Charter's Free Peering Policy Likely Greases Path to BHN/TWC Approval

Declaring itself interconnection fee-free helps Charter Communications' bid for regulatory approval to buy Bright House Networks and Time Warner Cable, said industry officials in interviews this week. By how much remains to be seen, they said. "I think it makes it a much easier sell," Cogent Communications CEO Dave Schaeffer said. "Anything they can show that they are willing to promote Internet growth ... will quell a lot of the concerns regulators had."

Charter pre-emptively swept away from its deal what had been a major sticking point in Comcast's now-aborted bid for TWC when it reaffirmed its own settlement-free interconnection policy Wednesday and announced plans to extend that to BHN and TWC (see 1507150038). Such free peering became a rallying point for Netflix and various trade associations that vociferously opposed Comcast/TWC. "It's a completely different political dynamic," a communications industry attorney said. While Charter has other issues to be resolved, the interconnection move "clears a big hurdle," Comptel CEO Chip Pickering said.

While such interconnection fees are not big revenue generators for cable companies, the worry is they would escalate rapidly over time, like retransmission consent agreement costs, Netflix CEO Reed Hastings said Wednesday. "We're really excited about it and what it does is it frees us up from worrying about getting taxed by an ISP," Hastings said, adding that he hopes a similar condition would be imposed on the AT&T/DirecTV proposed deal and that Comcast also moves to settlement-free. Cogent similarly hopes "this becomes the norm going forward," Schaeffer said. "I really think [free peering] is embedded in the open Internet order, though the order was vague on interconnection. [Charter's policy] puts pressure on the others in the industry to embrace change rather than fight change." Charter "set an example for the industry by respecting the tradition among Internet networks of interconnecting without the exchange of payments and augmenting connections as necessary," Cogent said in a filing posted Thursday in docket 15-149.

When asked about its own peering policy plans, Cox Communications Thursday said only that its hundreds of peering agreements with various companies, including Netflix, "are proprietary and confidential, and while we are not at liberty to go into any detail, they are all designed to deliver a superior experience with our products and services to our customers." The American Cable Association declined to comment. Comcast had no comment by our deadline. "Whether this means [the practice by] those few that have been trying to charge ends, I think it is a little too early" to say, said a communications lawyer who has represented a client that opposed Comcast/TWC. "There is momentum for that." The FCC should ask AT&T about making the same interconnection pledge, Comptel said Wednesday. The fall of the Comcast deal, interconnection agreements being reached voluntarily between companies and now enforceable commitments in a major transaction "will only make it more difficult for industry practices to go in the wrong direction," Pickering said. With one key standard of the net neutrality order being reasonableness, a large ISP with free peering makes another charging for interconnection "more easily defined as unreasonable," he said.

Charter's interconnection policy "kicks the can down the road" for dealing with the costs of broadband bandwidth buildout, said Doug Brake, telecom policy analyst with the Information Technology and Innovation Foundation. "The real issue [is] there's so much dancing around, we have to find a way to fairly allocate costs to a shift to over-the-top video," he said. "Who is going to be paying for the continued buildout?" While Netflix's backing helps Charter/BHN/TWC deal, it's not necessarily a given that other ISPs follow suit, Brake said. Charter has a fraction of the broadband subscribers Comcast does, making it "unsurprising that they have a different peering policy," he said. "It is also unsurprising they would be willing to eat the cost of delivering Netflix traffic, spreading those costs over all their subscribers, if it means a better shot at gaining approval to substantially grow their business."