Federal regulators are allowing Charter Communications to move ahead with its $78.7 billion takeover of Time Warner Cable, a massive deal that would create the second-largest cable and Internet provider in the country.
The move also means Charter can purchase Bright House Networks for $10.4 billion. The combined company would instantly become a powerhouse in the telecommunications industry with about 24 million customers in regions such as New York, Dallas, central Florida, Detroit, and Los Angeles.
Washington plans to put several conditions on the merger that will last for seven years and aim to enhance competition in online video and broadband service. For instance, the combined company would be prevented from fashioning agreements with companies such as Netflix and other streaming services that force them to pay a fee to reach consumers' devices. The merged firm also would be prohibited from imposing data caps on home Internet service which could discourage watching videos online.
In addition, Charter will be required to deploy high-speed Internet services to roughly 2 million new households, roughly half of which must be in markets where Charter currently is not offered and where there is already one broadband provider. This target is slightly more ambitious than what Charter told regulators it would otherwise plan to build, according to senior FCC officials who spoke on condition of anonymity because the deal is still pending.
The Justice Department, which also intends to let the deal occur, proposed its own conditions that prohibit the combined company from penalizing cable programmers if they decide to license their content separately to online video companies, among other things.
After five years, Charter will be allowed to ask the FCC to suspend its conditions related to data caps and commercial agreements with online streaming companies. Likewise, Charter will be able to petition the Justice Department to end its condition early.
While the conditions only affect Charter and its acquisitions and will not apply to the broader cable industry, they are a sign of FCC priorities.
"I don't think it would be a surprise to anyone that the chairman is very concerned about preventing unfair practices that would harm [online video companies]," said one senior FCC official.
Similar concerns convinced regulators to block Comcast's bid for Time Warner Cable in 2015. FCC officials later explained that Comcast's far-reaching influence in both content and distribution would give the combined firm an ability to control what many consumers see online. That would have negative effects on competition, they argued, as Comcast could try to prevent its subscribers from watching online shows and movies from rivals such as Netflix.
Charter, in a statement, said it was pleased to hear the acquisition will move forward.
"The conditions that will be imposed ensure Charter's current consumer-friendly and pro-broadband businesses practices will be maintained by New Charter," Charter said in a statement.
Federal Communications Commission chairman Tom Wheeler said Monday that the conditions would "directly benefit consumers by bringing and protecting competition to the video marketplace and increasing broadband deployment." The matter must still win a vote by the agency's five commissioners, who are expected to approve the deal.
The consumer group Free Press slammed the deal Monday.
"Thanks to this merger both Charter and Comcast now have unprecedented control over our cable and Internet connections," said chief executive Craig Aaron. "Their crushing monopoly power will mean fewer choices, higher prices, no accountability and no competition."
Altogether, the Justice Department valued the acquisition of Time Warner Cable and Bright House Networks at about $88 billion.
Charter's stock closed up nearly 5 percent; Time Warner Cable's rose 4 percent.