Charter Talking Buildout Plans With FCC, Seemingly as Part of Condition Discussions

Charter executives including Chief Financial Officer Christopher Winfrey, plus Michael Katz, director-Center for Telecommunications and Digital Convergence at the University of California-Berkeley, told FCC staffers last week how synergies from the $89.1 billion deals will lead to New Charter's building more residential line extensions and doing quicker upgrades in the four subsequent years after the close than the companies would have done individually, Charter said in an FCC ex parte filing in docket 15-149 Tuesday. In addition to lawyers representing BHN and TWC or their owners, Charter sent ex-FCC officials who work for that company in government affairs: Executive Vice President Catherine Bohigian and Senior Vice President Alex Hoehn-Saric.

At the Charter meeting were such FCC staffers as Media Bureau Chief William Lake and General Counsel Jonathan Sallet. He has been in a number of ex parte meetings in recent weeks on Charter/TWC/BHN (see 1602120046, 1602110045 and 1602050056). That indicates a decision is likely soon, since his input would become more important as that decision gets closer, one lawyer with deal review experience at the FCC and one cable lawyer told us last week. When Sallet became more hands-on in open Internet proceedings, that also indicated that the proceeding was nearing an end, the cable lawyer said.

The size of effort FCC staff is investing in ex parte talks "suggests the odds of out-right rejection are low," Jonathan Chaplin, analyst at New Street Research, wrote investors Tuesday. It would be unlikely to see Charter/TWC/BHN go to a hearing before an administrative law judge, especially because the arguments against it seemingly haven't gained strong traction, pointing to a strong likelihood of the deals heading toward a conclusion, the cable lawyer said.

Not everyone agrees. "I wouldn't read too much into the FCC staff meeting attendance," Public Knowledge Senior Staff Attorney John Bergmayer told us in an email. "This is a high-profile issue, and Charter itself has proposed various conditions, so naturally its proposals are under discussion." Free Press Policy Director Matt Wood said the fact Sallet "is a quarterback [on the deals] isn't surprising" and points more to how the review crosses multiple bureaus' lines than that the sides are getting close to the end zone.

Charter/TWC/BHN challengers aren't going quietly. A variety of public interest groups -- all of which had been coordinating under the No More Mergers banner -- submitted 300,000 signatures to the FCC Thursday in opposition to the deal (see here, here, here, here and here). The online petition warned of New Charter becoming "a cable behemoth that's nearly as big as Comcast -- resulting in higher prices and worse service for everyone." In a statement, Charter said, “It shouldn’t be surprising that advocacy organizations dedicated to opposing all mergers have been able to secure form letters from their online supporters, who also oppose all mergers. Charter is a different kind of cable company. That’s why we offer faster broadband at a better value than our competitors, we are committed to an open internet, and we don't have usage fees or data caps that penalize customers for using data intensive apps like streaming a lot of online video. Because of Charter's consumer and broadband friendly practices, commitment to independent and diverse programming, plan to expand access to high speed broadband by low income families and seniors, we have strong support from leading Internet companies like Netflix, programmers including TV One, Fuse Media, RFD-TV and The Blaze and leading national civic organizations such as National Urban League, National Action Network and LULAC -- all of whom agree that this transaction is in the public interest. Over the coming weeks, we will continue to work closely with state and federal regulators so that we can close our pending transactions and bring these benefits to more consumers.”

FCC staffers have met in recent days with such Charter/TWC/BHN critics as the Sports Fan Coalition and beIN Sports about the potential dangers of the merger to independent sports programming (see here) and Herring Networks about the difficulties independent networks face getting carriage (see here). Herring's filing proposed such New Charter conditions as banning any alternative distribution method clauses provisions in carriage agreements -- those being restrictions on programmers allowing their content to be streamed online elsewhere -- requiring New Charter to carry independent programmers and "protect[ing] independent emerging news sources from numerous Time Warner Cable News services post merger." Nvidia in a filing Friday in the docket said it met with FCC staff to discuss its complaint that Charter seemingly blocks third-party devices -- like Nvidia's Shield TV -- from accessing TV Everywhere apps (see 1602120046). And Incompas filed a declaration Feb. 15 by Global Economics Group Chairman David Evans challenging some arguments by economist Katz. Charter and Incompas have repeatedly pointed to analyses by Katz and Evans to make their cases of the public benefits -- or lack thereof -- of the deals (see 1602010036).

Language in Charter's ex parte filing and a subsequent filing Wednesday in the docket also point to Charter's discussing conditions with the FCC, because the company made the case in the filings that the deals would let it build out and reach more residences and multisite businesses than the three cable companies could individually, a communications lawyer told us. Charter's ex parte filing "confirms that a prime interest of the staff is having Charter commit to building out to a number of new homes," Chaplin wrote. "If the issue of residential line extensions was not central to the FCC's current thinking, we doubt there would have been such a meeting focused on the topic." Earlier this month, analyst Richard Greenfield of BTIG said over-the-top video conditions are unlikely. He said regulators likely will focus on conditions on stand-alone broadband offerings, overbuilding outside the company's footprint and/or a ban on most-favored-nation clauses that could impair OTT video competition.

Charter CEO Tom Rutledge has said he still hopes to see federal regulatory approval of the twin deals by the end of Q1 (see 1602040027). The FCC's unofficial 180-day shot clock for reviewing the transaction was at Day 146 Friday.