Gasps as New York PSC Revokes Charter-Time Warner OK
The New York Public Service Commission’s extraordinary revoking of approval of Charter Communications’ buy of Time Warner Cable (see 1807270027) surprised observers Friday. Commissioners voted 3-0 to rescind the state's 2016 conditional approval of Charter's purchase, directing the acquirer to cease operations and submit a transition plan within 60 days. At Friday's special session, commissioners also voted 3-0 to direct counsel to initiate a civil enforcement case against Charter in New York Supreme Court seeking civil financial penalties for past failures.
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Commissioners denied the company's requests to reconsider previous orders saying Charter missed broadband deployment targets required as conditions in the transaction OK (see 1807230019). The cable ISP argues that it exceeded broadband targets. Officials said the company inappropriately counted passings in New York City when the commission wanted the company to count passings in less dense areas.
“This has never been done in New York,” and possibly not in any other state, said Public Utility Law Project Executive Director Richard Berkley in an interview. PULP is a consumer advocacy group. Regulators historically sometimes took such actions against industries including streetcars but “in modern times, this doesn’t happen.”
“I’ve never seen such a thing,” said Sherry Lichtenberg, National Regulatory Research Institute telecom principal. “While there have been threats to take action against companies for non-performance, this appears to be the first time that a state commission has actually rescinded approval of such a transaction and ordered the company to develop a transition plan.”
Unwinding the deal is doable but possibly expensive, depending on how aggressively the company approached integration and equipment retirement, emailed 556 Ventures analyst Bill Ho. “If it does [go] through, it’s a cautionary tale nationally and playbook leverage for other public utility commissions.” Challenging the agency in court would be “logical to buy time,” he said. “The PSC vote is huge leverage to accelerate their builds and spend more money to salvage at the last minute.”
Charter showed “a record of repeated and worsening failures,” PSC Chair John Rhodes said at the livestreamed meeting. Substituting low-cost connections in New York City for high-cost connections in rural areas did a “grave disservice to thousands of upstate customers,” said Commissioner Gregg Sayre, adding that the PSC gave the company much time to get back on track. "I'm very sorry that we have to take these steps but I'm convinced that we have to." Commissioner James Alesi said he never likes to see such strong actions against a business, but it’s warranted in this case. Commissioner Diane Burman was absent.
The acquirer's Spectrum brand "has extended the reach of our advanced broadband network to more than 86,000 New York homes and businesses since our merger agreement with the PSC," Charter said in a statement to us. The operator and its employees "remain focused on delivering faster and better broadband to more New Yorkers, as we promised,” it added.
"Merger commitments are important, and it’s good to see" the agency "taking them seriously,” said Public Knowledge Senior Counsel John Bergmayer. PULP supports PSC action to protect consumers, Berkley said. He cautioned that it’s critical to ensure no service disruptions for people who rely on phone and internet in the case of a transition to a new owner, he said. Charter probably will seek rehearing at the PSC and then sue, with its best chance likely in federal court, Berkley said.
Compliance with the network expansion condition "is deficient and its behavior before the Commission is contrary to the public policy and the laws of New York State and the regulations of the Commission to such an extent that the Commission should now exercise its authority to revoke and rescind the Approval Order and further order that Charter cease its operations in New York State previously served by" TWC, said an order. The MVPD must file within 60 days a plan to transition to a successor provider or providers, the PSC said. During transition, it must keep complying with all local franchises in New York and other state laws and regulations, the agency said. Charter must ensure no service interruptions to customers or face further PSC action, it said.
The company failed to satisfy a June 18 target by 22,000 passings and didn’t make a sufficient good-cause showing “for this latest miss,” said an order directing court action. “This step is being taken after repeated attempts by the Commission, through administrative enforcement, which have not resulted in changes to Charter’s commitment to meet the requirements of the Network Expansion Condition.” Charter was already defending a New York lawsuit in the state supreme court on the company’s actual-versus-advertised internet speeds (see 1806210060). Discovery ends in mid-December, said a schedule posted last week in case 450318-2017E.