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.
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