A gift from the FCC to Charter and to small ISPs

When the FCC approved the Charter-Time Warner Cable merger in 2016, it required the new company to deploy high speed broadband to at least two million locations (residential and business) and at least half needed to be in areas already served by one other broadband provider.

This practice is called overbuilding and was put in place by Chairman Wheeler to increase competition and consumer choice while lowering prices.

The FCC, under a new chairman, has just voted to eliminate this merger requirement. Charter will still have to deploy its service to two million more locations, but it can do so without the requirement around competition. The previous chairman of the FCC was regularly frustrated by these very large ISPs unwilling to compete with each other. However, small service providers believed this rule would impact them exclusively. Groups lobbying on behalf of small ISPs asked the FCC to eliminate the requirement because they believed Comcast would come to areas served not by AT&T or Comcast, but by small ISPs unable to compete with a company like Charter.

Chairman Pai argued the following: “Unless Charter chooses to exclusively overbuild areas served by Comcast, which I find highly unlikely, Charter’s increased broadband market share will come at the expense of smaller competitors.”

It’s worth noting that Pai and both FCC commissioners voted to reverse the previous rule. Commissioner Clyburn, the sole Democrat, saw this as a partial victory because it did not do away with the requirement to provide service to two million more individuals and organizations.

She also conceded that it could have driven smaller ISPs out of business since Charter would most certainly go where the competition was the weakest. This is a victory for smaller ISPs and a great illustration of the impact of the FCC.

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