3 Things Charter Promises in Its Time Warner Cable Deal

Few consumer groups were happy last year when Charter Communications announced its intention to acquire Time Warner Cable, especially since it was also in the process of gobbling up smaller Bright House Networks.

The combined deal now has the approval of both the chairman of the Federal Communications Commission and the Department of Justice. If it goes through, the merger will create the country's second-largest broadband provider, and its third-largest pay TV company.

The deal still needs the approval of the four other FCC commissioners, as well as the California Public Utilities Commission, which is scheduled to vote next month.

As we wrote back in January, critics of the merger worry that the combined company could stifle innovation, thwart new competition, and raise rates for consumers. Charter and Time Warner Cable are typically among the lowest-ranked companies for customer service in Consumer Reports' annual surveys, and there seems to be little reason to believe that situation will improve if the deal goes through.

However, to gain regulatory approval, Charter has agreed to a number of conditions that would remain in effect for seven years, though it could petition to have them relaxed after five years. Here are the details.

1. No Data Caps

Charter has agreed not to impose data caps, or pricing based on usage rather than speed. The company doesn't have data caps, but a number of companies are testing them.

Why this matters: Consumers can rack up big bills when they stream a lot of video. Protection from data caps can keep bills in check as more of us turn to the Internet for entertainment, especially streaming video.

2. High-Speed Broadband Rollout

Charter is agreeing to expand high-speed broadband service to 2 million households that don't have it. The company also promises to provide low-cost Internet service to more than a half-million low-income homes. According to FCC Chairman Tom Wheeler, at least 1 million of those connections will be in markets where there's already an Internet provider, which should spur competition.

Why this matters: Access to decent Internet speed is increasingly important for daily life, and the lack of it can disenfranchise lower-income households. The new arrangement could help drive down broadband prices in areas where consumers have little choice among providers.

3. No Interconnection Fees

Under the terms of the deal, Charter is prohibited from collecting interconnection fees, which means it can't charge Internet content providers, such as Netflix, extra for connecting them to customers. Additionally, Charter can't sign deals with programmers that would inhibit online video distributors, such as Hulu or Netflix.

Why it matters: These prohibitions are meant to protect the growing market for new video services. It also helps established streaming video services such as Hulu and Netflix by prohibiting Charter from striking deals that make it harder for those companies to get content. Previously, Charter pledged to support free interconnections, at least until the end of 2018.

Need for Enforcement

With the deal now apparently all but done, Consumer Reports and other consumer groups are hoping that the regulatory agencies that have given their approval will monitor Charter's actions and enforce the conditions it has agreed to.

“Since day one, we've been very skeptical of this deal and the power it could give one company to become a cable and broadband giant,” said George Slover, senior policy counsel for Consumers Union, the policy and action arm of Consumer Reports. “History has shown us how powerful companies look for every angle to avoid or weaken the conditions imposed on their mergers, so the government is going to have to back up these tough conditions with tough enforcement.”

In his statement supporting the deal, the FCC's Wheeler appeared willing to back up the endorsement with some regulatory teeth.

"Importantly, we will require an independent monitor to help ensure compliance with these and other proposed conditions," he said. "These strong measures will protect consumers, expand high-speed broadband availability, and increase competition."

We'll be watching to see whether consumers are helped or harmed by the merger.

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