Charter-Time Warner Merger & Data Usage: How a Ruling Could Impact Consumers

By: Professor Karl Manheim

The Federal Communications Commission has recommended approval of Charter Communications’ merger with Time Warner Cable, making the combined company the nation’s second largest broadband provider. As a condition for FCC approval, Charter/TWC will not be able to impose usage-based charges or data caps on its broadband subscribers for seven years. Can the FCC impose such a condition? Maybe, but ultimately it may not matter.

In 2002, under a Republican administration, the FCC ruled that cable broadband was an “information service,” and thus mostly unregulated under the Federal Communications Act of 1934 and the Telecommunications Act of 1996. The Supreme Courtt upheld that determination in NCTA v. Brand X (2005). In 2010, the FCC began regulating cable broadband to achieve Net Neutrality, but in Verizon v. FCC (2014) the Court of Appeals for the DC Circuit invalidated the FCC order because the agency had earlier deemed cable broadband to be an information service, hence not subject to FCC regulatory jurisdiction. Last year, under a Democratic administration the FCC reversed its 2002 Order and ruled that cable broadband was a “telecommunications service,” and thus within the agency’s Title II jurisdiction (as a public utility). 2015 Report and Order on the Open Internet aka "net neutrality"). It is this ruling that allows the FCC to impose a no-cap policy (as a condition for merger). Verizon has once again appealed the FCC Order; that case is pending.

If the DC Circuit upholds the 2015 Order, then the no-cap condition will stand. If it invalidates the Order, then cable companies may have wide berth to do as they wish.

Keep in mind that the FCC is only 1 of 3 federal agencies who have to pass on the competitive effects of telecom mergers; the other 2 being the FTC and the DoJ. In the case of cable companies, state regulators may have to approve as well. Also keep in mind that cable companies will increasingly rely on broadband revenue as more customers cut the cord on cable video service. That’s why it is so expensive (roughly $50/mo for a service that costs the company far less than that). But even though cable companies have a license to print money, I still wouldn’t put my marbles there. That’s because customers will soon be able to cut the cable broadband cord too. We are in the middle of an FCC auction that will repurpose TV frequencies (channels 46-51) from broadcast TV to mobile Internet (ch. 52-69 have already been reclaimed). Once that happens, the speed of your Internet connection on your cell phone will rival that on cable (or DSL). Then we can kiss the cable companies and their monopoly prices goodbye.

How the Supreme Court Protected Rupert Murdoch's Reputation

By Associate Professor Aaron Caplan

In an anti-climactic conclusion to a long-running free speech battle, the U.S. Supreme Court unanimously ruled in Fox Television Stations v. FCC (2012) that the federal government could not take action against a TV network for failing to bleep out "fleeting expletives" from excited celebrities during awards shows in 2002. It was not a free speech decision. Instead, the court found that the FCC violated due process by failing to give broadcasters fair warning, at the time of these broadcasts, that isolated profanity would violate decency regulations. As it happens, the FCC did provide such a warning in 2003, but last week's Supreme Court decision declined to rule on whether FCC actions against subsequent broadcasts would be a free speech problem.

A curiosity was hidden near the end of the opinion. One government argument was that the FCC could not have deprived Fox of an interest in liberty or property without due process of law, because the FCC never imposed a fine. Instead, it placed a document in its files stating that Fox had violated decency regulations and let it off with a warning. The Supreme Court concluded that this wrist slap from the FCC implicated a constitutionally protected interest, because the existence of a past violation might be the basis for a larger fine in the event of a future violation. Fair enough. But then the court gilded the lily:

In addition, when combined with the legal consequence described above, reputational injury provides further reason for granting relief to Fox. As respondent CBS points out, findings of wrongdoing can result in harm to a broadcaster's "reputation with viewers and advertisers." This observation is hardly surprising given that the challenged orders, which are contained in the permanent Commission record, describe in strongly disapproving terms the indecent material broadcast by Fox (noting the "explicit, graphic, vulgar, and shocking nature of Ms. Richie's comments") and Fox's efforts to protect children from being exposed to it (finding Fox had failed to exercise "reasonable judgment, responsibility, and sensitivity to the public's needs and tastes to avoid a patently offensive broadcast"). Commission sanctions on broadcasters for indecent material are widely publicized. The challenged orders could have an adverse impact on Fox's reputation that audiences and advertisers alike are entitled to take into account.