV, Cox, and other regional cable providers violated antitrust law by sharing private company data during their coordinated effort against Time Warner Cable's exclusive arrangement and higher rates. The original complaint stated that this "unlawful information exchange" violated consumers' rights to fair channel price negotiations:

"As the complaint explains, Dodgers fans were denied a fair competitive process when DIRECTV orchestrated a series of information exchanges with direct competitors that ultimately made consumers less likely to be able to watch their hometown team,” said Deputy Assistant Attorney General Jonathan Sallet of the Justice Department’s Antitrust Division. “Competition, not collusion, best serves consumers and that is especially true when, as with pay-television providers, consumers have only a handful of choices in the marketplace."

Fast forward a few months and a new administration, however, and the Department of Justice has announced that it has settled its lawsuit against AT&T. According to the DOJ, AT&T has agreed to monitor its employees so they do not illegally share information about sensitive contract negotiations with competitors. This, the DOJ states, should wind up being a boon for consumers:

"When competitors email, text, or otherwise share confidential and strategically sensitive information with each other to avoid competing, consumers lose,” said Acting Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division. “Today’s settlement promotes competition among pay-television providers and prevents AT&T and DIRECTV from engaging in illegal conduct that thwarts the competitive process."

And yes, it makes sense to enforce existing antitrust law prohibiting covert collusion between companies. The problem, of course, is that nothing in the settlement fixes the original issue of Los Angeles residents being unable to actually watch these games due to Charter's exclusive deal with the Dodgers. Nor does it address the fact that cable providers increasingly pad consumer bills with "regional sports fees" that pay for these networks (which they often already own), but are designed to help providers falsely advertise a lower rate at the point of sale (something regulators truly couldn't care less about).

So while the settlement slaps the wrists of companies that technically broke the law to do battle with Charter's exclusive arrangement, nothing about it really makes things arguably better for the consumer. And with the DOJ's new incoming antitrust boss having formerly lobbied for both AT&T and Dish Network (he's previously supported AT&T's $85 billion plan to acquire Time Warner) the all-too-familiar anti-consumer dysfunction bone-grafted to the cable and broadcast sector isn't likely to evaporate anytime soon, even with the added benefit of streaming competition.

Filed Under: baseball, collusion, la sportsnet, merger, sports, tv
Companies: charter, dodgers, time warner cable

Charter's Trying To Kill Recent Merger Conditions Banning Usage Caps, Net Neutrality Violations

from the pay-more-money-for-the-same-product dept

For decades now the FCC has been an expert at imposing utterly meaningless merger conditions. Usually these conditions are proposed by the companies' themselves, knowing full well these "demands" are utterly hollow -- and FCC punishment for ignoring them will be virtually non-existent. The end result has been a rotating tap dance of merger conditions that sound good upon superficial press inspection, but wind up being little more than hot air. It's a symbiotic relationship where as the telecom sector consolidates (often at the cost of less competition) the FCC gets to pretend it's not selling consumer welfare down river.

But last year something weird happened.

When Charter proposed its $79 billion acquisition of Time Warner Cable and Bright House Networks, former FCC boss Tom Wheeler brought in net neutrality advocate Marvin Ammori to help hammer out conditions that wound up actually being meaningful. Under the deal, Charter was banned from imposing usage caps, engaging in interconnection shenanigans with content providers like Netflix, or violating net neutrality (even if the rules themselves were killed) for a period of seven years. Charter was also required to expand broadband to 2 million additional locations.

Not too surprisingly, broadband providers and the new incumbent-cozy FCC are getting right to work trying to eliminate those conditions entirely. New FCC boss Ajit Pai is circulating an order that would kill requirements that Charter overbuild into competing ISP territories, something demanded recently in a letter to the FCC by the American Cable Association. As is kind of telecom sector status quo, smaller cable companies say they'll take their investment ball and go home if the threat of additional, regulator-mandated competition isn't eliminated:

"To respond to growing consumer demand for increased bandwidth, all of us have been planning to upgrade the electronics on our networks and to deploy more fiber closer to customer locations over the next five years (the lifespan of the overbuild condition). Many of us have been planning to extend our networks to serve communities adjacent to our current service territories. But we have been forced to reconsider, scale back, or halt these investments in the wake of the Commission’s order."

Of course that's not how competition works, and companies believing they get to choose when you upgrade their networks speaks to the level of competition these companies already see. Elsewhere, broadband industry-funded think tanks like the Competitive Enterprise Institute (CEI) are also pushing Pai to kill off the usage cap ban, trotting out the long-standing industry claim that usage caps are all about fairness:

"...the Order requires New Charter to refrain from imposing “data caps” or setting "usage-based prices" for its residential broadband Internet access services for seven years after the transaction closes. Given that “the record makes clear that online video places enormous demands upon the networks of Charter and Time Warner Cable and increases their capital costs,” Commissioner Pai asked a simple question in his dissent: “Who should bear those costs?" Because the Order concludes that “all customers must do so equally,” New Charter’s natural response to this condition “will be to increase prices on all consumers in order to amortize the cost of serving a bandwidth-hungry few."

Granted if you've been paying attention to the usage cap debate, you realize this is a stale canard. Industry executives have acknowledged that caps have nothing to do with network management, and aren't an effective way to police network congestion anyway. As any earnings report highlights, caps aren't a financial necessity either, since flat-rate broadband has been incredibly profitable for the industry for years.

What usage caps are is a price hike imposed on uncompetitive markets. Granted they also help ISPs protect their TV revenues from the rise of internet video by penalizing competing streaming services, while letting the incumbent's own services sail through without penalty (aka zero rating). Anybody believing that imposing caps and overage fees on all users is really about making sure a few people "pay their fair share" should steer clear of swampland and bridge salesmen.

Granted Charter's latest merger has still proven harmful for consumers, who say the company has frozen broadband upgrades and raised rates dramatically in the wake of the megamerger. If consumer welfare were truly a U.S. telecom regulatory criteria the deal likely would have never been approved at all, but the cap condition specifically at least kept things from being arguably worse in the face of limited competition. If the FCC's looking to give a middle finger to the millions of customers impacted by this deal, killing the conditions -- and requiring these users pay even more money for the same service -- is a fantastic way to do so.

Filed Under: broadband caps, data caps, fcc, merger conditions, net neutrality, usage caps
Companies: charter, time warner cable