USTelecom says FCC should consider how Charter-TWC merger impacts ILEC broadband competition

As Charter Communications (NASDAQ: CHTR) moves forward with its pending $79 billion acquisition of Time Warner Cable (NYSE: TWC), USTelecom is concerned that the deal and other consolidation in the cable market could impede broadband competition for ILECs and other competitors.    

In an FCC filing, USTelecom said as the commission reviews the acquisition it should consider cable's dominant position in the high-speed broadband market.

The industry group sees further consolidation of the cable market, which is being led by Altice's proposed acquisitions of Cablevision and Suddenlink, as having a detrimental impact on broadband competition for ILECs and other emerging competitors.

One of USTelecom's key requests is for the FCC to remove the regulatory burdens on ILECs to support TDM-based special access services for wholesale customers and legacy voice so they can make further broadband investments.

"Cable's dominant position in the offering of high-speed broadband should be at the forefront of the Commission's mind as it considers the impact of increased cable consolidation and ease of coordination," said USTelecom in a FCC filing. "Further consolidation is likely to detrimentally impact broadband competition from ILECs and other emerging competitors given the powerful tools at cable's disposal. In its analysis of the proposed acquisition, the Commission must also account for the asymmetrical regulatory burdens that, as Chairman Wheeler has noted, direct ILEC resources and investments into legacy networks and away from broadband, hampering competition with increasingly dominant cable competitors."

USTelecom also noted how cable operators have dominant control over the residential broadband market, particularly for consumers who desire speeds of 25 Mbps or higher. These latest deals would enhance that reach.

"Cable companies have long dominated the residential broadband market, providing broadband internet access to 58% of residential customers," USTelecom said. "While there is heated broadband competition in areas where other providers have deployed fiber to compete head-to-head with cable, cable is the only choice in much of the country if a customer seeks services at speeds of 25 Mbps or higher."

Residential broadband is just one area where cable is gaining momentum in the high speed race. Similar to Comcast, Charter and Time Warner Cable have been aggressively rolling out fiber and leveraging existing HFC network

During the third quarter, Charter reported that commercial business segment revenues rose 13.2 percent year-over-year to $286 million due to higher sales to SMBs and wholesale service provider customer sales. Likewise, Time Warner Cable added nearly 50,000 commercial buildings in the first nine months of 2015, while revenues significantly rose by $112 million in the third quarter of 2015.

Given cable's growth in the business sector, USTelecom has asked the FCC to lift some of the restrctions the FCC has placed on the ILECs to maintain TDM-based services so they can increase investment in IP-based Ethernet services.

"These facts are significant because the strongest competitors to cable providers -- facilities-based, incumbent LEC broadband providers -- are subject to multiple layers of regulatory oversight and requirements of their services that already significantly constrain their ability to compete with cable companies," USTelecom said. "The cable companies are immune from many of those costs and restrictions."

For more:
- see the USTelecom filing (PDF)

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