FCC To Ban Charter Communications From Imposing Usage Caps If It Wants Merger Approval

from the throttled-and-capped dept

If you recall, the FCC and DOJ blocked Comcast's acquisition of Time Warner Cable, in large part because of the sheer volume of nonsensical benefits Comcast tried to claim the deal would bring consumers. When Charter Communications subsequently announced its own acquisition of the company, it decided to take a different tack; most notably by taking a more congenial tone with regulators, dialing back the tone-deaf rhetoric and astroturf, and even hiring long-time net neutrality and consumer advocate Marvin Ammori to help seal the deal.

And it's now apparent that Charter's approach paid off. After months of meetings with regulators, both the FCC and the DOJ have announced they intend to approve the deal -- with a few conditions. After Bloomberg leaked word of the looming approval, FCC boss Tom Wheeler issued a statement saying (pdf) that most of the conditions being attached to the deal will focus on preventing Charter from harming Internet video competitors.

According to Wheeler, Charter won't be able to impose caps, engage in interconnection shenanigans, or bully broadcasters into withholding content from streaming providers (something Dish complained about) for a period of seven years:

"In conjunction with the Department of Justice, specific FCC conditions will focus on removing unfair barriers to video competition.

First, New Charter will not be permitted to charge usage-based prices or impose data caps. Second, New Charter will be prohibited from charging interconnection fees, including to online video providers, which deliver large volumes of internet traffic to broadband customers. Additionally, the Department of Justice’s settlement with Charter both outlaws video programming terms that could harm OVDs and protects OVDs from retaliation– an outcome fully supported by the order I have circulated today. All three seven-year conditions will help consumers by benefitting OVD competition. The cumulative impact of these conditions will be to provide additional protection for new forms of video programming services offered over the Internet."

The FCC's ban on usage caps is probably the most interesting or the proposed conditions. The agency has by and large turned a blind eye to usage caps and zero rating of content so far. In part because it was unsure whether or not the courts would uphold the regulator's new net neutrality rules (which should be settled any day now), but also because the FCC has been hesitant to engage in broadband rate regulation. Like net neutrality, usage caps are a sign of a lack of competition in the broadband market, and streaming competitors like SlingTV worried that the Charter merger would simply result in yet another giant like Comcast -- with a vested interest in using the lack of broadband competition to hammer emerging streaming TV evolution.

Granted the conditions aren't all that revolutionary in that while Charter has flirted with usage caps, it currently doesn't impose them anyway. And on the interconnection front, the devil will be in the condition details (the threat of neutrality rule enforcement appears to have solved many of these disputes, for now). Meanwhile, consumer groups like Free Press say they aren't impressed, arguing the debt created by the deal will be passed on to Charter customers in still-uncompetitive markets, one way or another:

"Customers of the newly merged entity will be socked with higher prices as Charter attempts to pay off the nearly $27 billion debt load it took on to finance this deal. The wasted expense of this merger is staggering. For the money Charter spent to make this happen it could have built new competitive broadband options for tens of millions of people. Now these billions of dollars will do little more than line the pockets of Time Warner Cable’s shareholders and executives. CEO Rob Marcus will walk away with a $100 million golden parachute."

And while it's probably true that Charter will just find some other way to impose rate hikes on these subscribers, the conditions are at least an interesting signal from the FCC (and the DOJ, that issued its own statement on the approval) that it recognizes the growing threat usage caps are posing to the future of innovative services. Still, the conditions will be no substitute for real broadband competition, the lack of which a bigger, badder Charter will simply have to find new and creative ways to abuse.

Filed Under: antitrust, broadband caps, conditions, data caps, datacaps, doj, fcc, merger, usage caps
Companies: charter, time warner cable