Feds give green light to huge cable merger

Federal regulators on Monday gave Charter Communications the green light to finish its $78 billion acquisition of Time Warner Cable with a number of conditions.

The Justice Department signed off on a settlement to allow the merger to go forward. And Federal Communications Commission Chairman Tom Wheeler circulated an order to approve the merger to the four other commissioners.

The merger, which also includes the $10.4 billion purchase of Bright House Networks, will create the nation’s third-largest cable TV provider with about 17 million subscribers and the second-largest Internet service provider. 

The deal will come with a series of conditions.  Charter will be barred from imposing data caps on its Internet customers for seven years. For that time, it will also be barred from charging interconnection fees on web companies like Netflix, which are responsible for a significant amount of online traffic.

Charter had voluntarily agreed to those conditions for three years, winning over critics of past merger proposals, like Netflix.  

“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 in a statement after the deal was announced.

The Justice Department on Monday sued in order to enforce its own conditions on the cable TV side of the merger.

With its huge share of the TV market, Charter won’t be allowed to impose terms on TV programmers that would limit the distribution of their content online. The Justice Department said Time Warner Cable, with its 11 million subscribers, has been the “most aggressive” cable company in trying to negotiate those restrictions on TV programmers.

“Under the terms of the proposed settlement, New Charter will be prohibited from entering into or enforcing any agreement with a programmer that forbids, limits or creates incentives to limit the programmer’s provision of content to one or more [online video distributors],” the Justice Department said.

The proposed merger will still have to be approved by the entire FCC. But the circulation of the order to approve by the chairman signals that he has the votes to get it through. The California Public Utilities Commission will also have to sign off on the deal. 

From the beginning, the Charter merger appeared to face fewer hurdles than Comcast’s scuttled bid for Time Warner Cable last year.

Charter’s early voluntary positions on net neutrality and interconnection won over companies like Netflix. However, advocates pressed hard throughout the months-long regulatory review to strengthen the conditions.

An independent monitor will be appointed to help make sure the conditions are followed.

“The cumulative impact of these conditions will be to provide additional protection for new forms of video programming services offered over the Internet,” FCC Chairman Tom Wheeler said. “Thus, we continue our close working relationship with the Department of Justice on this review.”

The terms have not satisfied the harshest critics of the merger. In a statement, the advocacy group Free Press said Wheeler “just tarnished his legacy as head of the FCC.”

–This report was updated at 4:30 p.m.