Charter Spectrum Lobbies FCC To Kill Time Warner Cable Merger Conditions

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.