Smaller telcos have petitioned the FCC to repeal the broadband overbuild condition in the Charter-Time Warner Cable merger.
Both the American Cable Association and the NTCA: The Rural Broadband Association, which represent smaller telcos, filed petitions at the FCC Thursday (June 9) asking it to reconsider the condition.
The FCC used the deal to try to promote both broadband buildouts and competition, requiring Charter to offer broadband to two million new customers, at least a million of which must be outside their current service areas and already receiving high-speed Internet service from at least one other provider.
In its petition for reconsideration, ACA said the condition was illegal. "[T]he FCC failed to identify a merger-specific harm or benefit to justify the overbuild condition," ACA said. "[A]s a result, ACA believes the overbuild condition is unlawful in that FCC precedent precludes the agency from imposing conditions -- 'voluntary' or otherwise -- except to address merger-related harms or confirm merger-related benefits."
In addition, said ACA, the condition is is "will exacerbate the merger harms the Order identifies, damage economic efficiency, injure small providers, and harm consumers," concluding: "The condition should be stricken."
NTCA told the FCC that it had failed to provide sufficient notice that it would impose such a residential build-out condition. "Mandating competition where none would otherwise exist imposes the risk of undermining, rather than furthering, broadband availability and affordability," NTCA said.
Smaller telcos are understandably concerned that such mandated overbuilding threatens the viability of smaller operators.
"Commission induced competition in difficult-to-serve areas, where margins are already razor thin, could result in companies cutting back services or going out of business altogether–or consumers paying unaffordable prices for services in markets that can barely (or not at all) justify a single provider, never mind two network operators," said NTCA.
"The overbuild condition also damages the smaller providers that are overbuilt, their long-term incentives, and their customers," said ACA, which estimated that the overbuild "could decrease the lifetime value of an ACA member’s triple-play customer by as much as 85%."
Charter Communications chairman and CEO Tom Rutledge has said he plans to overbuild telcos, not cable operators. ACA has hundreds of telecom members.