The FCC has released the full order (pdf) detailing its justifications for approving Charter's $79 billion acquisition of Time Warner Cable and Bright House Networks, and it may leave you wondering why the agency approved the deal at all. As recently noted, the FCC attached several major conditions to the deal after voting 4-1 to approve it, the most notable of which is that Charter is prevented from imposing usage caps on its customers for a period of seven years after the deal is signed.
But were you to read the FCC's order, you might walk away wondering why the agency approved it. The FCC is quick to list three major reasons why the deal isn't particularly good for consumers, something the FCC hopes its conditions will manage to fix.
"We conclude that the transaction will materially alter the Applicants’ incentives and abilities in ways that are potentially harmful to the public interest," the FCC said.
"First, New Charter’s increased broadband footprint and desire to protect its video profits will increase incentives to impose data caps and usage-based prices in order to make watching online video more expensive, and in particular more expensive than subscribing to a traditional pay-TV bundle," Said the agency.
"Second, New Charter’s larger number of broadband subscribers will increase its incentive and ability to raise prices on companies—including online video distributors—that interconnect with New Charter’s network to deliver Internet traffic that consumers want," it noted.
"Third, the transaction will likely increase New Charter’s incentive and ability to use its leverage over programmers to extract contractual terms that will frustrate the programmers’ abilities to license content for online distribution," said the FCC. "In doing so, New Charter will foreclose online video distributors from content that allows them to be more vibrant competitors to cable operators."
But the FCC is claiming its merger conditions will prevent all these horrible scenarios from playing out.
In addition to blocking the company from imposing usage caps, Charter is also forbidden from forcing edge providers like Netflix for direct interconnection, and is prohibited from threatening broadcasters should they strike deals with streaming competitors (something Dish repeatedly claimed happened with Sling TV). Charter also needs to expand its footprint to two million additional locations, one million of which must be in areas served by at least one other provider.
Merger conditions however are only valuable as long as they're enforced, something that hasn't historically been the FCC's forte.
Over the last fifteen years the FCC has repeatedly let telecom operators ignore all manner of conditions, with the worst-case scenario being wrist slaps in the form of small fines -- often years after the offenses are even relevant. Deployment promises like the 2 million additional households have historically proven especially pointless, in that the results are never seriously audited, letting companies play endless carrot on a stick with regulators incapable of (or politically hindered by) serious follow through.
Time will tell if the FCC's conditions are enough to keep Charter on its best behavior, or if the company simply finds other, more creative ways to use its much large size to unfair competitive advantage -- and pass debt incurred from the deal directly to consumers.