A behind the scenes struggle between DISH Networks and Charter Communications over DISH’s online video service Sling TV has led to an admission by a Wall Street analyst that “usage-based billing” is an important tool for stifling over-the-top online video competition.

On Dec. 21, DISH’s legal team sent a letter to the FCC complaining about Charter’s attempts to “address” the competitive threat of Sling TV, DISH’s online video alternative to cable television.

“Charter’s laser-like focus on Sling TV shows that it views Sling TV as a serious competitive threat rather than a benign interest,” wrote DISH’s attorneys. “Charter is focused on protecting its video subscriber base rather than enhancing the broadband Internet experience for its subscribers. Charter’s documents further reveal thinly veiled complaints to programmers about making their programming available to Sling TV and other [online video] products.”

In the highly redacted filing, Dish suggested Charter was making thinly veiled threats to Disney and Scripps Networks over their willingness to allow their content to be included on Sling TV. DISH has complained to the FCC the cable company was attempting to undermine the new competitor.

A sample from DISH lawyer’s highly redacted submission to the FCC shows much of this fight is occurring out of public view.

On Thursday, the FCC also received an ex parte filing alerting the public that Time Warner (Entertainment) and HBO executives privately met with FCC staff last week, at their invitation, telling them Charter was likely threatening other programmers with unspecified action if they continued to allow their programming to appear on Sling TV.

In that meeting, HBO executives suggested “New Charter” — the combination of Charter Cable, Time Warner Cable, and Bright House Networks — “would be inclined to take action directed at programmers” if services like Sling TV continued to grow. Those threats seem to have been confirmed by Charter CEO Thomas Rutledge, who warned the company would take ‘competitive action’ against programmers selling content to the competition.

In the past, several cable executives have hinted that allowing wider distribution of cable networks over competitors’ networks or direct-to-consumer would dilute the value of those networks to cable operators. That would likely lead to demands for reduced prices when cable networks sought contract renewal. Some cable companies might also drop those networks altogether, arguing customers can get them elsewhere. Either retaliatory move would cut viewer numbers, which in turn would force networks to charge less for advertising.

That the FCC would invite further discussions on the issue of online video competition has some on Wall Street concerned about the prospects of Charter winning approval to buy Time Warner Cable and Bright House.

On Friday, BTIG analyst Richard Greenfield wrote investors, wondering if “we should be less confident in deal approval than we currently are.” With both the Justice Department and the Obama Administration pushing hard for competitive online alternatives to cable television, the FCC may be worried allowing New Charter to have 25-30 percent of the broadband market. With broadband a prerequisite for signing up for services like Sling TV, Rutledge’s “competitive action” could dissuade consumers from choosing online video instead of cable television.

New Street Research analyst Jonathan Chaplin admitted one of Charter’s strongest potential weapons against online video competitors is usage-based Internet billing. That Charter has committed to avoiding usage pricing for the next three years would seem to delay any attempt by Charter to deploy usage caps and usage pricing to stop online competition.

But three years may also not be long to wait, especially if the current “cap-free” commitment helps win merger approval. Chaplin believes Charter’s current commitment to not impose usage caps weakens DISH’s argument, but it could be the subject of special conditions from regulators if the deal is ultimately approved.

The topic appears to be sensitive enough to have provoked Charter to push back hard against DISH and Time Warner (Entertainment) in a blog post published last Friday afternoon.

We are happy to report that the vast majority of stakeholders are pleased with the merger and excited about New Charter.  It’s no surprise, though, that there are some who seek to use the regulatory review process to extract concessions or conditions that further their business goals.  Following the well-worn play book, to achieve that goal, they must first try to discredit the merger, but their allegations are often not based on the facts. For example, charges by Dish and Time Warner’s HBO that New Charter will harm Online Video Distributors simply do not make sense. As we have demonstrated, there is no more OVD-friendly provider than Charter, with our slowest speed at 60Mbps, no data caps, no usage-based billing, no annual contracts and no modem fees. Additionally, we’ve committed that New Charter will offering settlement-free peering to Internet companies, which means we will continue to invest in interconnection to avoid congestion. Netflix CEO Reed Hastings, a supporter of the transaction, stated “the key thing about the Charter deal is it’s all Internet companies that benefit — us, Hulu, Amazon, HBO Now — so that we can all compete for consumers’ affection.”

In a sign federal regulators are taking the behemoth merger of Charter Communications, Time Warner Cable, and Bright House Networks seriously, the FCC today announced it was temporarily stopping the clock on the merger review required to approve or reject it.

“The commission has a strong interest in ensuring a full and complete record upon which to base its decision in this proceeding,” the FCC wrote in a statement. “Pausing the clock will ensure that commenters have sufficient time to review and comment on this new information, and will provide commission staff with the necessary time to review both the applicants’ materials and any responses.”

The delay is expected to last at least 15 days. The FCC considers such mergers under an informal 180-day “shot clock” that was designed to make certain mergers under review would receive prompt consideration by regulators. But the FCC treats the clock as a suggestion, not a mandate, and has often delayed contentious mergers, sometimes to a degree where the parties involved recognize the direction the review is headed, and withdraw their application.

Charter insists that is not the case here.

“We have recently submitted supplemental information to underscore the benefits of these transactions and it is expected that the FCC would want to give the public time to comment,” Charter said in a statement. “We are working well with the FCC on its review of our deal and continue to look forward to a timely approval.”

Comcast said the same thing when its merger application for Time Warner Cable stalled in federal and state regulators’ offices. Its merger application was eventually voluntarily withdrawn.

While planning to quietly drop Time Warner Cable’s budget-minded, unrestricted $14.99 Everyday Low Price Internet package after it acquires the company, Charter Communications is celebrating a “new and improved” low-income Internet offer that will likely discriminate against current customers while protecting company profits.

Charter Communications announced this month it would start offering qualified low-income families and seniors 30/4Mbps broadband service for $14.99 a month within six months of closing its acquisition deal with Bright House Networks and Time Warner Cable. Charter claims its newest program will offer the highest broadband speed of any similar low-income discount Internet plan, and will include discounts for cable television and phone service as well.

“Recognizing the central role broadband plays in our daily lives and the economic challenges faced by many Americans today, we look forward to launching this offering that will provide more consumers a superior broadband service,” said Tom Rutledge, president and CEO of Charter Communications. “Our industry-leading low-cost broadband service is just one of the many benefits these transactions will bring to our customers. We look forward to providing this superior broadband service to underserved families and seniors throughout Charter’s footprint.”

Time Warner Cable offers $14.99 to anyone without paperwork. Charter isn’t.

But Charter’s discount Internet offer will replace Time Warner’s current $14.99 discount Internet program, available to any customer without pre-conditions or term contracts. Charter’s proposal to regulators states the company plans to replace multiple tiers of broadband service offered by Time Warner and Bright House with just two options — 60 and 100Mbps tiers that will eventually cost customers at least $60 a month — four times the cost of Time Warner’s budget-minded alternative.

Unlike Time Warner’s Everyday Low Price Internet, customers will have to qualify for the discounted program, which will discriminate against current customers, individuals and families without school age children, and senior citizens that do not receive additional assistance from the government.

Among the most onerous restrictions, Charter plans to protects itself from revenue cannibalization by prohibiting existing broadband customers from paying less by signing up for Charter’s new discounted plan. Customers will have to voluntarily drop Bright House/Charter/Time Warner Cable Internet service for at least 60 days before they can apply for Charter’s new low-cost option.

Other requirements limit participation only to families with students participating in the National School Lunch Program or seniors age 65 or older who also receive Supplemental Security Income program benefits. In all cases, participating customers must pay off all current and any past charges still owed to Bright House, Charter, and/or Time Warner Cable before they can enroll.

Charter included in a press release announcing the program a list of organizations it claims prove “widespread support for Charter’s low-cost broadband service.” Charter did not mention most of the groups quoted have a long history supporting the telecom industry, mostly after cashing generous contribution checks from the cable and phone companies involved:

National Urban League: A notorious friend of big cable and phone companies, the Urban League is a regular supporter of telecom mergers and opposes Net Neutrality. The Urban League has compiled a poor record among civil rights groups that routinely favors corporate contributors over the need of their constituencies. Its president, Marc Morial, has attracted the attention of the Center for Public Integrity, which published an exposé about the group and its leadership in 2014.

Sharpton

National Action Network, an organization founded and run by Reverend Al Sharpton: Sharpton’s group no longer discloses its corporate donor list, but large telecom companies often have the support of NAN on everything from mergers and acquisitions to blocking consumer protection regulation. An entertainment company executive in California called Sharpton corporate America’s “least expensive negro” for his willingness to advocate for big cable and phone companies in return for relatively small donations to his organization. National Action Network Inc. is on Charity Navigator’s Watchlist.

League of United Latin American Citizens: Time Warner Cable is an existing Corporate Alliance member of LULAC, a group that routinely supports large telecom company mergers and acquisitions and often advocates on their behalf while accepting corporate contributions.

Connected Nation: A group Public Knowledge says is sponsored by telephone and cable companies and represents their interests.

Digital Divide Partners LLC: Two guys from the Bronx running a website with spelling and grammar issues. The site doesn’t seem to have been updated since May 2015 and only then to post a generic thank you letter from the Manhattan Borough President Gale Brewer.

NOBEL Women: In addition to the company’s sponsorship of group functions, Bright House’s corporate vice president for government and industry affairs – Marva Johnson, was a featured participant at the group’s 2014 annual conference.

Rainbow PUSH Coalition: Jesse Jackson’s group has come under fire for favoring the corporate agendas of its donor base. Rainbow/PUSH has a long record supporting corporate telecom mergers, including SBC and Ameritech back in 1999, AT&T and Tele-Communications, Inc. in 1999, AT&T and BellSouth back in 2006, Comcast and NBCUniversal in 2011, among many, many others. The coalition, supposedly representing the interests of average Americans, has also filed comments with regulators opposing a-la-carte cable TV pricing (pay only for the channels you want) and railing against Net Neutrality.

Apple TV (version 4)

The cable industry is on the cusp of saving billions of dollars annually buying and maintaining set-top boxes and cable modems if they can convince customers to buy their own instead.

Cable companies collectively spend as much as $10 billion a year on customer premise equipment (CPE), ranging from simple Digital Transport Adapters for older analog-only TV sets, to the most advanced cloud-based set-top boxes and DVRs.

Cable industry analyst Craig Moffett believes the cable industry will save a fortune and lose one as consumers buy their own set-top equipment like Apple TV or Roku boxes and buy their own modems to avoid monthly rental charges. That means cable companies will likely forfeit a considerable percentage of their leasing/rental revenue.

“The idea that customers will eventually consume video through their own Apple TV or Roku boxes, or simply connect their cable to their smart TVs, Xboxes and Sony PlayStations, is neither new nor far-fetched,” wrote Moffett. “There are good reasons to believe that CPE spending may come down significantly in future (product) generations.”

Most cable equipment is leased to customers and often installed by a cable operator that covers the costs of sending a truck to the customer’s home. After installation, the average American cable subscriber pays $89.16 a year renting a single cable box, and for those with multiple boxes and a DVR, those costs rise to $231.82 a year. A cable modem can be purchased for $50-90 on average, and usually pays for itself in less than one year of rental charges charged by many cable operators.

Comcast X1

Even with more capable consumer-targeted set tops like the latest Apple TV ($149-199) and Roku devices now approaching $100, it will not take long for consumers to recoup their money avoiding rental fees.

Cable operators like Time Warner Cable now carry the majority of their cable channels on apps accessible through devices like the Roku. Customers will not get the flashiest on-screen experience, but they do get a welcome alphabetical channel lineup and a reasonably good picture. Future generations of the boxes are expected to enhance usability and picture quality.

Cable operators like Charter stand to gain the most. If their merger with Time Warner Cable and Bright House Networks is approved, all three companies are expected to see reductions in equipment expenses estimated at $2.97 billion in 2015 to as little as $917 million by 2019, according to Moffett. Charter is already expecting to see its capital spending fall more than a billion dollars a year, from $6.97 billion to $5.83 billion by 2019, but consumers should not expect to see the savings passed on to them.

Cable operators can also expect considerable savings after fully deploying DOCSIS 3.1 technology that powers their broadband services. The next generation cable broadband platform offers increased efficiency and flexibility that will allow operators to sell faster speeds.

Comcast may stand apart from others believing deluxe set-top boxes like its X1 are urgently needed to keep cable TV customers satisfied. One of Comcast’s largest planned expenses is deploying millions more of these advanced platforms to customer homes in 2016.

Any final approval of Charter Communication’s planned acquisition of Time Warner Cable and Bright House Networks will likely not come before next summer, as regulators in California decide to take a closer look at the blockbuster merger deal that would make Charter the second largest cable company in the country.

An administrative law judge is contemplating the merger’s impact on California, and a decision is unlikely to come before May 2016, with a final vote of the California Public Utilities Commission tentatively scheduled for June 16th. The judge agreed with consumer groups that the deal warrants evidentiary hearings — a sign the deal deserves additional scrutiny.

New York State’s Public Service Commission is also still reviewing the transaction, although it is expected to render a decision within the next few months. On the federal level, the FCC has also not held back, recently requesting answers to a number of questions regarding John Malone’s involvement in the future of “New Charter.” Malone remains Charter’s biggest single shareholder and could wield considerable control over New Charter’s operations. Considering Malone’s long history of antagonizing customers and engaging in what lawmakers called anti-competitive behavior during his realm at Tele-Communications, Inc. (TCI), regulators may not want to see history repeat itself.

What was originally anticipated by industry observers to be an ‘easy approval,’ is now looking more like Comcast’s failed bid for Time Warner Cable, as regulators seem to be in no hurry to give Charter’s deal a green light.

If regulators do ultimately approve the deal, it is likely to come with a number of conditions designed to at least temporarily protect consumers and competitors. Stop the Cap! argued in filings with state and federal regulators Charter’s proposal was uncompelling and consumers were unlikely to benefit from the deal. Time Warner Cable’s ongoing Maxx upgrade program delivers faster Internet speeds and better service than Charter’s more modest proposal offering upgrades up to 100Mbps. Time Warner Cable Maxx offers customers up to 300Mbps broadband for the price the company now charges for 50Mbps.