WASHINGTON, D.C. —­­ Yesterday, the Department of Justice approved the merger of Charter and Time Warner Cable, the sixth and third biggest ISPs in America. Today, FCC Chairman Tom Wheeler reportedly circulated a proposed order approving the transaction, which will likely be voted on sometime between the FCC’s Open Meeting on Thursday and the next meeting on May 25. The combined company will be the second largest cable company, serving 21% of wireline broadband customers (or 30% of customers with speeds greater than 25 Mbps up / 3 Mbps down) — but still have 2.5 million fewer subscribers than Comcast, the industry leader.

“Regulation by extortion has long been standard operating procedure at the FCC,” said Berin Szóka, President of TechFreedom. “The FCC has held yet another merger hostage so it could extort the companies into ‘voluntarily’ agreeing to do things the FCC couldn’t legally require by regulation. Ending this gangster tactic is perhaps the most important reform to be made at the FCC, yet it’s something Democrats have fiercely opposed including in bipartisan FCC reform legislation.”

The FCC Order reportedly imposes two key seven-year conditions.

  1. Charter may sell only unlimited data plans. Both companies had experimented with usage-based pricing above a basic data tier (a so-called “data cap”), but, under heavy pressure from the FCC and activist groups, had already abandoned the idea. TWC had offered a $5 discount for a 30 GB “cap,” while Charter had offered basic tiers of 100 GB, 250 GB, and 500 GB. Comcast currently offers a 300 GB plan, and charges $10 for each additional 50 GB, or $30-35 for unlimited data.
  2. Charter must give free interconnection to web companies like Netflix. Web companies have always paid such costs, yet Netflix has been highly successful at persuading the President and the FCC that it shouldn’t bear even these small costs, attacking Comcast for offering Netflix a deal that saved Netflix money compared to what Netflix had paid traditional transit providers.

“The DOJ recognized that this merger would benefit consumers,” continued Szóka. “This merger in no way reduced broadband or video competition but will accelerate network upgrades and improve service. Across the country, cable companies are facing stiffer competition from telcos who’ve massively boosted speeds by pushing fiber to the neighborhood, or all the way to the home. New competitors like Google Fiber are also getting into the market. Mergers like this are simply the market for corporate control at work, bringing better management to a company like TWC, which has lagged behind other companies in network upgrades, innovation and customer service. Under antitrust law, this was a simple case. But the FCC’s ‘public interest’ non-standard standard allowed the Commission once again to do whatever it wanted.”

“The merger conditions may sound pro-consumer, but they’re really reverse-Robin Hood forms of price control for broadband,” warned Szóka. “So-called ‘data caps’ are really just basic tiers. If big ISPs use them at all, they’re set so high that only a minuscule percentage of customers exceed them. Of course, those heavy users would prefer not to pay for additional data but why shouldn’t they bear more of the cost of network? Even the FCC’s 2010 Open Internet Order recognized that ‘prohibiting tiered or usage-based pricing … would force lighter end users of the network to subsidize heavier end users.’ Requiring Charter to give Netflix free interconnection means basically the same thing: those who hardly stream video will have to bear the cost of the infrastructure required to deliver it.”

“The FCC’s regulation-by-extortion will benefit the 1% of power users at the expense of the 99%,” concluded Szóka. “This is a replay of the AT&T/DirecTV deal: the two companies had offered to deploy 15-20 Mbps fixed wireless broadband to 13 million rural homes and businesses, half of which lacked any comparable option. But the FCC nixed the idea, insisting that AT&T focus on deploying 1,000 Mbps fiber-to-the-home in cities instead. Isn’t bridging the Digital Divide more important than ensuring that urban elites can binge-watch Netflix?”

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We can be reached for comment at media@techfreedom.org. See more of our work on mergers, including:

  • Our statement  opposing conditions in the TWC-Charter merger
  • Our comments to the FCC on the TWC-Charter merger
  • Our statement on the FCC’s burdensome conditions on the AT&T/DirecTV merger
  • Coalition letter urging Congress to bar the FCC from imposing merger conditions not specific to harms caused by a merger, or that the FCC could not impose by regulation

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