The Justice Department just filed a lawsuit to block Charter Communications' expected acquisition of Time Warner Cable and Bright House Networks. But it also proposed a settlement for the suit, and that offers a way forward for the deal.
It's a green light of sorts. But the Department of Justice wants to ensure that the road rules are understood by New Charter, the new company that would combine Charter with Time Warner Cable and Bright House.
New Charter would become the second largest cable company in the U.S. and the country's third biggest distributor of multi-channel video programming (MVPD).
Unchecked, New Charter has incentive to harm competition by creating new restrictions or broadening existing ones on online video distributors, reasoned the Justice Department. So the lawsuit was filed in case Charter doesn't agree to the settlement and the oversight it grants the Justice Department.
Online video distributors broaden video choices for consumers, stated Principal Deputy Assistant Attorney General Renata Hesse, head of the department's Antitrust Division. Without the suit and settlement path, New Charter would have more leverage against programmers and could demand that they limit licensing to online video distributors.
"Together with our counterparts at the FCC, we have secured comprehensive relief and we will work together to closely monitor compliance to ensure that New Charter will not have the power to choke off this important source of disruptive competition and deny consumers the benefits of innovation and new services," said Hesse.
To support its suit and settlement, the Justice Department asserted that Time Warner Cable has become the industry's "most aggressive MVPD" in ensuring Alternative Distribution Means (ADM) in contracts with programmers. The ADMs prohibit programmers from distributing certain content or prevent them from offering it to online video distributors.
"We are pleased to reach this critical step in the regulatory review of our merger with Charter and remain optimistic that the transaction will be finalized soon," said Rob Marcus, CEO of Time Warner Cable.
From here, the Federal Communications Commission will vote on its own set of recommendations to tender New Charter. The FCC's recommendations would run for seven years and would guarantee that New Charter expand its reach to about 2 million more consumers who live in rural areas.
