Charter Condition Reconsideration Could Be Followed by Other Relief Asks

The order on circulation would eliminate Charter's requirement for 1 million-subscriber overbuilds, but keeps the total buildout requirement at 2 million, the FCC confirmed. The agency said the company would still have to build to the same number of locations overall but more of them could be unserved households‎, which will help close the digital divide more than the current condition. The American Cable Association, NTCA and the Competitive Enterprise Institute petitioned the FCC in June on Charter's overbuild condition (see 1606100043).

The overbuild order might suggest FCC willingness to revisit other Charter/TWC/BHN conditions like limits on interconnection fees and usage-based pricing once the agency revises net neutrality rules overall and if Charter sought it, Cowen & Co. analyst Paul Gallant wrote investors. Last month, he said the Pai administration revisiting Charter/TWC and AT&T/DirecTV conditions would be "unusual [but] plausible." Charter and AT&T didn't comment. Presumably, companies subject to transaction conditions will review them and maybe seek relief "from those that are costly and don't make sense in today's marketplace environment," Free State Foundation President Randall May emailed us Friday.

Companies like Charter and AT&T could seek relief on takeover conditions -- as AOL Time Warner successfully did in 2003 (see 0308210022) -- but it's not clear they would, said a lawyer with multichannel video programming distributor and merger experience. AT&T didn't see particularly onerous conditions in its DirecTV approval, the conditions on Comcast's buy of NBCUniversal are six years old and that company is probably more focused on hoping no one tries to extend those conditions, and Charter might not want to expend the political capital on the issue now, the lawyer said. With AT&T going through DOJ review of its Time Warner deal, now is probably not a good time to be seen trying to duck obligations, the lawyer said. The FCC on its own could reconsider an order, but such a move would probably be unprecedented, said cable lawyer Barbara Esbin of Cinnamon Mueller.

It wouldn't be shocking if Commissioner Mignon Clyburn joined Republicans Ajit Pai and Mike O'Rielly in voting for the order since it should lead to Charter expanding into more unserved areas, such as rural markets, which is a Clyburn priority, said the lawyer with MVPD and deal experience. One cable industry official familiar with the draft order also said the overbuild change could possibly get support from all three commissioners since it still requires a sizable network expansion and doesn't let Charter off the hook. The cable official also said it would be unlikely companies seek waivers on conditions because it likely wouldn't be in their interests. Clyburn didn't comment.

“Looking back, some of the conditions imposed on the Charter and ATT mergers were more like ransom than rational remedies," emailed Adonis Hoffman, chairman of the for-profit Business in the Public Interest and before that chief of staff to Clyburn. "Some were solutions in search of problems that did not exist, nor likely to exist. Those conditions requiring an inexpensive nod to disadvantaged consumers, while hard to enforce, were probably warranted and hopefully will remain.”

Under the current conditions, Charter within five years of closing on TWC/BHN must extend its broadband network offering at least 60 Mbps download speeds to at least 2 million addresses, with at least half being "outside of its footprint where any provider other than New Charter offers 25 Mbps or faster [speeds]." The FCC order also set a variety of milestone deadlines: expansion of broadband service to at least 150,000 locations within 12 months of close, with that growing to at least 400,000 by Dec. 31 of this year and ratcheting up annually from there. The Charter/TWC/BHN order also said conditions for the most part will stay in effect for seven years from close, with Charter able to petition for shorter terms on some conditions related to settlement-free interconnection, data caps and usage-based pricing after the fourth anniversary of close.