Multiple Proposed Conditions Submitted in Charter/TWC/BHN

From breaking out the cost of renting a cable modem on customers' bills to making any conditions indefinite, opponents of Charter Communications buying Bright House Networks and Time Warner Cable put multiple proposed conditions before the FCC by the Thursday deadline for replies or responses to opposition. Parties argued in comments posted Friday in docket 15-149 for conditions to govern New Charter activities if the $89.1 billion pair of deals were to go through. Multiple Charter/TWC/BHN filings urged outright, unconditional opposition, often pointing to possible injury to online video distribution (OVD). "The single biggest barrier to providing video services is obtaining access to reasonably priced programming, followed by competing with other providers," NTCA said in its filing. "This merger will exacerbate both of these significant competitive issues."

A bigger Charter means a tougher competitive market for smaller multichannel video programing distributors (MVPDs), said the American Cable Association and ITTA (see here and here). Entravision Communications said in its filing it and other Latino-oriented programmers would suffer as the consolidation tilts the marketplace in the favor of large MVPDs. ACA also proposed an array of conditions that it said were "crafted to address flaws and shortcomings with the types of remedial conditions the Commission has imposed in the past, and [are] utterly essential to protect MVPD consumers and competition of MVPD services." They would include an MVPD having the right to bring a complaint comparing itself to a similarly situated other MVPD, the requirement New Charter-affiliated programmers provide requesting MVPDs with proof the offered rates and terms are nondiscriminatory compared with what's charged similarly situated distributors, and the opportunity of MVPDs to audit New Charter-affiliated programmers annually to ensure no discrimination. The FCC also should require that any bargaining agent designated by an eligible MVPD has the same protections and rights to use the nondiscriminatory access condition similar to the protections and rights that come with commercial arbitration, ACA said. New Charter-affiliated programmers also should be blocked from blacking out programming during the pendency of a nondiscriminatory access complaint, it said.

ACA also suggested changes to the FCC's "baseball-style" arbitration to make it work better for small- and mid-sized MVPDs. They include requiring that on request from an MVPD, New Charter-affiliated programmers be required to provide data that would let the MVPD figure out if the offered prices and terms "are equivalent to fair market value and to formulate an informed 'final offer' to initiate an arbitration." It also said the baseball-style process should change so New Charter-affiliated programmers submit the first final offer, which then is reviewed by the MVPD before it returns with its own final offer. And any conditions put on the Charter deals shouldn't come with expiration dates but require that New Charter apply for relief by making its case that conditions have changed enough to warrant that relief, ACA said.

Using Section 629 of the Communications Act -- on ensuring commercial availability of navigation devices -- as its legal basis, the agency should require New Charter to separately state the price of Charter-supplied cable modems on customer bills and to not subsidize that modem cost, Zoom Telephonics said in its filing. "Charter cannot seriously maintain that it offers its modems 'at no charge,'" Zoom said, saying peer companies such as BHN, Comcast, Cox and TWC separately state the price for leasing cable modem, and give discounts when customers buy their own cable modems.

Cincinnati Bell Extended Territories in its filing repeated its argument that the FCC should use the deals as an opportunity to look into "the discriminatory and harmful" pricing differentials MVPDs face in programming. The Charter/TWC/BHN deals "will directly and adversely impact those differentials and will harm Terrestrial Competitors and local competition," it said. The company also pushed for a requirement that New Charter be required to have uniform pricing and service offerings throughout each designated market area (DMA) and that Liberty-affiliated programmers be required to give terrestrial competitors the lowest rates and best non-economic terms and conditions it also offers New Charter or any other distributor for a given DMA. Liberty Broadband, chaired by John Malone, is the largest shareholder in Charter; Malone is also chairman of Liberty Media, which is a major stakeholder in cable networks Discovery and Starz. That Malone tie has become a significant part of the FCC's review of the transaction (see 1511030024).

Dish urged the FCC to deny Charter/TWC/BHN altogether, arguing there's no proof any cost savings will be passed along to the public, while the infrastructure investments it was going to make were already being planned before the merger came along, Dish said. In its filing, Dish said the Charter/BHN/TWC application is filled with holes, from its insistence that New Charter would lack any incentive to degrade online video distributor (OVD) competitors "despite substantial evidence to the contrary" and its ignoring the effect of the merger on low-income consumers to "obscuring the loss of high-paying jobs by focusing instead on the return of a minimal number of low-paying jobs to the U.S." While Charter continues to maintain that harming an OVD would make only its broadband service less attractive to consumers, "their documents tell a different story -- that [the three applicants] view OVDs as a threat to [their] video business, not as a boon to [their] broadband business," Dish said.

Public Knowledge's filing cited the incentive that Charter would have to harm competitive OVDs, the increased power it would have over programmers that would let it keep programming from those rival OVDs, and the increased clout it would wield in the set-top box market. While Charter committed to make its video content app accessible, which is further than some other MVPDs have gone, "the Commission should not be persuaded that such a vague commitment goes far enough to promote set-top box competition or the public interest," Public Knowledge said.

The Free Press filing also pointed to video market problems the deal could introduce. "The prospects for competitive entry or competitive responses are non-existent, the claimed benefits are speculative and non-merger specific," Free Press said, saying Charter "certainly cannot demonstrate that the deal would not harm the public interest in the form of higher prices needed to recoup the massive and wasteful new debt created to consummate this corporate marriage."

But free-market-oriented Institute for Policy Innovation (IPI) said Charter/TWC/BHN should go ahead "with the addition of conditions and concessions." Given the heavy competition in the video marketplace, IPI said, "fears that a post-merger Charter will wield overwhelming market power such that it will be able to quash such competition seems more based in Progressive Era general distrust of corporations than any informed understanding of the current video marketplace and the obvious current trends."

An analysis concluding that New Charter and Comcast coordinating exclusionary action was unlikely overstates the difficulty of such coordination occurring, said Marius Schwartz, a Georgetown University economist and former FCC chief economist, hired by AT&T to analyze an analysis by Fiona Scott Morton. Charter has pointed to that Yale economics professor's analysis to argue that a Comcast collusive duopoly would be "wholly implausible" (see 1511030024). That analysis overstates the difficulties Comcast and New Charter would face if they wanted to tacitly collude, Schwartz said, according to an AT&T filing. And while there has been a lack of history of such collusion against OVDs, he said, that lack "is certainly not dispositive as regards to what might happen post merger."

Incompas said it hired "expert economists" to review and analyze Charter's evidence. In the meantime, it said in its filing, Charter's interconnection policies "do not go far enough" because it can suspend interconnection for traffic growth, it can "unilaterally force peering partners to meet in new locations of Charter's choosing" and the policy commitment is "unreasonably short." While not saying such should be a condition, Incompas said interconnection locations "should be mutually agreed upon by peering parties" and its interconnection agreements should be a "more reasonable" seven years instead of Charter's norm of three. The FCC should make Charter resubmit its interconnection policy "with the changes they have committed to, as well as require them to address the remaining issues on the record," and hold New Charter to a seven-year commitment on the policy, Incompas said.

In a statement, Charter said it was "gratified by the support New Charter has received to date from programmers, diversity organizations, business leaders and members of the communities we serve. New Charter’s commitments to provide faster broadband service without data caps, modem fees or contracts, industry leading interconnection policies, and investing in customer service by returning jobs to the U.S. put the transaction squarely in the public interest."