Smaller cable providers applauded the news this week from the FCC that it is no longer requiring Charter to overbuild in areas where a broadband operator already exists. The condition that Charter overbuild in markets already served was originally imposed when Charter bought Time Warner Cable and Bright House last year.
“In all likelihood, these overbuilds would have occurred where smaller operators are serving areas that might not support two providers,” American Cable Association President and CEO Matthew M. Polka comments.
Polka also calls the FCC decision “compelling because the agency is simultaneously advancing the goal of affordable and universal broadband by requiring Charter to venture into unserved areas and by eliminating the threat of government-mandated uneconomic entry into smaller operators’ markets.”
Polka thinks that the requirement undermined operators’ ability to make investments. “For smaller operators, this threat was real as evidenced by the 38 ACA members who recently urged the FCC to eliminate the overbuild condition,” he says.
The decision involved a rare agreement among all the FCC commissioners, including the sole Democrat, Mignon Clyburn.
“It has become clear that forcing New Charter into competing with another carrier incentivizes the company to overbuild where the weakest potential competition currently exists,” Clyburn writes in a statement. “Given our conclusions about competition in the broadband market, I am concerned that years from now, we will simply end up with still only one entity — New Charter — serving those ‘overbuilt’ areas.”
FCC Chairman Ajit Pai also opined that the requirement would have substantially reduced buildout to unserved areas, and he again referenced his restaurant comparision that he used at the ACA Summit in Washington, D.C., last week. “This is like telling two people you will buy them dinner, ordering two entrées, and then sending both to just one of your companions,” Pai says.
He adds that Charter is still obligated to build out to two million new locations. “The difference now is that the beneficiaries will be consumers currently on the wrong side of the digital divide,” he comments. “That’s a major difference, and one that will go a long way toward helping deliver online opportunity to all Americans.”
FCC Commissioner Michael O’Rielly also used a statement to object to the idea that Charter would have been forced to enter markets where existing providers may not have been able to make the economic case for larger investments in their networks.
“These companies would have had to divert resources away from expanding their networks or improving overall quality of service to pay for additional marketing and advertising to avoid customer losses to Charter,” O’Rielly says.
“In some cases, these would have been the very same markets in which the Commission is providing universal service high-cost support, because we determined that government subsidies were needed in order to be able to bring broadband to consumers. In other cases, the policy would have favored Charter cherry-picking the profitable portions of a market, leaving the rest to the existing provider with even more difficult economics and perhaps threatening its overall survival.”
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