FCC’s Pai: Charter ‘overbuild’ mandate would ‘reduce buildout to unserved areas'

FCC Chairman Ajit Pai
Charter will still be required to build out broadband into 2 million homes, it just won’t have to do so in regions where it will have to compete in with fellow MSOs.

Confirming his agency’s vote to reverse the so-called overbuild mandate on Charter Communications, FCC Chairman Ajit Pai described the requirement as an inefficient use of government leverage.

“Since these one million overbuilt deployments would be credited against the total, it would substantially reduce buildout to unserved areas,” Pai said in a statement. “This is like telling two people you will buy them dinner, ordering two entrées, and then sending both to just one of your companions.

RELATED: Charter overbuild requirement reportedly reversed by FCC

As an approval condition for Charter’s purchases of Time Warner Cable and Bright House Networks, the FCC ruled that the MSO must extend broadband—25 Mbps download speed or higher—to 2 million additional U.S. residences. 

One million of those homes had to reside in areas already served by other internet providers—a condition vehemently opposed by the American Cable Association, which did not want its small-operator constituents having to compete with the nation’s No. 2 cable company. 

“As I outlined in my partial dissent on the overall transaction last May, the overbuilding requirement represents extremely harmful public policy,”  added FCC Commissioner Michael O’Rielly, who as Pai’s fellow Republican on the five-member Commission led by former FCC Chair Tom Wheeler, voted against the overbuild mandate  

“To be clear, I have spent most of my career trying to remove barriers that may be preventing competition in communications markets,” O’Rielly added. “This highly repugnant overbuilding merger condition, however, is nothing of the sort. Instead, it functions as a misguided effort to install the government as Charter’s network deployment decision making team. Had it become effective, it would have forced existing and future Charter subscribers to pay higher rates for Charter’s expansion into markets that may have been economically unwise to enter, but were necessary in order for the company to meet the commission’s dictate.”

Charter will still be required to build out broadband into 2 million homes, it just won’t have to do so in regions where it will have to compete in with fellow MSOs—a prospect that was supported by Wheeler, whose oft-stated mantra was “competition, competition, competition.” 

Speaking to the investment community last May, Charter Chairman and CEO Tom Rutledge said it was always the company’s intention to overbuild into areas served by telcos and not small cable providers.

“When I talked to the FCC, I said I can’t overbuild another cable company, because then I could never buy it, because you always block those,” Rutledge said. “It’s really about overbuilding telephone companies.”

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