The New York Public Service Commission voted on Friday to oust Charter from the state. They are revoking the approval of Charter’s acquisition of Time Warner Cable in 2016 due to the company failing to meet the requirements of that merger. The PSC has given Charter 60 days to present a plan for divesting it’s New York property and to subsequently leave the state. Charter announced almost immediately that they will appeal the decision, so expect a big ugly court fight.
The Commission’s order provides the justification for the drastic measure cites the following reasons for the order:
- The company’s repeated failures to meet deadlines;
- Charter’s attempts to skirt obligations to serve rural communities;
- Unsafe practices in the field;
- Its failure to fully commit to its obligations under the 2016 merger agreement; and
- The company’s purposeful obfuscation of its performance and compliance obligations to the Commission and its customers.
One of the biggest items under contention is Charter’s agreement to extend its network to 145,000 unserved and underserved residential housing units within four years of the merger. Charter claims that they are meeting that commitment, but the PSC says that a lot of the passings counted by Charter were in places like New York City where the company already had an obligation under local franchise agreements to connect to customers. The PSC ‘s merger requirement specified that Charter would reach beyond its current network boundaries to add suburban and rural customers that are within reasonable range of the Charter network.
The PSC accuses Charter of lying to the PSC and the public about meeting its merger obligations. They say the company has repeatedly falsely advertised and told customers that it is exceeding its commitments to the state. Now that this is likely going to end up in court the facts will be made clear, and it’s likely that the PSC’s facts are correct or they wouldn’t have taken this extraordinary step.
I can only remember a few cases during my career where a state regulatory body disenfranchised a telco or cable company. The few cases I recall were based upon criminal behavior of the company owners. Cities have sometimes cancelled a cable TV franchise, but usually it’s been due to the cable company being nearly dead or bankrupt and the city wanting to be able to legally tear down unused cables.
It’s been routine practice for big ISPs to not fully meet commitments they promise during mergers negotiations with regulators. They generally take a weak stab at meeting commitments, but they’ve never fretted about not fully complying since the only recourse against them are fines, or something more drastic like is being done in this case. It may sound cynical, but I think big companies do the math and gladly accept fines when that’s cheaper than meeting a commitment.
The NY PSC order focused on Charter’s failure to meet merger conditions, but there is an older history of dispute between the PSC and the company. The PSC has had a long-standing dispute in upstate New York and accused Time Warner Cable (and eventually Charter) of defrauding the public by providing old and obsolete cable modems that were not capable of achieving the advertised broadband speeds. In 2013 Time Warner Cable promised the NY PSC it would fix the problem, but the commission sued the company (now Charter) in 2017 after it was shown that most of the old cable modems were still in service – although the cable company had subsequently begun advertising even faster speeds. It turns out that Time Warner / Charter was not only failing to replace old modems as promised, but they were still recirculating the obsolete modems back into service for new broadband customers.
I have no idea of how the courts might rule on this case because the suggested remedy of kicking Charter out of the state is unprecedented. I’d love to hear of any similar cases if readers know of them – but I can’t recall a state regulatory commission trying to kick a major ISP out of their state.
Obviously Charter could have avoided all of this by complying with the requirements of the merger. But I’m sure that an internal decision was made that the capital required to meet those conditions was more than the company is willing to spend. The company didn’t help its case if it lied to the PSC about meeting the commitments. It’s clear that Charter has been derelict in the earlier case of replacing obsolete cable modems and in that case they are clearly bad corporate citizens. It takes a lot for a regulatory to decide to oust a regulated company, and I guess Charter has crossed that line.