Charter's Time Warner Cable Deal Gets Justice Department Approval

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FCC chairman Tom Wheeler

The FCC still needs to approve the acquisition, though chairman Tom Wheeler signaled his support on Monday.

The U.S. Justice Department on Monday approved the planned acquisition of both Time Warner Cable and Bright House Networks by Charter Communications, though the deal still requires FCC approval.

Shortly after the Justice Department's approval, which came with several conditions, FCC chairman Tom Wheeler issued a recommendation that the five-member body also approve the deal, though with some conditions of its own, including some that presumably favor, Hulu, Netflix and others.

"First, New Charter will not be permitted to charge usage-based prices or impose data caps," said Wheeler. "Second, New Charter will be prohibited from charging interconnection fees, including to online video providers, which deliver large volumes of internet traffic to broadband customers."

A third condition of approval "outlaws video programming terms that could harm" any service that distributes video over the internet and protects them from "retaliation."

Each of those three conditions are for seven years.

After the Justice Department and FCC issued their statements on Monday, shares of Charter jumped 5 percent while shares of TW Cable rose 4 percent. Bright House is not a publicly traded company.

"The conditions that will be imposed ensure charter's current consumer-friendly and pro-broadband businesses practices will be maintained by New Charter," Charter said Monday in a statement.

The news came after a recent delay in the 180-day review "shot clock" to give regulators time to consider the latest information on Charter's residential pricing and packaging methodology and its plan to deploy a new low-cost broadband service.

Charter, in which John Malone's Liberty Media owns a big stake, swooped in with a deal for TW Cable last year after Comcast abandoned its bid for the company amid regulatory opposition. The cash-and-stock deal had a price tag of around $55 billion. Including debt, the deal at the time was valued at $78.7 billion.

In May, Charter, run by CEO Tom Rutledge, unveiled its cash-and-stock deal for TW Cable, which will make it the No. 2 U.S. cable operator behind Comcast and the No. 3 pay TV operator behind Comcast and AT&T/DirecTV. Shareholders have approved the deal, and so have most states.

The National Association of Broadcasters and Dish Network had urged the FCC to reject the proposed combination. Opposition to the Charter deal has been less prevalent. Many in the sector had predicted conditional approval.

Last year, the FCC gave conditional approval to another pay TV mega-deal, AT&T's $49 billion acquisition of DirecTV.

Rutledge said last year that he was "confident" about getting regulatory approval for the company's two big planned deals for Time Warner Cable and Bright House Networks, saying they would "not reduce competition in any market."

While the marriage will result in a bigger company that commands about 15 percent of the nation's cable and satellite TV subscribers and 22 percent of its broadband subscribers, Charter had in an FCC filing emphasized its commitment to the principles of net neutrality.