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Prohibit New Charter from Imposing Data Caps Or Charging Usage-Based Pricing for Its Residential Broadband Service

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Prohibit New Charter from Imposing Data Caps Or Charging Usage-Based Pricing for Its Residential Broadband Service Federal Communications Commission FCC 16-59 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Applications of ) ) Charter Communications, Inc., ) MB Docket No. 15-149 Time Warner Cable Inc., and ) Advance/Newhouse Partnership ) ) For Consent to Assign or Transfer Control of ) Licenses and Authorizations ) MEMORANDUM OPINION AND ORDER Adopted: May 5, 2016 Released: May 10, 2016 By the Commission: Commissioner Clyburn approving in part, concurring in part, and issuing a separate statement; Commissioner O’Rielly approving in part, concurring in part, dissenting in part and issuing a separate statement; Commissioner Pai dissenting and issuing a separate statement. TABLE OF CONTENTS Heading Paragraph # I. EXECUTIVE SUMMMARY ................................................................................................................ 1 II. DESCRIPTION OF THE TRANSACTION ........................................................................................ 13 A. Description of the Parties ............................................................................................................... 13 B. The Proposed Transaction .............................................................................................................. 18 III. STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK .......................................... 26 IV. COMPLIANCE WITH COMMUNICATIONS ACT AND FCC RULES AND POLICIES .............. 31 V. POTENTIAL PUBLIC INTEREST HARMS ...................................................................................... 34 A. Applicants’ Incentives to Harm OVD Competition ....................................................................... 34 B. Use of Residential BIAS Retail Terms to Harm Video Competition ............................................ 48 1. Relevant Markets ..................................................................................................................... 50 2. Unilateral Effects ..................................................................................................................... 68 a. Data Caps and Usage-Based Pricing ................................................................................. 74 b. Standalone BIAS Pricing .................................................................................................. 87 C. Increased Concentration in Interconnection Services .................................................................... 93 1. Background ............................................................................................................................. 94 a. The Internet Interconnection Ecosystem .......................................................................... 94 b. The Applicants’ Interconnection Operations .................................................................. 101 2. Relevant Markets ................................................................................................................... 104 3. Increased Interconnection Costs ............................................................................................ 108 a. BIAS Subscriber Shares .................................................................................................. 110 b. Increased Bargaining Power within the Interconnection Market .................................... 113 c. Higher Interconnection Fees ........................................................................................... 118 4. Specific Harms to OVDs ....................................................................................................... 122 5. Conditions ............................................................................................................................. 131 a. Mandatory Interconnection ............................................................................................. 132 Federal Communications Commission FCC 16-59 b. Interconnection Disclosure ............................................................................................. 135 c. Open Internet Order Related Commitments ................................................................... 137 D. Competition in Video Distribution .............................................................................................. 140 1. Background ........................................................................................................................... 141 2. Relevant Markets ................................................................................................................... 146 3. Potential Effects .................................................................................................................... 154 E. Competitors’ Access to Programming ......................................................................................... 160 1. Background ........................................................................................................................... 161 2. Program Access ..................................................................................................................... 165 3. RSNs and Other Sports Programming ................................................................................... 166 4. Other Programming ............................................................................................................... 176 a. Program Access Attribution Rules.................................................................................. 177 b. Attributable Programming .............................................................................................. 179 c. Incentive and Ability to Foreclose or Raise Prices of Affiliated Programming ............. 188 F. Access to Online Content ............................................................................................................. 206 G. Other Potential Public Interest Harms and Issues Raised in the Record ...................................... 224 1. Fewer Regulatory Benchmarks ............................................................................................. 224 2. Increased Coordination in the BIAS Market among BIAS Providers ................................... 228 3. Cable Modems ....................................................................................................................... 237 4. Set-Top Boxes and Other Video Navigation Devices ........................................................... 248 5. Supply, Quality, and Diversity of Video Programming ........................................................ 264 a. Carriage Decisions for Diverse, Independent Programmers ........................................... 265 b. Creation of New Programming and Quality in the Video Programming Market ........... 276 (i) Video Programming Market ..................................................................................... 276 (ii) Latino Video Programming Market ......................................................................... 280 c. PEG Channels ................................................................................................................. 289 6. Competitors’ Higher Prices for Programming ...................................................................... 298 7. Local Broadband Competition .............................................................................................. 301 8. New Charter’s Debt ............................................................................................................... 305 9. NAB and Entravision Petitions ............................................................................................. 313 VI. ANALYSIS OF POTENTIAL BENEFITS ........................................................................................ 315 A. Analytical Framework ................................................................................................................. 316 B. Reduced Programming Acquisition Costs ................................................................................... 321 C. Conversion of Time Warner Cable and Bright House to All-Digital Service, and Related Increased Residential Broadband Speeds and Improved Video Services .................................... 347 1. Conversion to an All-Digital Network .................................................................................. 348 2. Residential BIAS Speed Upgrades ........................................................................................ 356 3. Improved Video Benefits ...................................................................................................... 362 D. Uniform Broadband Pricing and Marketing ................................................................................ 364 E. Increased Competition to Serve Commercial Customers ............................................................ 373 F. Network Buildout to Residential Customers ............................................................................... 382 G. Expanded Deployment of WiFi Access Points ............................................................................ 390 H. Deployment of a Mobile Video Application ................................................................................ 396 I. Video Device and User Interface Innovation ............................................................................... 400 J. Generalized Claims Related to Reduced Barriers to Innovation ................................................
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