Reuters is reporting the Republican-dominated Federal Communications Commission has reversed a pro-consumer mandate requiring Charter to overbuild at least one million homes to offer competitive internet service. The requirement was imposed on Charter Communications as part of the FCC’s approval of its merger deal with Time Warner Cable and Bright House Networks in 2016.

The overbuild requirement would have forced Charter to directly compete with incumbent phone and/or cable operators in areas where only one provider now offers service.

Pai

The petition to repeal the condition was personally circulated by FCC chairman Ajit Pai who didn’t feel the FCC should mandate cable companies to compete as part of a merger approval.

Former FCC chairman Thomas Wheeler pushed for the requirement, noting that Charter’s merger offered an opportunity to incorporate pro-consumer deal conditions like increased competition. The overbuild requirement would have required Charter to expand its cable service in areas where only telephone company DSL was available or give an opportunity for consumers to have a choice of cable operators. Pai’s effort gives Charter a big break, now only requiring the company to offer high-speed internet as a de facto monopoly to two million new customers where no internet service currently exists.

It also represents a gift to small independent cable operators and their lobbying arm, the American Cable Association, who feared the overbuild requirement would bring Charter into their service areas as an unwelcome competitor that would have “devastating effects on the smaller broadband providers Charter will overbuild” and could put them out of business.

The Competitive Enterprise Institute has its own pending filing asking the FCC to eliminate other deal conditions, including a prohibition on data caps Charter must adhere to for up to seven years.

One of America’s handful of cable overbuilders that provide competing cable television service will be ripe for an acquisition or merger after launching an initial public offering that could raise as much as $750 million and make them a juicy target for a takeover.

WideOpenWest, which customers know better as WOW!, provides almost a half-million customers in Alabama, Florida, Georgia, Illinois, Indiana, Maryland, Michigan, Ohio, South Carolina and Tennessee with a choice of a second cable company. It has consistently won reasonably high scores in ratings issued by Consumer Reports and often offers better speed and service than incumbent providers. WOW has been quietly and slowly expanding service, but in the last two years has attracted the interest of private equity firms and Wall Street banks. One of those equity firms — Crestview Partners, invested $125 million in WOW 18 months ago. UBS Investment Bank and Credit Suisse have teamed up to manage the IPO.

Jeff Marcus, who also happens to be a partner in Crestview, has been named chairman of WOW. Avista Capital Partners still owns almost 60% of the company.

By entering the public market, WOW could quickly come under pressure from Wall Street analysts to get out of the cable business by selling the company and profiting investors. The drumbeat for mergers and acquisitions has only intensified with a corporate-friendly Trump Administration that has sought to appoint “hands-off” regulators at the FCC and Justice Department. There are several likely buyers — the various cable companies that face direct competition from WOW and would like shut the company down and upstarts like Altice, which has targeted smaller cable operators like Cablevision and Suddenlink.

Marcus has telegraphed he is isn’t in a hurry to spend investors’ money, which could leave WOW flush with cash, something else attractive in a takeover. Multichannel News reports that one of WOW’s “main directives” would be to offer “video, voice, and data services in packages that consumers want,” — hardly a revolutionary concept. In a July interview, Marcus made it clear there was ‘no burning need to increase scale.’ That tells would-be buyers the company hasn’t any immediate plans to spend a lot of money or expand service, things that could drive away some buyers.

“It’s all opportunistic,” Marcus said. “When I started Marcus Cable with 18,000 subscribers, I had no idea that it would get to 1.3 million. One thing led to another and we took advantage of opportunities as they presented themselves. I think that’s what is going to happen here.“

A wealth opportunity for Marcus would be collecting significant proceeds selling the operation. There is a good chance WOW will either buy other companies or be bought itself as the cable industry consolidation wave continues. Other operators about its size — Cable ONE and until recently NewWave Communications, have been considered takeover targets for years. NewWave was acquired by CableONE in January for $735 million in cash, coincidentally slightly less than the potential upper limit of WOW’s proceeds from an IPO.

The French press continues to report, with some bewilderment, that U.S. consumers are being fleeced by the country’s biggest telecom companies while politicians do nothing to regulate a duopoly market or force more competition to stop the pick-pocketing. The Francophone press is responding to reports that cable baron Patrick Drahi is vacuuming up profits from his American subsidiary Altice USA — which owns Cablevision and Suddenlink — and is likely to get much bigger in 2017, all thanks to the U.S. regulatory landscape.

“Americans live under a corrupt politician-sanctioned broadband monopoly in many places, and this assures telecoms operators in the United States can earn astounding profit margins impossible in European markets,” notes Giga France.

Le Figaro reported this month Altice’s directors had an easy job figuring out where much of the global conglomerate’s future profits would come from: the United States.

“Given the structure of the telecom market, [Altice’s] margin for growth in France is low, whereas in the United States it is considerable,” the newspaper reported. The reason is a persistent lack of competition, made possible by politicians that accepted the recommendations of lobbyists and corporate special interest think tanks on how to structure the broadband market.

Drahi

In the United States, providers have won near-absolute control of their networks and need not share access with competitors. Large telecom companies argued that requiring shared access to their infrastructure would threaten investment and stall broadband network deployment. Ironically, some even argued it would lead to reduced competition. But the reverse turned out to be true and the United States has fallen far behind in competition and network quality, while more traditionally regulated markets in Europe now enjoy low prices, faster internet speeds, and a larger number of competitors vying for consumers’ business.

Wall Street indirectly conspires to keep the status quo by discouraging the entry of new fixed line providers, claiming it will destroy shareholder value and consume billions of investor dollars constructing competing networks that will be unlikely to attract enough subscribers fast enough to give shareholders a timely return on their investment.

With a provider-friendly Trump Administration in power, and more importantly the installation of Ajit Pai, a notorious telecoms-friendly regulator as chairman of the FCC, Altice’s directors consider 2017 to be one of the most inviting years for expansion in the United States.

Le Figaro reports there is plenty of opportunity for Altice’s empire to become more dominant in North America. In France, its SFR unit now holds a 25% share in the fixed line market, but that number is unlikely to grow much considering ongoing price wars that come from fierce competition in France. In the U.S., Altice only holds barely 3% of the market, and Drahi has made no secret he would like to become at least the second-largest provider in the United States.

Les Echos suggested Altice is quietly preparing a full-scale ambush on the U.S. market starting with a much-anticipated IPO expected this year. Wall Street doesn’t welcome Altice entering the U.S. cable business as a market disruptor. Instead, investment banks are willing to loan huge sums to Altice for the purpose of acquiring telecom companies, maintaining the existing duopoly of one cable and one phone company for the majority of Americans.

“In the past, every time he introduced a publicly traded asset, Drahi proceeded with acquisitions: Numericable, in 2013, SFR the following year; and by 2015 Cablevision and Suddenlink in the U.S.A.,” reports Les Echos.

In France, up to four providers compete head to head for fixed line telecom customers. In other parts of Europe, telecom networks are often forced open to competitors. Neither is the case in the States, and consumers are paying very high telecom bills as a result.

Les Echos notes the U.S. cable business is so lucrative, “never before has a French company made such an important investment in the country of Uncle Sam.”

Suddenlink and Cablevision: Consistent source for fat revenue growth for Altice.

Drahi told investors more than a year ago he wanted to eventually generate 50% of Altice’s business overseas, primarily in the profitable U.S.

Altice has so far only bought up smaller cable operators, but observers expect Drahi will aim for much larger targets, including the possibility of buying out a wireless provider or even targeting Comcast, AT&T, or Charter. Les Echos quotes Vincent Maulay, an analyst at Oddo who notes that Drahi may be able to collect future assets inexpensively if Verizon decides to move on an acquisition of Charter. Regulators will likely force the combined company to shed cable assets in New York State where Verizon and Charter currently compete. That would allow Drahi’s Cablevision to pick up divested service areas, perhaps even in Manhattan.

Nine years after Earthlink began promoting its $29.99 six-month offer for alternative broadband service for Time Warner Cable customers, the completion of Charter Communication’s takeover of Time Warner Cable has eliminated a clever way for customers to get broadband rate relief.

For almost a decade, savvy broadband-only Time Warner Cable customers have been able to bounce between new customer promotions at Time Warner Cable and Earthlink. When a year-long promotion with Time Warner Cable ended, a customer could switch seamlessly to Earthlink for six months and pay just $29.99 a month — charged to their Time Warner Cable bill. When the Earthlink promotion ended, customers were entitled to enroll as a new Time Warner Cable broadband customer and pay a lower rate for up to one year. After that, back to Earthlink.

No more.

Charter Communications closed that loophole this month and now prohibits existing Charter/Spectrum customers from getting promotional rates from Earthlink.

Once Charter customers end a broadband-only new customer promotion, currently $44.95 a month for one year, the rate jumps to $64.99… and stays there indefinitely.

The new restrictions appear in fine print on Earthlink’s website:

Charter Communications eliminated lower-cost broadband options for its customers, but claims its single remaining advertised offer (60Mbps in non-Maxx areas, 100Mbps in former TWC Maxx cities) offers a greater value because it is faster than Time Warner Cable’s Standard Internet 15Mbps plan and ends Time Warner’s practice of charging a $10 modem rental fee.

But it also costs more than earlier promotions at Earthlink ($29.99) and Time Warner Cable ($34.95).

Charter has junked Earthlink’s former promotion for Time Warner Cable customers.

“My broadband bill is now double what it used to be because I cannot switch to a broadband promotion with Charter as my Earthlink promotion ends this month,” reports Jim Deneck, a former Time Warner Cable customer in South Carolina. “I was paying $30 a month and now Spectrum wants to charge me $65 a month. The modem fee savings is irrelevant to me because I bought my modem years ago.”

Charter/Spectrum customers hoping for a better promotion from Earthlink are now also out of luck.

“After Spectrum pricing took effect in my area, my bill went up $30 a month,” writes Stop the Cap! reader Gennifer in Maine. “I was hoping to switch back to Earthlink but after placing an order with Earthlink, a representative from Charter/Spectrum called me and denied my request. It’s false competition. Since when is it okay to sign up with one company and then get a call from another telling me I am not allowed to take my business elsewhere. It’s monopoly abuse!”

Earthlink is entirely dependent on Charter Communications allowing them to resell service over Charter’s cable lines. Earthlink has been cautious not to outcompete either Charter or its predecessor Time Warner Cable, and charges roughly the same rates as a customer would get direct from either cable operator. The only benefit of the arrangement for customers was the ability to bounce between new customer promotions to pay the new customer rate indefinitely, but Charter has made sure that practice stops.

Gennifer did manage to ultimately outwit Charter, but at the cost of time and inconvenience.

“I called Spectrum and canceled my service and we signed up as a new customer under my husband’s name,” Gennifer writes. “Unfortunately, Charter won’t process an order at an address with existing service so you have to cancel and turn in equipment first and then place an order under a different name to qualify for a promotion. They really don’t want to give their customers a break or a discount. I wish we had other options.”

The average household in the United Kingdom pays 9% less for broadband, phone, and television service than a decade ago, even though data usage has exploded and the country is embarked on a massive broadband upgrade effort. Contrast that with reports the average household in the United States is facing rate increases averaging 8-10% annually, even though the costs to deliver service have been declining for years.

According to a Ofcom report reviewing price trends, the average British resident today pays an average of $164.35 a month for broadband, television, landline and mobile phone services. Many U.S. households spend close to that amount before including their mobile phone bill.

In Great Britain, where competing companies have open access to the country’s telephone network, the average price of an entry-level broadband and landline package dropped at least 25% to $42 a month. A similar package from Charter Communications costs $64.98 a month for the first year, before prices rise to over $80 a month in year two. In the United Kingdom, a triple play package of phone, TV, and internet access now averages $53.14 a month. In the United States, it averages well over $100 a month.

The British, like their North American counterparts, are voracious consumers of internet data, consuming 132GB per household in 2016, up from 8GB in 2008. But despite increased usage, the cost of internet service in Britain has dropped, even with heavy investment in fiber optic network upgrades.

In Great Britain, multiple providers compete by offering services over existing telecom networks. In the last three years, customers have been able to choose from 551 different dual and triple play offers from several different companies, up from 294 just three years ago. Most now choose discounted bundles of multiple services under a single provider. But customers can still choose a plan that most closely fits their needs. In the United States, some providers like Charter Communications are eliminating most ions for customers, preferring to sell a more-costly, one-size fits all broadband and phone option.