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.

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


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  1. identicon
    Anonymous Coward, 2 Jul 2020 @ 12:28pm

    The best

    Yay "competition" there is so much of it, the best competition ever! Nobody has competition like we do!

    reply to this | link to this | view in thread ]

  2. icon
    Celyxise (profile), 2 Jul 2020 @ 1:23pm

    And the sad part is Ajit Pai will look at his maps provided by Charter and see all the beautiful competition Charter is talking about and then agree that the restrictions no longer need to apply.

    Another day, another dose of public corruption.

    reply to this | link to this | view in thread ]

  3. identicon
    Anonymous Coward, 2 Jul 2020 @ 1:25pm

    Next time put a percentage of stock on the line

    Next time a major corp wants to merge and promises the world will become perfect afterward, make them put a percentage of their company up as collateral. If they fail to meet all of the demands, the government body overseeing the merger gets that percent, and the merger is undone. All costs are borne by the two companies that were trying to merge.

    Too large to fail means it was too large to be allowed.

    reply to this | link to this | view in thread ]

  4. icon
    That One Guy (profile), 2 Jul 2020 @ 1:29pm

    If it's a bad thing today it's still a bad thing tomorrow

    That merger conditions come with a timer is what gets me every time. The very idea of a problem being serious enough to warrant specifically telling a company 'you are not allowed to do this' and yet after a set amount of time it magically becomes no big deal is beyond absurd, and shows just how toothless such conditions actually are and how the entire process is little more than a song and dance, made to look good but not actually hold back the companies involved in any meaningful way.

    reply to this | link to this | view in thread ]

  5. icon
    Anonymous Anonymous Coward (profile), 2 Jul 2020 @ 1:33pm

    Oranges competing with squash for the best protein prize

    The perspective missing from Charter's erroneous statement of competition in video is that there are numerous silos out there, all of whom have select content. So it isn't the silos that are competing against each other, it is the content they contain, which means there isn't any actual competition between providers, but their products. Now if that content was distributed between each of the silos, equally, then we would have a market for competition between silos.

    reply to this | link to this | view in thread ]

  6. icon
    Anonymous Anonymous Coward (profile), 2 Jul 2020 @ 1:39pm

    Re: Next time put a percentage of stock on the line

    The government body overseeing this merger was the FCC. Why would we want the FCC to be in control of some percentage of any company? Amongst the many problems with that is that the next administration will 'reinvent' the FCC again and screw over any decisions made by the previous commission make up. What a way to run a business?

    NO, government should not own parts of business's, for confirmation just look to the post office.

    reply to this | link to this | view in thread ]

  7. identicon
    Anonymous Coward, 2 Jul 2020 @ 3:18pm

    That includes the FCC basically folding like wet cardboard

    The FCC invested heavily in the self-wetting cardboard sector.

    reply to this | link to this | view in thread ]

  8. identicon
    Anonymous Coward, 2 Jul 2020 @ 4:15pm

    Re: If it's a bad thing today it's still a bad thing tomorrow

    stop complaining, those restrictions are the only thing keeping my internet cost at $80/month, with no real alternative other than Charter...

    I for one am glad they can't impose usage caps, but I'm sure as soon as the restrictions are removed, they will put theme in place claiming they are needed to 'manage network congestion'... which will be an obvious lie as their network is working fine without them...

    reply to this | link to this | view in thread ]

  9. identicon
    Anonymous Coward, 2 Jul 2020 @ 4:58pm

    One can only wish...

    Dear Charter Communications,

    We are sorry to see you go, but we sympathize with the difficulties you express.

    We feel compelled to remind you that significant penalties will apply for early termination of the contract. There will be the Early Termination fee, the Right of Way Return fee, Disconnection fee, ... and of course the Business Divestment Oversight fee as your remaining business is separated from that of what was Time Warner Cable, with the latter being sold on the auction block. And, of course, Late Fees will accrue if any of the above fees are not paid on time.

    All of which were spelled out in the merger contract you signed 4 years ago. As a courtesy, we have included a copy of the signed merger contract for your reference.

    Sincerely,

    The FCC

    reply to this | link to this | view in thread ]

  10. identicon
    Anonymous Coward, 2 Jul 2020 @ 7:53pm

    Re: Oranges competing with squash for the best protein prize

    Any competent regulator would look at Charter’s argument about completion in the video space and retort that “when suburbs grow, it’s a good time to own the only bridge into the city” and deny it.

    reply to this | link to this | view in thread ]

  11. identicon
    Anonymous Coward, 3 Jul 2020 @ 10:36am

    Re:

    Ajit Pai will look at his maps provided by Charter and see all the beautiful competition Charter is talking about and then agree that the restrictions no longer need to apply.

    What made you think Pai was enforcing them to begin with?

    reply to this | link to this | view in thread ]

  12. identicon
    Anonymous Coward, 3 Jul 2020 @ 10:48am

    Re: Re:

    by maps you mean cash$$$ right?

    reply to this | link to this | view in thread ]

  13. identicon
    Anonymous Coward, 3 Jul 2020 @ 10:54am

    Re: Re: Next time put a percentage of stock on the line

    NO, government should not own parts of business's, for confirmation just look to the post office.

    I'm just gonna leave this here: USPS: Last Week Tonight with John Oliver - HBO

    TL;DR: The Postal Accountability and Enhancement Act along with various other executive orders has taken what was a profitable post service and turned it into a multi-million dollar indebted and barely functioning business.

    Guess what? You can't mandate that a business, public or private, pay in advance for the retirement benefits of it's workers as part of it's annual expenses. Never mind that the associated costs will probably change long before they are ever used.

    The same acts also made the US postal service unable to raise it's shipping rates. You can't mandate large additional expenses and at the same time prohibit price hikes to cover them and expect the business to remain solvent. No business can work that way, which is exactly what the government wanted. The US government has been trying to kill the postal service for years. So they passed legislation for the sole purpose of speeding up that process.

    Don't compare the government's ability to run things against the private sector when the government is desperately trying to kill the very thing you're using to compare them with.

    reply to this | link to this | view in thread ]

  14. identicon
    Anonymous Coward, 4 Jul 2020 @ 10:59am

    Re: Re: Next time put a percentage of stock on the line

    "NO, government should not own parts of business's, for confirmation just look to the post office."

    1) Create a mess
    2) proclaim you have a plan
    3) ...
    4) profit!!!
    5) rinse repeat

    The gop screwed up the us postal service on purpose - why? - idk, because they are idiots.

    reply to this | link to this | view in thread ]


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