Charter-Time Warner Deal: FCC Planning To End Competition Requirement For Charter

The Federal Communications Commission is reportedly prepared to lift a regulation placed on Charter as part of its merger agreement with Time Warner Cable that required the cable and internet company to deploy broadband connections that are competitive with other providers.

The rule, which stems from Charter’s 2015 acquisition of competitor Time Warner Cable, requires Charter to offer broadband internet with download speeds up to 60Mbps. The company was required provide the high-speed connections to at least two million homes in the U.S., including at least one million currently served by at least one other high-speed provider—a process known as overbuilding.

Ajit Pai, the new chairman of the commission under the Donald Trump administration, is prepared to eliminate the rule and free Charter of its obligations to provide fast and competitive internet.

Earlier this week, Pai and the FCC received a petition from the American Cable Association asking that it remove the requirement placed on Charter.

"The threat of government-mandated, uneconomic entry undermines the incentive for smaller operators to invest in expanding their networks to bring new and better broadband services to unserved or underserved populations," the Association wrote, arguing the requirement would force Charter to serve homes that already have a broadband option rather than build its service out to those who have none.

The Cable Association also spoke out against the regulation at the time it was passed, arguing it would harm consumers.

"First, it will harm Charter's customers by preventing Charter from investing its resources most efficiently, such as by upgrading its networks to higher speeds. Second, it will harm customers of local, small providers when these customers are satisfied with their existing service," American Cable Association CEO Matthew Polka said.

Pai—who opposed the Charter-Time Warner merger, not because of the merger itself but because of the FCC’s regulations placed on the deal— reportedly is in agreement with the lobbying organization, and will work to remove the requirement that Charter provide competition for at least one million homes already served by one broadband provider while maintaining the requirement of reaching two million new homes in total.

At the time the requirement was passed, then-FCC chairman Tom Wheeler argued the ruling was essentially to create competition where ISPs were refusing to do so. Cable companies often avoid markets already served by a high-speed provider, ensuring the companies never get into a race to the bottom for pricing.

Charter CEO Tom Rutledge agreed to fulfill the requirement to overbuild, but noted in a 2016 speech that he would only overbuild in areas where telephone companies are the primary internet providers, not other cable companies.

“When I talked to the FCC, I said I can’t overbuild another cable company, because then I could never buy it, because you always block those,” Rutledge said at the MoffettNathanson Media & Communications Summit in New York.

Cable companies have also cited cost as a reason they won’t compete with each other. In an FCC filing, Comcast executive vice president David Cohen reasoned the “expense to build in any particular community” was too much to go head-to-head with a cable company already in that area.

At the time of Cohen’s statement, Comcast was planning to spend $45.2 billion to acquire Time Warner Cable—a fellow cable company that shared no similar markets with Comcast. Cohen said if the merger was approved—it was eventually blocked by the FCC —the two companies would have no intention of overbuilding in one another’s regions.