FCC Has Broadband Conditions for CenturyLink-Qwest

CenturyLink Inc. (NYSE: CTL) and Qwest Communications International Inc. (NYSE: Q) are another step closer to sealing a $22.4 billion merger after the Federal Communications Commission (FCC) approved the deal, albeit with conditions aimed at boosting the adoption and availability of broadband in their combined markets.

On the adoption side, the combined company is on the hook to launch a "major" campaign for low-income consumers in their territories, and offer broadband services starting "at less than $10 per month" and a computer for less than $150 to qualifying households.

Here's what they must do on the deployment end:

  • "Significantly increase" the capacity of the Qwest network and deliver actual download speeds of at least 4Mbit/s to at least 4 million more homes and businesses, and at least 20,000 more anchor institutions.

  • More than double the number of homes and businesses that can get 12Mbit/s broadband, and triple the number that can get 40Mbit/s.

The FCC also inserted a competitive-facing condition that prevents the larger company from increasing enterprise service prices for seven years in a few dozen buildings where Qwest and CenturyLink compete (Minneapolis and Olympia, Wash.). The company must also "phase down" three forms of support designed for smaller companies, which it already receives from the Universal Service Fund. (See FCC Proposes USF Reform.)

Why this matters
The conditional approval gets the companies closer to creating a much stronger telco competitor for cable operators such as Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Mediacom Communications Corp. to contend with. MSOs in existing Qwest territories could eventually face new IPTV competition if CenturyLink, as anticipated, gets more aggressive with the technology.

Additionally, the speed and capacity conditions should put some added pressure on cable's Docsis 3.0's platform as well as the industry's quickening pursuit of business customers.

With the FCC blessing, the deal is expected to close soon after the companies receive final state approval, creating a combined company that will serve about 17.2 million access lines and 5.2 million broadband customers in 37 states.

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— Jeff Baumgartner, Site Editor, Light Reading Cable

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