Charter Bid for Time Warner Cable Wins Antitrust Approvalby and
Company agrees to seven-year deal to protect online video
FCC chief also recommends approval to fellow commissioners
Charter can’t strike agreements with programmers that would make it more difficult for streaming services like Netflix Inc. to obtain content, the Justice Department said in a statement Monday. Tom Wheeler, the chairman of the Federal Communications Commission, also said he supports approval of the merger.
"Online video distributors offer consumers greater choices for video services,” said Renata Hesse, the head of the Justice Department’s antitrust division. “This merger would have threatened competition by increasing the merged company’s leverage to demand that programmers limit their licensing to these online providers."
U.S. officials are trying to protect the growing market for online video streaming and have moved to prevent cable companies from using their control over broadband to thwart distribution of content by entertainment companies over the Internet. Charter, which would become the second-largest U.S. cable provider, and No. 1 Comcast Corp. would have an effective duopoly over broadband service to homes, critics of the deal have said. Charter said it will serve less than 21 percent of the broadband market.
The enlarged Charter, which is also buying Bright House Networks LLC, would supplant Time Warner Cable as the second-largest U.S. cable operator, gaining 13 million customers in cities including New York, Los Angeles and Dallas. Charter last year said after the deals close it would have a total of 23.9 million customers in 41 states -- a figure that includes cable-TV subscribers as well as those just paying for broadband or telephone service.
Charter shares closed up 4.6 percent to $207.01 in New York. The Stamford, Connecticut-based company said it was pleased with the decisions by the Justice Department and the FCC. Time Warner Cable closed up 4 percent at $209.63.
Under the FCC’s proposed conditions, an additional 2 million customer locations will have access to a high-speed connection, according to Wheeler’s statement. At least 1 million of those will be in places with another broadband provider, showing the “viability” of such overbuilding, he said.
"These strong measures will protect consumers, expand high-speed broadband availability, and increase competition," Wheeler said.
Charter in May agreed to acquire New York-based Time Warner Cable and Bright House, a cable company based in Syracuse, New York, for $55.1 billion and $10.4 billion, respectively. The deal came together after Comcast’s plan to buy Time Warner Cable collapsed last year after opposition from the Justice Department and the FCC over Comcast’s nationwide control of broadband.
The Justice Department is seeking court approval of the settlement clearing the acquisitions. The deal still needs approval from California regulators. At the FCC, Wheeler sent a recommendation for approval to his fellow commissioners at the agency, where he leads the Democratic majority.
FCC Commissioner Michael O’Rielly, one of two Republicans on the five-member agency, said Wheeler’s recommendation appears to pursue policies unrelated to the merger. “I will carefully consider” the proposal before voting, O’Rielly said in an e-mailed statement.
The Justice Department said that without the settlement, Charter may wish to keep programmers from selling shows to online video sites that draw viewers from cable subscription packages. Time Warner Cable has been an "industry leader" in seeking such restrictions, the government said, and with more subscribers, Charter would have more to gain from imposing contractual provisions that make online video services less competitive.
Under the seven-year settlement, Charter is prohibited from entering into or enforcing any agreement with a programmer that forbids or limits the provision of content to streaming sites. Charter also can’t retaliate against programmers for licensing to those services.
Wheeler said Charter can’t impose caps on data usage that might discourage viewing of Internet video. The agreement, which imposes a monitor to ensure compliance by Charter, also prohibits the company from charging fees for online video providers to connect to its network, Wheeler said. That was a pledge made earlier by Charter that led top Web video provider Netflix to support the merger.
The case is U.S. v. Charter Communications Inc., 16-00759, U.S. District Court for the District of Columbia.