Charter to focus overbuild strategy on telco competition

With a federal mandate to overbuild broadband subscribers by 2 million, Charter Communications (NASDAQ: CHTR) President and CEO Tom Rutledge said his company will not be providing other cable companies with more competition.

"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 at last week's MoffettNathanson Media & Communications Summit. "It's really about overbuilding telephone companies."

As a condition of its approved takeovers of Time Warner Cable (NYSE: TWC) and Bright House Networks, Charter is required to build 2 million new passings over the next five years. One million of those passings must compete with another broadband provider. 

Rutledge said the conditions require that Charter build 2 million new passings over a period of five years, with 1 million of those passings against another high-speed Internet provider.

"If someone builds a housing development with 20,000 homes in it, there is a phone company in there, usually it's AT&T, or Frontier in some markets," Rutledge said. "Usually that plant is in the ground in the same trenches as yours, so you're in a competitive environment."

The American Cable Association (ACA) had earlier expressed concern about the overbuild condition, saying: "The requirement on Charter to overbuild competitors will harm consumers in two ways. First, it will harm Charter's customers by preventing Charter from investing its resources most efficiently, such as by upgrading its networks to higher speeds. Second, it will harm customers of local, small providers when these customers are satisfied with their existing service."

More than anything, ACA is worried the more powerful Charter will put its smaller MSO constituency out of business.

For his part, however, Rutledge said competing head-on with smaller cable companies wouldn't be good business for Charter, either.

"Why would we go where we could get killed," he said. 

For more:
- visit this Charter investor relations site
- read this Multichannel News story

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