Chairman recommends that the body approve the third-largest US cable companys plan to purchase the second-largest, as well as Bright House Networks
The Federal Communications Commission (FCC) is letting the third-largest cable company in the US buy the second-largest: chairman Tom Wheeler has recommended that the body approve TV and internet distribution giant Charters plan to purchase Time Warner as well as the smaller Bright House Networks, so long as the new company abides by several conditions.
A draft approval of the agreement is being circulated among the commissioners and will likely be voted on soon. Perhaps the most immediately significant of those to consumers is that the new company will not charge usage-based prices or impose data caps on its customers for seven years.
The FCC has recently received a deluge of complaints about internet data caps as the industry continues to look for ways to increase revenue in a maturing market. According to a freedom of information act review by the Wall Street Journal, the number of complaints rose to 7,904 in the second half of 2015 from 863 in the first.
Other conditions will affect video pricing, as well: New Charter, as the combined company is called in its regulatory filings, wont be allowed to pass interconnection or peering costs back to popular websites.
That keeps New Charter from effectively taxing the popularity of high-traffic sites, especially video sites, by charging those sites more for the privilege of being carried at an average speed to the consumer. In a word, the deal keeps Charter from making Netflix pay an extra fee it would likely pass on to the consumer. Netflix has endorsed the deal, too.
The struggle for new revenue is largely a function of a shifting focus to the web within the digital media world: cable television subscriptions are on the wane and affiliate fees from TV networks themselves are less reliable sources of continuously increasing revenue. Thus, the average cost per residential user of internet connectivity has continued to rise across the three largest cable companies in the country, according to their earnings reports.
Further conditions on the merger would require that the company expand to a further two million customers and that one million of them be in an area currently served by a New Charter competitor. In a press release, Wheeler said the condition would [bring] innovation and new choices for consumers, and demonstrate the viability of one broadband provider overbuilding another.
Charter didnt object to any of the requirements: The conditions that will be imposed ensure Charters current consumer-friendly and pro-broadband businesses practices will be maintained by New Charter.
Many of the proposals mirror those suggested during last years failed acquisition of Time Warner by the largest cable company in the US, Comcast. Watchers on the sidelines from analysts to activists condemned the proposed deal as anti-consumer and suggested the lead it would give Comcast over even its closest competition (Time Warner) would be extreme.
The current deal, while it creates a much larger second-place cable operator, still does not surpass Comcast in coverage area, though it comes close: Comcast has 27.7 million customers Charter, Time Warner and Bright House together will have about 24 million. The only other national TV provider of a similar size is satellite company DirecTV, with about 26 million customers; as a condition of its recent acquisition by AT&T, it, too must build out fiber-optic connections to 12.5m people.