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'New Charter' Can Sell FCC on Broadband-Friendliness

MSO OK With Settlement-Free Peering, Gets Netflix Support 10/05/2015 8:00 AM Eastern
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Charter Communications has a strong broadband argument for its merger with Time Warner Cable and Bright House Networks.

WASHINGTON — As the Federal Communications Commission prepares to collect another round of data on the Charter Communications-Time Warner Cable-Bright House Networks merger, it is unclear how receptive the federal government will be to the deal that would combine the second, third and sixth largest cable broadband providers. But New Charter thinks it has an upbeat broadband story to tell.

 

FCC general counsel Jon Sallet made clear in explaining the FCC’s dislike of the proposed Comcast-Time Warner Cable deal (which would have combined the first and second largest MSOs) that it was all about the broadband. In a speech to the Telecommunications Policy Research Conference, Sallet said, “[T]he core concern came down to whether the merged firm would have an increased incentive and ability to safeguard its integrated pay TV business model and video revenues by limiting the ability of OVDs to compete effectively, especially through the use of new business models.”

 

Sallet said that included onerous “interconnection deal terms [that] could prevent an OVD from gaining the national distribution needed to compete with Comcast-TWC.” He was essentially confirming what most had concluded: The FCC’s obsession with over-the-top competition played a crucial role.

 

Charter has already been proactive on that front, signaling that it would accept settlement-free interconnection, its current practice, as a deal condition and extend it to TWC systems. Netflix, which hammered Comcast for its paid peering, has praised the Charter plan and blessed the deal under that condition.

 

Charter has been pitching itself, and with some reason, as a broadband-friendly company that could provide increased competition to top broadband provider Comcast.

 

“New Charter,” unlike Comcast, does not have a suite of co-owned programming assets that could potentially be advantaged through its OTT access policies, with the exception of a couple of TWC regional sports networks, which don’t provide national programming. The FCC also has some pretty specific access rules for those.

 

Among Charter’s broadband-friendly talking points are that it currently has settlement-free peering and will extend that through 2018 at least if the deal goes through. Sallet in his speech talked about having interconnection alternatives, and Charter sees New Charter as offering that competition.

 

Charter also has 60-Mbps minimum speeds, no data caps or usage-based billing, no early termination fees and no separate modem charges, all of which it would extend to Time Warner Cable.

 

The company also said New Charter’s total high-speed subs would be under 30% of the market, as opposed to the 50%-plus share for the nixed Comcast-TWC deal.

 

“We should be careful not to impute any intrinsic problems with a merger simply because the FCC wants to take a closer look at the companies or the competitive market in which the company operates,” said Adonis Hoffman, former chief of staff to FCC commissioner Mignon Clyburn and founder/chairman of Business in the Public Interest. “Even with a longer than usual review period, I suspect the Charter merger will be approved with conditions.”

 

Consolidation critic Free Press was not quite as sanguine about the deal prospects.

 

“Massive cable-industry consolidation is rarely in the public interest,” Free Press senior director of strategy Tim Karr said. “None of the benefits that Charter touts depend on a merger. The market was already moving to higher speeds and settlement-free peering, and the law prohibits unreasonable practices.”

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