Cable Industry Proclaims More Competition 'Hurts Consumers' & 'Damages Economic Efficiency'

As part of the conditions attached to Charter's $79 billion acquisition of Time Warner Cable and Bright House Networks, the FCC imposed a requirement that Charter expand broadband service to another two million locations, one million of which must already be served by an ISP delivering speeds of 25 Mbps or greater. Unfortunately these kinds of conditions historically don't mean much; merger broadband expansion promises are almost always volunteered by the ISPs themselves, who already planned the expansion regardless of their merger plans.

That isn't stopping a lobbying organization representing Charter's cable competitors from crying and stomping their feet over the condition. In a filing by the American Cable Association (ACA, pdf), the organization's lawyers try to claim that not only would an influx of competition somehow harm consumers, the group claims that adding competitors to what are frequently stagnant markets will somehow "damage economic efficiency":

"That overbuild condition is unlawful. It is not tailored to mitigate a merger-specific harm or confirm a merger-specific benefit. It will exacerbate the merger harms the Order identifies, damage economic efficiency, injure small providers, and harm consumers. The condition should be stricken."

Another coalition of cable providers, the NTCA, tried to claim the same thing in a filing of its own:

"While the commission's intentions in proposing the buildout requirement were undoubtedly good, the reality is imposing such a condition creates artificial competition in areas that cannot support it, which will ultimately undermine, rather than further, broadband availability and affordability in higher-cost areas in particular."

When is competition "artificial?" When we say it is! The thing is, it's not really competition these companies are worried about. It's the inevitable hoovering up of their businesses by Charter down the road. Charter CEO Tom Rutledge recently made it clear at an investor conference that he won't be targeting cable companies under the condition -- rather, he'll be targeting phone companies. Why? Phone companies, usually unwilling or unable to invest in fiber, make easier targets. There's no need to compete with smaller cable operators, when you can just gobble them up at a later date:

"When I talked to the FCC, I said I can't overbuild another cable company, because then I could never buy it, because you always block those," Rutledge said at the MoffettNathanson event. "It's really about overbuilding telephone companies." "Why would we go where we could get killed," Rutledge said.

In other words, Charter doesn't want to compete with cable companies, because the FCC would then prohibit them from merging with them later for fear of lessening competition. Instead, Charter plans to take aim at the already struggling second-tier telcos in these areas, then acquire smaller cable operators down the road. So despite the FCC's intentions, the deal creates another homogeneous giant just like Comcast with little to no real competition to keep it in check, and the conditions are little more than regulatory band-aids for what's ultimately going to end badly for every individual and organization not-named Charter.

While the FCC's conditions do include a few useful nuggets for consumers and small businesses (a ban on caps and net neutrality violations for seven years), with the pace at which the cable industry is looking to defang and hamstring the agency, it's not clear there's going to be much of an FCC left to enforce the conditions during the latter stretch of that window. While the FCC certainly tried to shine up these conditions to downplay the negative aspects of deal approval, it's still abundantly clear that giant telecom mergers like this only ultimately benefit the companies involved.

That's a lesson that for whatever reason we seem utterly unwilling to learn despite our collective disdain for the end result.

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