Coverage: FCC chairman, Justice Department sign off on Charter-Time Warner Cable deal

The Federal Communications Commission, along with the Justice Department, announced Monday that it will approve Charter Communications Inc.’s acquisition of Time Warner Cable Inc. as long as the newly formed company agrees to several strict restrictions.

Shalini Ramachandran and John D. McKinnon of The Wall Street Journal had the day’s news:

Federal regulators are poised to approve Charter Communications Inc.’s $55 billion acquisition of Time Warner Cable Inc., but they will force the merged company to live up to stringent obligations that don’t apply to its bigger rivals.

Under a deal with the U.S. Justice Department and Federal Communications Commission, Charter agreed to abandon for seven years several common industry practices that the government feared could threaten the growth of rival online video providers such as Netflix Inc. and Hulu. The company agreed not to impose data caps or charge broadband Internet customers based on data usage, practices that have riled customers.

Charter will also be required to build out its broadband access to two million homes, which would compel it to compete against other cable companies in some markets, according to a person familiar with the matter. That would be a significant move for an industry that has divvied itself up geographically.

The conditions, which were outlined by the Justice Department and FCC on Monday, shackle the combined company from threatening the emerging streaming video economy at a time when consumers are increasingly dependent on broadband access in their everyday lives for services and entertainment. Yet, many homes have limited choice in Internet providers, leaving them at the mercy of local companies’ pricing and speeds.

Gene Kimmelman, chief executive of consumer interest group Public Knowledge, said the conditions were “a clear signal to the content industry and entertainment companies that the enforcement agencies are giving them a green light to grow online video and experiment as a direct competitor to cable, and they will prevent cable from interfering.”

Cecilia Kang and Emily Steel of The New York Times included comments from consumer groups who are fearful about what will happen once these companies receive full approval:

Others criticized the F.C.C.’s conditions of approval as overreaching. “At first blush, it appears that the commission may have operated well outside the four corners of the merger application to pursue unrelated matters and policies,” Michael O’Rielly, a Republican commissioner for the agency, said in a statement.

Some consumer advocates also opposed any approval of the deals, fearing that a combined entity would eliminate competition and increase prices for customers.

“Creating broadband monopoly markets raises consumer costs, kills competition, and points a gun at the heart of the news and information that democracy depends upon,” Michael Copps, a former Democratic member of the F.C.C. and a special adviser to the Common Cause public interest group, wrote in an email. “F.C.C. approval of this unnecessary merger would be an abandonment of its public interest responsibilities.”

The F.C.C. has the broad mandate of protecting the public interest, which gives it the ability to create conditions that may seem unrelated to antitrust reviews but could make a deal good for consumers, said Gene Kimmelman, a former antitrust official at the Justice Department who is now president of Public Knowledge, a nonprofit media advocacy group.

“Offering to extend their broadband footprint and offer subsided broadband to some low income customers furthers existing F.C.C. policy efforts and serves the public interest,” he said.

Meg James of the Los Angeles Times explained how the cable industry is shifting:

Pay-TV operators are bulking up to better withstand shifting consumer behavior.

Last summer, AT&T acquired DirecTV, based in El Segundo, in a $49-billion merger that catapulted the phone giant into becoming the nation’s largest pay-TV provider, with 26 million customers.

Frontier Communications completed its $10.5-billion purchase of Verizon’s wire line, broadband Internet and FiOS TV businesses in California, Texas and Florida and took over Verizon’s operations on April 1. That has led to many consumer complaints about dropped service and other problems.

The Charter-Time Warner Cable-Bright House deal was announced about four weeks after Comcast Corp.’s ambitious bid for Time Warner Cable collapsed under government scrutiny. Federal regulators signaled that they would block the Comcast-Time Warner Cable combination because they did not want one company to control so many broadband Internet connections.

Charter will dramatically expand its geographic service area and has said it will achieve $800 million in synergies annually from the deal. Los Angeles is viewed as an important market, which Charter will look to dominate by consolidating its operations with the much larger Time Warner Cable.