Charter’s overbuild condition may go away with new FCC administration

FCC headquarters
Even if an overbuild requirement is nixed by the FCC, Charter must still provide high-speed internet services 2 million additional homes.

New FCC Chairman Ajit Pai has circulated a petition to roll back a condition of Charter’s Time Warner Cable purchase that required Charter to “overbuild” broadband service into 1 million homes.

According to Broadcasting & Cable, the item needs one more vote to become law. If it does, Charter will still be required to provide high-speed internet services of 25 Mbps or higher to 2 million additional homes. It just won’t be mandated to make sure 1 million of those homes are outside of its footprint. 

RELATED: ACA to FCC: If you don't want bigger Charter, why force it to overbuild?

The item circulated by Pai is a petition from the American Cable Association, which asked for reconsideration of the merger condition last June.

The ACA fears that its small-operator constituency will be hurt if a much larger competitor like Charter is suddenly forced onto their rural turf. The ACA wondered why the FCC, which said that Charter is too big while announcing approval for the mergers, wanted the MSO to get even bigger.

"The overbuild condition imposed by the FCC on Charter is stunningly bad and inexplicable government policy," said ACA President and CEO Matthew Polka, in a statement. "On the one hand, the FCC found that Charter will be too big and therefore it imposed a series of conditions to ensure it does not exercise any additional market power. At the same time, the FCC, out of the blue, is forcing Charter to get even bigger.”

Meanwhile, speaking at an investor conference shortly before ACA filed its petition, Charter President and CEO Tom Rutledge downplayed the overbuild threat to smaller cable operators. 

"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.”

Rutledge said phone companies are, generally speaking, wracked with debt, short on cash and won't be making fiber upgrades soon. Smaller MSOs, meanwhile, are in the process of making DOCSIS 3.0 and 3.1 upgrades, and offer substantially stiffer competition in many cases. 

"Why would we go where we could get killed?" Rutledge asked.