FCC Approves New US Broadband Giant in Charter-Time Warner Cable Merger

Public interest groups warn the deal, which will create a massive new broadband giant with more than 20 million customers in 41 states, will lead to higher prices for consumers.

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May 6 2016, 9:20pm

Cables merging. Photo: Juan Luis Martel/Flickr

The Federal Communications Commission announced on Friday that the agency has voted to approve Charter Communications' controversial mega-merger with Time Warner Cable, despite warnings from public interest groups that the debt-bloated new company will be forced to slap consumers with higher prices.

The merger will combine Charter, Time Warner Cable, and smaller rival Bright House Networks—the nation's second, third, and sixth largest cable companies, respectively—to create a massive new broadband giant with more than 20 million customers in 41 states. The deal, which is valued at a whopping $90 billion including debt, will put the new Charter and industry leader Comcast in control of nearly two-thirds of the cable market.

The FCC's vote, which was expected, comes nearly two weeks after the Justice Department gave the merger its own green light. The FCC is charged with ensuring that telecom mergers advance the public interest, while the Justice Department must ensure that such deals don't run afoul of antitrust laws.

The merger will be subject to several conditions designed to assuage the concerns of the deal's critics. The new company faces a seven-year prohibition on usage-based pricing and data caps, and over that time will not be permitted to charge companies like Netflix so-called interconnection fees to ensure smooth traffic. Perhaps most importantly, the new company will not be allowed to pressure content companies into withholding programming from online video platforms like Netflix and YouTube.

"This deal is inimical to the public interest"

Critics of the deal say the merger would further decrease competition in a national broadband market already dominated by a small handful of giant corporations that exercise effective monopoly power in many regions of the country.

Former FCC commissioner Michael Copps, who now serves as a special adviser at DC-based public interest group Common Cause, said in a phone interview that the merger's conditions are not nearly strong enough to offset what he called the deal's harmful consumer impacts.

"The job of the FCC isn't to minimize harm," Copps told Motherboard. "It's to advance the public interest and the well-being of consumers. This deal is inimical to the public interest, and it just shows you that the consolidation bazaar is still open for business at the FCC."

Craig Aaron, president and CEO of DC-based public interest group Free Press, is particularly concerned by the massive level of debt—as much as $27 billion—that Charter is taking on to finance the deal. Combined with Time Warner Cable's existing debt, the new company will emerge carrying more than $50 billion in debt, a staggering figure that Aaron says will likely be paid off through price hikes for consumers.

"Nothing in the reported conditions will lower those prices for the people these rate hikes will hit hardest: low-income households, people of color and other underserved communities," Aaron said. "Families will be forced to make hard choices about basic necessities, and getting online will be impossible for far too many."

"Americans now face the grim reality of a marketplace where Charter and Comcast have unprecedented control over our cable and internet connections," Aaron added. "Their crushing power will mean fewer choices, higher prices, no accountability and no competition. The temporary conditions attached to the merger do too little to remedy these harms."

Although the FCC did not specify how the agency's five members voted, published reports indicate that Democratic FCC commissioners Jessica Rosenworcel and Mignon Clyburn joined agency chairman Tom Wheeler, who recently circulated an order calling for the deal to be approved, in voting for the merger.

Republican Mike O'Rielly also voted in favor of the deal, but reportedly objected to several of the conditions. His GOP colleague Ajit Pai voted against the deal outright, also in protest of the conditions, which he considers to be too onerous.

"Chairman Wheeler's order isn't about competition, competition, competition; it's about regulation, regulation, regulation," a spokesperson for Pai told The Hill. "It's about imposing conditions that have nothing to do with the merits of this transaction. It's about the government micromanaging the internet economy."

Now that the Justice Department and the FCC have signed off on the merger, all that remains is for the California Public Utilities Commission to weigh in on the deal, which it is expected to do later this month.

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