WASHINGTON — Charter Communications’s third-party cable modem practices are getting a thorough vetting at the Federal Communications Commission, and could result in a condition on the Comcast-Time Warner Cable merger that would apply rules governing cable set-top boxes to modems.
Executives at cable-modem maker Zoom Telephonics met with no fewer than 20 members of the transaction team last month to hammer Charter over its third-party modem certification standards.
While the FCC is mostly concentrated on the Comcast portion of the proposed Time Warner Cable merger, it also includes system swaps and spinoffs to Charter. The modem issue appears to be the Charter-related part of the deal getting most of the agency’s attention.
Zoom has filed a petition to deny the deal, but said that if it is approved, the FCC should condition that approval on Charter stating an unsubsidized price for leasing cable modems and not “unreasonably” refusing to allow “nonharmful” modems to attach to its network.
Since 2012, Charter has bundled the price of leasing its modems into the overall price of service, which Zoom has said gives customers no financial incentive to purchase their own devices.
Charter said that not charging a separate modem fee is good for subscribers. The Stamford, Conn.-based MSO said its decision to bundle the price of the modem, as well as taxes and Universal Service fees, was a way to give its customers “greater transparency about the services they are paying for” and to reduce “bill shock.” The bundled price is still lower for a higher-speed service than its competitors offer, Charter said, even with the lease fee.
Charter has a list of modems it argues meet the requirements for the functionality needed on its systems, and that modems that don’t meet that standard — and pass Charter’s testing — could harm the network and prompt customer complaints to the ISP. Zoom has argued that the standard is unreasonably high and meant to discourage third-party modems, such as its devices.
Zoom has argued that Charter is required by law to provide a separate price for its leased boxes, while Charter claims that rule only applies to navigation devices for basic-tier cable video service and not to cable modems.
Attorney Andrew Schwartzman, who is representing Zoom, say the law and FCC policy are clear. “Consumers are entitled to attach non-harmful equipment to any network,” he said. “Similarly, cable operators are prohibited from bundling the price of leasing cable modems with the price of Internet service.”
He also said that if the FCC does not “successfully resolve” the modem issue in the Comcast/TWC review, Zoom will likely oppose Charter’s just-announced proposal to buy Bright House Networks as well (see cover story).
In a filing late last week, Charter told the FCC it had reached out to Zoom to get the company to submit its modem to cable operator’s certification process. The MSO said that Zoom informed it that without Charter breaking out the price of modem rental, it did not wish to engage.
Jeff Baumgartner contributed to this report.
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