Justice Department, FCC Approve Charter-Time Warner Cable Deal -- With Some Conditions

The U.S. Department of Justice and the Federal Communications Commission Monday gave Charter Communications their approval to acquire Time Warner Cable for $78 billion -- with some conditions.

The combination of Time Warner Cable and Charter will form one of the largest service providers in the country.

The Department of Justice Monday also approved Stamford, Conn.-based Charter's related $10.4 billion acquisition of Bright House Networks. The merger of the three cable providers will make up "New Charter," according to a statement from the Justice Department. New Charter will be the second-largest Internet service provider in the U.S. behind Comcast, and the third-largest cable provider behind Comcast and AT&T.

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Andrew Pryfogle, senior vice president of cloud transformation for Petaluma, Calif.-based Intelisys, a master agent that partners with Time Warner Cable and Charter, said the approval will free up partners of both companies who have been waiting for a decision to be reached.

"[The decision] removes a lot of uncertainty and allows the channel to get back to the business of selling," Pryfogle said.

The deal and its conditions are still subject to court approval. FCC Chairman Tom Wheeler circulated an order approving the acquisition late Monday. California's utility regulator must also approve the deal, a decision that is expected to come in May.

’We are pleased to reach this critical step in the regulatory review of our merger with Charter, and remain optimistic that the transaction will be finalized soon,’ said Time Warner Cable Chairman and CEO Rob Marcus in a statement on the provider's corporate blog.

Both the Justice Department and the FCC have specific demands for the acquisition.

The Justice Department said it doesn't want Charter to limit access to streaming video providers by putting contractual restrictions on them, which could limit content distribution. The FCC, meanwhile, said it wants to prohibit Charter from using data caps or charging consumers more for using more data, a practice that some in the industry employ today. The FCC has said it will use an independent monitor to ensure Charter complies with the conditions of the deal.

The FCC and the Justice Department said the imposed conditions will help block large providers from making online video services -- such as Netflix and Hulu -- less competitive or less appealing to customers.

The FCC is also requiring Charter to roll out high-speed Internet access to another 2 million customers within five years, with about 1 million customers located within a competing broadband provider's service base.

When a service provider's size and reach hits such a high level, an inverse effect on pricing could ripple across the industry, said Patrick Lee, business development executive for Morristown, N.J.-based solution provider Alliant Technologies.

"[New Charter] will be a huge company once it comes together, but we don’t anticipate pricing impact -- at least not at this point," lee said.

Alliant Technologies has a broadband aggregation service that taps underlying broadband providers. Alliant doesn't foresee feeling much fallout from the deal but will be monitoring any impact, Lee said.

"I would think if we see anything, it could actually improve pricing and access to broadband services," he said.

Once complete, the acquisition will result in a dramatically larger cable and fiber footprint for Charter. The provider will also pick up Time Warner Cable's NaviSite, which Intelisys' Pryfogle called a "world-class cloud platform."

"The combined story of these companies is powerful,’ he said.