The deal to create another monster US cable operator has been given the go ahead by the FCC and the Justice Department, which means Charter will now merge with Time Warner Cable and Bright House Networks.
Faultline successfully predicted events from the outset of this deal over two years ago, anticipating Comcast coming in with a successful counter-bid that would fail regulatory scrutiny, and Charter reiterating its own deal at a higher value and clearing regulatory hurdles.
The key to this deal, as it has been to many around the globe, has been the way conditions were placed on Charter which would protect content players and OTT video generally and the public. Perhaps the surprise of the package is the way that the FCC has insisted that for at least 7 years Charter may not put a data cap on its broadband customers. Charter is also required to build out broadband access to a further 2 million US residents, where at least 1 million are in competition with other service providers. We see this as a condition similar to the one placed on AT&T when it bought DirecTV, to ensure that 12.5 million of its subscribers had access to broadband at speeds over 45 Mbps.
The chief architects of this deal, Charter CEO Tom Rutledge and investor John Malone, will have no problems agreeing to resume broadband build out, something that Malone has been a vocal champion of during the past few years and has embarked upon in Europe at Liberty Global.
Charter must not employ usage-based broadband pricing or impose data caps, or charge interconnection fees, like those charged by Comcast, AT&T and Verizon to Netflix. The Department of Justice’s settlement with Charter outlaws any video programming terms that might harm online video providers or limits the proliferation of online video services.
“The cumulative impact of these conditions will be to provide additional protection for new forms of video programming services offered over the Internet,” FCC chairman Tom Wheeler said in his statement on the proposal, which has gone to the full FCC for voting, which we view as almost a formality.
In an immediate response to this set of conditions, Comcast issued a statement saying that it was going to raise its broadband cps from 300 GB per month to 1 TB.
The FCC is planning to propose an independent monitor to ensure compliance with the proposed conditions, something that has been done in Europe in the past, but to our knowledge never in a technology settlement in the US.