FCC Chairman Tom Wheeler has submitted an order to the agency's five-person commission formally recommending Charter Communications' (NASDAQ: CHTR) purchases of Time Warner Cable (NYSE: TWC) and Bright House Networks.
Outlining a range of conditions, in place for seven years and agreed upon by Charter, Wheeler's proposal requires Charter to build out broadband access to 2 million U.S. residents who currently don't have it.
The cable company must not engage in usage-based pricing of Internet services, and it will be prohibited from charging interconnection fees. Charter must also steer away from deal making that limits the proliferation of online video. These conditions, Wheeler said, were agreed up in conjunction with Justice Department officials.
"The cumulative impact of these conditions will be to provide additional protection for new forms of video programming services offered over the Internet," Wheeler said in a statement.
"We are pleased that Chairman Wheeler has submitted the proposed conditions for consideration by the full commission and that the DOJ has submitted its agreement for approval by the court," Charter said in a statement.
"The conditions that will be imposed ensure Charter's current consumer-friendly and pro-broadband businesses practices will be maintained by New Charter. We are confident New Charter will be a leading competitor in the broadband and video markets and are optimistic that we will soon receive final approval from federal regulators as well as the California PUC," the cable company added.
Wheeler's proposal will now be subjected to the full vote of the five-member FCC Commission, which is expected to approve the order.
Charter faces one last hurdle of significance — the California Public Utilities Commission is set to vote on the deal next month. However, a state administrative law judge has already recommended approval of the merger, pending similar conditions.
In a note to investors, Evercore analyst Vijay Jayant called the conditions "manageble.
"We expected a longer period on concessions, while the new-build is consistent with the historical annual home passing of the combined companies," Jayant said. "Charter and Time Warner Cable have combined to average -- 500,000 new video home passings annually over the past seven years. At this pace, the company could expand its network to 2 million incremental passings within four years (we already had Charter building that much in the next four to five years)."
Meanwhile, progressive group Free Press released a statement saying Wheeler had "tainted his legacy" by issuing the approval order.
- read this FCC press release
Wheeler set to circulate approval order for Charter's TWC and Bright House bids
Army of progressive groups launch FCC Hail Mary to stop Charter-TWC