Trade Group Seeking Conditions To Combat Increased Vertical Integration Harms
PITTSBURGH, October 15, 2015 – The American Cable Association asserts that Charter Communications’ proposed merger with Time Warner Cable (TWC) and Bright House Networks (BHN) will result in greater vertical integration that will harm the economic interests of consumers served by competing independent cable operators unless the Federal Communications Commission crafts conditions that will actually succeed in reducing the transaction-specific competitive harms to purchasers of its affiliated cable networks.
ACA explained in an Oct. 13 filing with the FCC that if Charter is allowed to combine with TWC and BHN, the new entity, presently called “New Charter,” will become the third-largest multichannel video programming distributor (MVPD) in the country, with 17.3 million video subscribers.
ACA also explained that important programming assets – Discovery Communications networks and premium network Starz – would be deemed attributable to “New Charter” under FCC rules establishing whether one entity has a significant economic interest in another. Because of this vertical integration, Discovery and Starz will have an incentive and ability to extract higher prices and more onerous terms and conditions from ACA members that compete head-to-head with New Charter than would be possible absent the merger. Accordingly, ACA called on the FCC to adopt more stringent and effective conditions than those that have been adopted in past mergers to ensure that smaller MVPDs have a remedy to combat anti-competitive conduct likely to result from the proposed transaction.
Charter today is vertically integrated with Discovery and Starz ownership positions controlled by John Malone indirectly through Liberty Broadband in the case of Charter, and directly in the case of Discovery and Starz. BHN is currently vertically integrated with Discovery networks through its parent company, Advance/Newhouse, which holds a substantial attributable interest in Discovery.
“In view of the fact that this transaction increases and spreads the existing harms of Charter’s and BHN’s affiliation with Discovery and Charter’s affiliation with Starz, and these harms will result in higher costs to consumers, the Charter-TWC-BHN transaction calls for the imposition of conditions and those conditions must be more effective than those used by the FCC in previous cases and specifically targeted to improve their functionality for small and medium-sized MVPDs,” ACA President and CEO Matthew M. Polka said.
In the filing, ACA said past FCC conditions aimed at curbing abuses arising from vertical integration have been inadequate. The FCC has relied on a combination of a non-discriminatory access condition and a commercial “baseball-style” arbitration remedy to lessen the ability of vertically integrated programmers to harm rivals of their affiliated MVPDs. Neither of these remedies has been fully effective in the past for smaller MVPDs, and neither will be sufficient in the future to address the problems created by the combination of Charter, TWC, and BHN.
“The FCC must adopt remedial conditions targeted to address the demonstrable harms of the transaction, and fix the flaws and shortcomings in the types of remedial conditions it has imposed in the past. Such conditions are utterly essential to protect MVPD consumers and competition of MVPD services should the parties go forward with their transaction,” Polka said.
About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for nearly 7 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA’s members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit https://acaconnects.org/