With the hours running out on the Republican-controlled Federal Communications Commission, Charter Communications withdrew its petition that the commission end two conditions on the company’s merger with Time Warner Cable and Bright House Networks.

That petition was one of the issues that appeared to be left hanging as FCC chairman Ajit Pai’s tenure drew to a close. He exited on Jan. 20, with President Joe Biden naming Democratic commissioner Jessica Rosenworcel as acting chairwoman the next day. 

Pai was never a fan of merger stipulations, which he sees as attempts to regulate via condition.

“At this time, the bureau will no longer consider filings specific to this petition,” said the Wireline Competition Bureau, “but the docket will remain open for additional filings, such as those required by Charter or the Independent Compliance Officer.”

Charter has been looking to get out from under the “no charging for interconnection” and “no usage-based/data caps” pricing conditions. A court threw out the first condition, so that request was essentially moot, but the second is still in force. Those conditions were set to expire in May 2023 but Charter wanted them to end in May 2021.

FCC approval could have had a major impact on Charter’s over-the-top video strategy. In imposing the conditions, the agency said they were to ensure Charter could not “hamper or prevent its current and future online video rivals from expanding, becoming more competitive, or starting up in the first place.” Charter had suggested those OTT rivals hardly need protection from the company given that rival internet service providers have not had similar conditions and the over-the-top marketplace is flourishing.

ALSO READ: Charter Free to Charge Streaming Video Companies Interconnect Fees

Charter likely saw the handwriting on the wall with the upcoming change in administrations. FCC Democrats now in control were fans of the merger conditions.

One of those commissioners, Rosenworcel, now acting chairwoman, voted against deregulating internet providers and has called for the return of rules against blocking, throttling and paid prioritization, as has fellow Democratic commissioner Geoffrey Starks. She and Starks have also voted against eliminating broadcast regulations.

Until Democrats can confirm a new fellow party member to fill the seat of the exiting Republican chair Pai, the commission will be at a 2-2 political tie, meaning noncontroversial items are likely on the docket at the outset.

Rosenworcel could become permanent chair down the road, though Biden could have simply designated her chair had that been the plan. With the Senate controlled by Democrats, it will be easier for Biden to pick someone else, who might still need Senate confirmation. Rosenworcel, though, has plenty of fans inside and outside the commission, particularly on Capitol Hill. 

An unlikely group of stakeholders has coalesced to tell the FCC that its additional 14 days for comment on Charter's petition to get get out from under two Time Warner Cable merger conditions doesn't cut it.

The comment window had been July 22 to Aug. 6, but the FCC's Wireline Competition Bureau said Monday (Aug. 18) it was extending the deadline until Sept. 2 "to ensure that the Bureau has a full record upon which to evaluate the effects of the conditions."

But in a letter to the FCC Wednesday (Aug. 19), Entertainment Studios Networks, Free Press, INCOMPAS, Newsmax Media, Inc., Open Technology Institute, Public Knowledge, and Sports Fans Coalition said that the FCC should extend that 14 days to 30. "Only by doing so can the Commission ensure that all interested parties have had a full and fair opportunity to address the issues so that the Commission has a sufficient record on which to render its decision. This approach is made more imperative given the procedural irregularities and other concerns that have already arisen in this proceeding," they said.

The procedural irregularities is a reference to the timing of the FCC's request for comment. (Newsmax Media has told the FCC its request for comment only two days after Charter sought an early termination of some Time Warner Cable merger deal conditions jumped the gun and created the appearance of favoritism toward the company.)

"The Commenters appreciate the fact that the Bureau took a step toward ameliorating its prejudicial action in prematurely putting the Charter Petition out for comment before the date specified by the Commission," they continued. "However, a fourteen-day comment period is not consistent with the full comment cycle anticipated in the Commission’s order, and is patently insufficient under the current circumstances. As the Bureau recognizes, the D.C. Circuit recently issued an order on review of several challenges to the conditions imposed on Charter that may bear directly on this proceeding."

The U.S. Court of Appeals for the D.C. Circuit last week threw out two of the Charter-Time Warner Cable broadband-related conditions, the one "prohibiting Charter from charging programming suppliers for access to its broadband subs" and the one "requiring New Charter to provide steeply discounted broadband service to needy subscribers," with the court saying it essentially had no choice after the FCC failed to defend them.

Charter is looking to get out from under the "no charging for interconnection" and "no usage-based pricing" conditions.

The FCC, in imposing all the conditions, said they were to ensure Charter could not “hamper or prevent its current and future online video rivals from expanding, becoming more competitive, or starting up in the first place.”

Charter has suggested those rivals hardly need protection from the company given that its rival internet service providers have not had similar conditions and the over-the-top marketplace has flourished.

The Federal Communications Commission has extended the comment deadline on Charter Communications’ petition to exit two Time Warner Cable merger conditions early.

The deadline had been July 22-Aug. 6, but the FCC's Wireline Competition Bureau said it was extending the deadline until Sept. 2 "to ensure that the Bureau has a full record upon which to evaluate the effects of the conditions."

It also wants to give stakeholders a chance to weigh in on the Aug. 14 decision by the U.S. Court of Appeals for the D.C. Circuit that also deals with ending Charter deal conditions.

Charter is looking to get out from under the "no charging for interconnection" and "no usage-based pricing conditions," The court threw out the first, but said the second was still in force.

Those conditions are set to expire in May 2023 but Charter wants them to end in May 2021.

The FCC, in imposing the conditions, said they were to ensure Charter could not “hamper or prevent its current and future online video rivals from expanding, becoming more competitive, or starting up in the first place.” 

Charter has suggested those rivals hardly need protection from the company given that its rival internet service providers have not had similar conditions and the over-the-top marketplace has flourished. 

A federal appeals court has thrown out two of the Charter/Time Warner Cable broadband-related conditions, the ones "prohibiting Charter from charging programming suppliers for access to its broadband subs" — no charging for interconnects — and the one "requiring New Charter to provide steeply discounted broadband service to needy subscribers," with the court saying it essentially had no choice after the FCC failed to defend them. 

Three customers of the combined Charter/Time Warner Cable/Newhouse, represented by the Competitive Enterprise Institute, had filed suit saying the conditions were responsible for their cable bills going up and wanted the conditions set aside due to that "injury."

Because the FCC did not defend the conditions, imposed by the Tom Wheeler FCC, the court vacated both, but made clear that the other conditions — usage-based pricing and buildout conditions— remained in force. The petitioners had challenged them as well. Charter separately is looking to get out from under the usage-based pricing conditions.  

A three judge-panel of the U.S. Court of Appeals for the D.C. Circuit said the FCC appeared to have imposed irrelevant and nongermane conditions, but did not have to get to those issues. 

"We need not resolve these questions, however, for there is a simpler ground of decision," the court said. "The lawfulness of the interconnection and discounted-services conditions are properly before us, yet the FCC declined to defend them on the merits. The agency’s only explanation for doing so was its view that we cannot reach the merits. Having lost on that question, the FCC has no further line of defense. “Because the Commission chose not to argue the merits in the alternative, we have no choice but to vacate the challenged portions of the order.” 

The decision was two to one, with judge David Sentelle dissenting. Sentelle did not weigh in on the merits, but dissented because he thought the court should not be weighing in at all. "[T]here is insufficient evidence to show that the injury to the consumer appellants would be redressed if this court were to order the vacation of the conditions imposed by the government on New Charter," he wrote. "It may be that New Charter would take actions beneficial to the appellants, but it is not the case that this court can redress their injuries."

Free State Foundation president Randolph May focused on the court's opining on non-germane conditions.  

“Aside from the court’s decision regarding specific merger conditions, I was very pleased to see the court affirm what I’ve been preaching for two decades — the so-called ‘voluntary’ conditions that merger proponents offer up in order to get the FCC to act on their pending merger applications are a not-so-subtle form of unseemly regulatory exhortation," he said. "Hopefully, other courts will build on the foundation the opinion has laid for challenging these 'voluntary' commitments often having nothing to do with the specific merger at hand.” 

One reason the FCC did not challenge the petitioners on the conditions is that chairman Ajit Pai has long criticized "regulation by deal condition" and even voted against the Charter/TWC merger not because he opposed the merger, but what he saw as overregulation (or even extortion) by non-merger-specific condition. 

In his statement on the Charter/TWC deal, he said the FCC had “turned the transaction into a vehicle for advancing its ambitious agenda to micromanage the internet economy.”  

In 2017, Pai led the FCC vote to modify the Charter/TWC deal by removing the condition that Charter overbuild a million internet access customers who could already get high-speed access from another provider.

The Justice Department and broadband/telecom company CenturyLink have settled allegations that the company violated the conditions of its acquisition of Level 3. 

Specifically, DOJ said CenturyLink had promised not to solicit customers that had switched to assets divested as part of the deal. DOJ said that on more than 70 occasions CenturyLink tried to woo back customers who had chosen to switch to the divestiture buyer in Boise City-Nampa, Idaho. 

Related: CenturyLink Extends Connectivity Pledge 

"When a defendant violates the terms of a settlement decree, it must be held accountable to its obligations to the department and the American consumer,” said Assistant Attorney General Makan Delrahim, who heads the antitrust division. “Today’s motion to amend the Final Judgment ensures that consumers get the benefit of competition otherwise lost by CenturyLink’s acquisition of Level 3 Communications. I also commend CenturyLink for its cooperation in resolving the department’s concerns.” 

CenturyLink did not dispute the allegations and agreed to: 

1. "extend the non-solicitation period by two years for the Boise MSA; 

2. "the appointment of an independent monitoring trustee; and

3. "pay the United States to defray the costs of the department’s investigation of CenturyLink’s violations of the court order."

DOJ has submitted that amended settlement to the U.S. District Court for the District of Columbia, which will have to sign off on the settlement for it to become official. 

CenturyLink also agreed to abide by four new provisions in antitrust settlements that make them easier for the Antitrust Division to enforce.

Roku has asked the FCC not to grant Charter Communications' request to end early deal terms tied to the cable company’s purchases of Time Warner Cable and Bright House Networks back in 2016.

Also read: Charter Seeking to Charge Video Companies for Interconnection

“In-home broadband internet access service is fundamental to full participation in all spheres of our digital world, and until there is effective competition throughout the country for terrestrial broadband internet access services, the Commission should remain vigilant against any efforts by internet service providers (“ISPs”) to weaken constraints on their power to implement anti-competitive measures,” Roku said in comments filed to the FCC Aug. 6.

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In June, Charter formally requested that conditions tied to its mega-merger, set to last seven years beyond a 2016 start date, be ended two years early.

Charter is seeking relief from a regulatory condition that requires it to offer to interconnect its IP network to any qualifying entity free of charge and on standardized terms.

Charter is also seeking restrictions on its ability to impose data caps and usage-based pricing on its customers.

With these conditions in place, Charter was able to gain endorsement for its mergers from the biggest online video company of them all, Netflix.

In its June FCC filings, Charter conceded that the agency's reasoning for the conditions was based on protecting the “OVD” (online video distributor) marketplace. But that now robust market no longer needs that protection, Charter said.

“The OVD marketplace has flourished in the four years since the merger closed,” Charter said. “In fact, far from seeking to harm OVDs, Charter, like many other established broadband providers, is actually actively working to increase its subscribers’ access to online video services. Eliminating these Conditions at the end of five years will therefore advance, rather than thwart the competitive gains that have been made, giving Charter the flexibility it needs to best meet the data usage needs of all of its subscribers and to configure its network to deliver data in the most efficient way possible.”

Poppycock!

Roku said in its comments that in basing its request on the current flourishing state of the streaming video marketplace, Charter misconstrues the original intent of the FCC’s conditions.

“That claim is simply not correct,” Roku said. “The underlying rationale for the conditions was not the state of the OVD marketplace. Rather, the rationale the Commission cited in adopting the conditions was twofold: 1) the incentives of Charter post-merger to act anti-competitively toward OVDs, and 2) the lack of competition in the provision of terrestrial broadband that otherwise would constrain Charter from acting anti-competitively. The Charter petition addresses neither of those concerns."

Charter Communications chairman and CEO Tom Rutledge set some cable hearts back on their regular beats Thursday, claiming that the third largest MVPD in the country has no intention of overbuilding cable operators as part of the conditions of its just-completed merger with Time Warner Cable and Bright House Networks, but instead will focus on telco broadband providers.

Among the conditions imposed by the Federal Communications Commission regarding its purchases of TWC and Bright House, Charter agreed to overbuild 2 million homes over a period of five years in markets outside its footprint.

The American Cable Association, representing smaller cable providers, had objected to that requirement, saying it potentially put small cable companies at risk of being "drive(n) out of the market" by the more economically powerful Charter. 

At the MoffettNathanson Media & Communications Summit, though, Rutledge said the plan is to focus on telephone companies in its overbuilding strategy, not cable companies.

“When I talked to the FCC, I said I can’t overbuild another cable company, because then I could never buy it, because you always block those,” Rutledge said at the MoffettNathanson event. “It’s really about overbuilding telephone companies.”

Rutledge also told analysts the same in briefings at the INTX show in Boston earlier this week.

Rutledge said the conditions require that Charter build 2 million new passings over a period of five years, with 1 million of those passings against another high-speed Internet provider.

“If someone builds a housing development with 20,000 homes in it, there is a phone company in there, usually it’s AT&T, or Frontier in some markets,” Rutledge said. “Usually that plant is in the ground in the same trenches as yours, so you’re in a competitive environment.”

He added that the conditions also allow Charter to purchase up to 250,000 cable customers in the area that aren’t interconnected, which would be further incentive not to overbuild a cable system.

Asked by interviewer MoffettNathanson principal and senior analyst Craig Moffett that if other cable operators who had expressed concern over that particular provision may have misread the condition, Rutledge said overbuilding a cable operator would be business suicide.

“Why would we go where we could get killed,” Rutledge said.

Rutledge also provided some insight into the operator’s integration plans for TWC and Bright House, adding that Charter plans to hire an additional 20,000 people over the next few years. That is in addition to the workers being absorbed through Time Warner Cable and Bright House, something the Charter CEO has said in the past.  Time Warner Cable had about 55,000 employees when the Charter merger was announced in May 2015 and Charter had about 24,000 employees at the end of that same year. Rutledge added that it should take about two years to fully integrate the companies.