The Federal Communications Commission has voted to eliminate a merger requirement that would have forced Charter Communications to expand its network into the territory of other high-speed broadband providers.
The FCC’s approval of the Charter/Time Warner Cable merger last year required Charter to deploy broadband with download speeds of 60Mbps to at least two million residential and small business locations, of which at least one million would have to be in areas served by at least one other high-speed provider. The FCC’s then-Democratic leadership said that “overbuilding” in areas served by only one ISP would bring lower prices and greater choice to consumers.
But the FCC’s new Republican leadership has now eliminated the overbuild portion of the merger condition so that Charter can instead provide two million new connections in areas that don’t already have high-speed service. Reuters reported the move today, and an FCC spokesperson confirmed it to. The full order has not yet been released.
Charter will still have to build out to just as many potential new customers. “The condition was changed to reach more unserved locations—a total of two million,” the FCC spokesperson said. “The original condition required one million unserved and one million overbuild.”
The overbuilding requirement was adopted under former Chairman Tom Wheeler, who expressed frustration about cable companies’ unwillingness to compete against each other. But lobby groups representing small ISPs asked the FCC to eliminate the overbuild requirement, arguing that small providers would be driven out of business if forced to compete against the nation’s second largest cable company. The FCC majority is now held by Republican Chairman Ajit Pai and Republican Commissioner Michael O’Rielly, who objected to the overbuild requirement when the merger was approved.
“Unless Charter chooses to exclusively overbuild areas served by Comcast, which I find highly unlikely, Charter’s increased broadband market share will come at the expense of smaller competitors,” Pai argued at the time of the merger. Pai also objected to the overall requirement of building to two million new customer locations, saying the number had no “rational connection with the merits of this transaction or public policy.”
When a merger involves FCC license transfers, the commission is required to review the deal to determine whether it serves the public interest. The FCC can block mergers on public interest grounds or impose conditions designed to offset any harms resulting from the transaction. Charter is required to finish the buildout to two million new locations by May 2021.
UPDATE: After this article was published, Pai released a statement calling the FCC’s decision a step toward “making sure that any American who wants high-speed Internet access is able to get it.”
“Following our decision today, Charter Communications is still obligated to build out to two million new locations. The difference now is that the beneficiaries will be consumers currently on the wrong side of the digital divide,” Pai said.
The full order and statements from commissioners are also now available. Democratic Commissioner Mignon Clyburn voted with the Republican majority, suggesting that the order was a partial victory because it “preserv[ed]” the requirement to build to two million locations instead of eliminating it entirely. She agreed that the competition requirement might spur Charter to “overbuild where the weakest potential competition currently exists,” eventually putting smaller ISPs out of business. But she also argued that the FCC should have required a buildout to more than two million locations.
The lobby groups that asked the FCC to eliminate the overbuild condition praised the decision. “In all likelihood, these overbuilds would have occurred where smaller operators are serving areas that might not support two providers,” the American Cable Association said. The threat of overbuilding “undermined these operators’ ability to make investments that would benefit their existing subscribers or expand their networks to reach unserved households,” the group said.
Disclosure: The Advance/Newhouse Partnership, which owns about 13 percent of Charter, is part of Advance Publications. Advance Publications owns Condé Nast, which ownsTechnica.