M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Tuesday, April 26, 2016

Charter-Time Warner Cable merger gets approval

Two weeks after California recommended approval of the Charter-Time Warner Cable deal, now the DOJ/FCC have also cleared the way for that deal to close - but with conditions.

On April 12, California administrative law judge recommend approval of the deal under the conditions that 1) Charter upgrade all its California customers to high-speed, digital broadband within 30 months, 2) Charter comply with Federal open Internet access regulations, and 3) that for three years Charter not impose data caps on customers. 

Then yesterday, the DOJ filed suit and settled an suit against the parties. In the proposed final judgment that has already be agreed to by the parties the government and the combined company agree to a number of conditions:

Based on imposed conditions that will ensure a competitive video marketplace and increase broadband deployment, an order recommending that the Charter/Time Warner Cable/Bright House Networks transaction be approved has circulated to the Commissioners. As proposed, the order outlines a number of conditions in place for seven years that will directly benefit consumers by bringing and protecting competition to the video marketplace and increasing broadband deployment. If the conditions are approved by my colleagues, an additional two million customer locations will have access to a high-speed connection. At least one million of those connections will be in competition with another high-speed broadband provider in the market served, bringing innovation and new choices for consumers, and demonstrate the viability of one broadband provider overbuilding another.

In conjunction with the Department of Justice, specific FCC conditions will focus on removing unfair barriers to video competition. First, New Charter will not be permitted to charge usage based prices or impose data caps. Second, New Charter will be prohibited from charging interconnection fees, including to online video providers, which deliver large volumes of internet traffic to broadband customers. Additionally, the Department of Justice’s settlement with Charter both outlaws video programming terms that could harm OVDs and protects OVDs from retaliation– an outcome fully supported by the order I have circulated today. All three seven-year conditions will help consumers by benefitting OVD competition. The cumulative impact of these conditions will be to provide additional protection for new forms of video programming services offered over the Internet. Thus, we continue our close working relationship with the Department of Justice on this review.

Importantly, we will require an independent monitor to help ensure compliance with these and other proposed conditions. These strong measures will protect consumers, expand high-speed broadband availability, and increase competition.

While this is a big win for network neutrality advocates, it's the kind of settlement that the government typically tries to avoid in the context of antitrust regulation. Typically, the government would go for cleaner divestitures. Here, divestiture isn't in the cards, but more heavy handed regulation of the combined entity is the answer. A similar approach was used to mixed effect a few years ago in the Comcast Universal merger.  We'll see how this goes. Me? I've got Fios.



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