Charter Communications has asked the FCC to consider dropping two key conditions imposed on its merger with Time Warner Cable and Bright House Networks – the prohibition on data caps and usage-based broadband data policies and paid interconnection deals – on the five-year anniversary of the deal's closing date.
The FCC imposed those two conditions as part of a framework allowing Charter's acquisitions of those cable operators in a deal that turned Charter into a national cable powerhouse. The FCC's initial five-year conditions are scheduled to sunset on May 18, 2021, unless the FCC decides to extend them another two years.
In a petition (PDF) filed June 17, Charter argues that current conditions in the online video market and the network interconnection sector give the FCC reason to put a stop to those conditions next May.
With respect to usage-based pricing and data caps, Charter acknowledges that the condition was put in place over concerns that Charter could use them to hamper or prevent the online video distributor (OVD) market from expanding and competing.
Charter argues that the OVD market has flourished and become fiercely competitive despite the presence of caps and usage-based policies from US service providers such as Comcast, Cox Communications, Cable One/Sparklight, AT&T and Suddenlink (now part of Altice USA).
"In fact, the online video distribution marketplace is almost unrecognizable compared to what existed in 2016," Charter said, citing the continued growth of streaming services such as Netflix, the emergence of new services such as Disney+ and Apple TV+, and the proliferation of OTT-delivered pay-TV services.
Charter likewise holds that OVDs are also in control of "vast amounts of content" and that Charter and other service providers have aided their success by integrating streaming apps on their various pay-TV platforms. Integrating services such as on Netflix on operator-supplied boxes is "not due to any government mandate; they are just good business," Charter argued.
Charter also reasons that the condition prohibiting the operator from using data caps and usage-based pricing "artificially hamstrings" its ability to allocate the costs of maintaining its network no matter how much data a customer uses and believes it should have the same flexibility as other US service providers.
The timing of Charter's data cap ask isn't great. It comes as several US cable operators and telcos have relaxed usage-based broadband policies temporarily during the pandemic at the urging of FCC Chairman Ajit Pai. At least one small cable operator, Antietam Broadband, has already decided to abolish usage-based pricing for good, noting that the policy was no longer necessary as customers started to shift to speed tiers that reflected their usage during the pandemic.
Seeking a sunset on settlement-free interconnections
The other big piece of Charter's ask centers on a deal condition that requires Charter to interconnect its IP network to a qualifying entity free of charge and on standardized terms.
Charter wants the FCC to sunset the interconnection condition in part because the market has evolved on its own to support paid network peering agreements. On that point, Charter notes out that other major US ISPs, including Comcast, Verizon and AT&T, have successfully forged voluntary, paid interconnection deals with Netflix.
Charter also believes that the ongoing settlement-free interconnection condition is a burden and creates an inefficient allocation of resources.
"For example, it requires Charter to respond to requests of the interconnecting party to augment Charter's capacity if port utilization in either direction exceeds certain specified percentages under conditions set out in the Condition," Charter argued. "Charter is required to accomplish any requested augmentation within 90 days, even though the peering party has no such requirement. These blanket, inflexible requirements do not represent optimal network management principles."
Update: The FCC's Wireline Competition Bureau on Monday announced it had opened a docket for the Charter petition, setting an August 6 deadline for reply comments.
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— Jeff Baumgartner, Senior Editor, Light Reading