All signs are pointing to a relative cake walk for Charter Communications’ executives this afternoon as they seek final approval from the California Public Utilities Commission to acquire Time Warner Cable systems in the state, with the help of an Administrative Law Judge that is recommending approval with a minimum of conditions.

In fact, the strongest condition Charter may have to accept in California came by accident. As part of Charter’s lobbying effort, it proposed a set of voluntary conditions it was prepared to accept, claiming to regulators these conditions would represent benefits of approving the transaction. One of those was a temporary three-year commitment to abide by the FCC’s Open Internet Order, which among other things bans paid prioritization (Internet fast lanes), intentionally blocking lawful Internet content, and speed throttling your Internet connection.

Somewhere along the way, someone forgot to include the language that sunsets (or ends) Charter’s voluntary commitment after three years.

Without it, Charter will have to abide by the terms of the FCC’s Open Internet Order forever.

Soon after recognizing the change in language, Charter’s lawyers appealed to the CPUC to correct what it called a “drafting error.”

“[New Charter does] not seek modification of the second sentence, which matches their voluntary commitments, but believe[s] that the three-year limitation in the second sentence was intended to— and should—apply to the first sentence as well,” Charter’s lawyers argued two weeks ago.

In other words, the Administrative Law Judge’s apparent attempt to ‘cut and paste’ Charter’s own press release-like voluntary deal commitments into his personal recommendation went horribly wrong. Charter’s lawyers prefer to call it an “intent to track” the company’s voluntary commitments. Either way, Charter’s lawyers all call the new language unfair.

“Holding New Charter indefinitely to FCC rules even after the FCC’s rules are invalidated or modified, and irrespective of future market conditions or the practices or rules governing New Charter’s competitors, would be a highly unconventional requirement,” the lawyers complained.

That provides valuable insight into how “New Charter” is likely to feel about Net Neutrality three years from now. Charter’s lawyers argue it would be unfair to hold them to “invalidated” rules — the same ones the company itself has voluntarily embraced as a condition of approval, but only for now.

Remarkably, in the final revision of the Administrative Law Judge’s recommendations to the CPUC recommending approval, the language that is keeping Charter’s lawyers up at night is still there:

New Charter shall fully comply with all the terms and conditions of the Federal Communications Commission’s Open Internet Order, regardless of the outcome of any legal challenge to the Open Internet Order. In addition, for a period of not less than three years from the closing of the Transaction, New Charter (a) will not adopt fees for users to use specific third-party Internet applications; (b) will not engage in zero-rating; (c) will not engage in usage-based billing; (d) will not impose data caps; and (e) will submit any Internet interconnection disputes not resolvable by good faith negotiations on a case-by-case basis.

Charter’s new service area, including Time Warner Cable and Bright House customers.

If it remains intact through the vote expected this afternoon, New Charter will have to permanently abide by the FCC’s Open Internet Order, with no end date. That condition will apply in California, and because of most-favored state status, also in New York.

Stop the Cap!’s recommendations to the CPUC are also in the same document, although our views were not shared by the judge:

Stop the Cap! objects to [New Charter’s] 3-year moratorium on data caps and usage based pricing for broadband services. It argues that such bans should be made permanent or, if not permanent, should last at least 7 years in parallel with the lifespan of the conditions imposed in the FCC’s approval of the parent company merger. In addition, Stop the Cap! objects to what it asserts will be a major price increase for existing Time Warner customers when Charter’s pricing plans replace Time Warner’s pricing plans.

More broadly, Stop the Cap! president Phillip Dampier called the revised recommendations to approve the deal underwhelming and disappointing.

“By window-dressing what is essentially Charter’s own voluntary offer to the CPUC, the commission is continuing to miss a golden opportunity to win deal conditions that will meaningfully benefit Californian consumers that will otherwise get little more than higher cable and broadband bills,” Dampier told Communications Daily. “Virtually everything Charter is promising customers is already available or soon will be from Time Warner Cable, often for less money. Time Warner Cable committed to offering its customers 300Mbps speeds, no usage caps or usage billing, and all-digital service through its Maxx upgrade program, expected to be complete by the end of 2017 or 2018. The CPUC is proposing to allow New Charter to wait until 2019 to provide 300Mbps service and potentially cap Internet service three years after that, four years less than what the FCC is demanding.”

Among the conditions Charter will be expected to fulfill in return for approval of its merger in California:

• Within a year of the closing of the merger deal, New Charter must boost broadband download speeds for customers on their all-digital platform to at least 60Mbps, an upgrade that is largely already complete.
• Within 30 months, New Charter must upgrade all households in its California service territory to an all-digital platform with download speeds of not less than 60Mbps, an upgrade that has already been underway for a few years.
• By Dec. 31, 2019, New Charter shall offer broadband Internet service with speeds of at least 300Mbps download to all households with current broadband availability from New Charter in its California network. Time Warner Cable essentially promised to do the same by early 2018, with many of its customers already getting up to 300Mbps in Southern California.
• While Charter talks about a bright future for the Time Warner customers joining its family, the company has not done a great job maintaining and upgrading its own cable systems in parts of California. Many smaller communities still only receive analog cable TV from Charter, with no broadband option at all. Therefore, the CPUC is giving New Charter three years to deploy 70,000 new broadband “passings” to current analog-only cable service areas in Kern, Kings, Modoc, Monterey, San Bernardino and Tulare counties. But the CPUC is giving New Charter a break, only requiring them to offer up to 100Mbps service in these communities.
• Time Warner Cable and Bright House customers in California will be able to keep their current broadband service plans for up to three years. Customers will also be allowed to buy their own cable modems and set-top boxes, but there is no requirement New Charter compensate customers who do with a service discount.
• Within six months of the deal closing, New Charter must offer Lifeline phone discounts within its service territory in California.
• New Charter must print and distribute brochures explaining the need for backup power to keep phone service working if electricity is interrupted. Those brochures must be available in multiple languages including, but not limited to, English, Spanish, Chinese and Vietnamese, as well as in accessible formats for visually impaired customers.

The CPUC is also expected to adopt Charter’s own voluntary commitments not to impose usage caps, usage billing, modem fees, and other customer-unfriendly practices for three years, a point that drew strong criticism from Stop the Cap! and the California Office of Ratepayer Advocates for being inadequate.

Both groups proposed that bans on data caps and usage billing should stay in place “until there is effective competition in Southern California, or no shorter than seven years after the decision is issued, whichever is later.”

ORA’s program supervisor Ana Maria Johnson believes the proposed changes don’t go far enough to “mitigate the harms that the merger will likely cause, especially in Southern California.”

Dampier was surprised how little the CPUC seemed to be asking of New Charter, especially in comparison to regulators in New York.

“The New York Public Service Commission did a more thorough job protecting consumers by insisting on faster and better upgrades, including readiness for gigabit service, and the same level of broadband service for all of New Charter’s customers in New York,” Dampier argued. “It also demanded and won meaningful expansion in rural broadband, low-cost Internet access, protection of New York jobs, and improved customer service. It is remarkable to us the CPUC did not insist on at least as much for California.”

The CPUC is expected to take a final vote on the merger deal this afternoon, starting at 12:30pm ET/9:30am PT and will be webcast. It is the 20th item on the agenda.

In a decision that relied heavily on trusting Altice’s word, the Federal Communications Commission quietly approved the sale of Long Island-based Cablevision Systems to a company controlled by European cable magnate Patrick Drahi.

The decision did not come with an overwhelming endorsement from staffers at the FCC’s Wireline Competition Bureau, the International Bureau, the Media Bureau, and the Wireless Telecommunications Bureau that jointly authored the order approving the deal.

“We find the transaction is unlikely to result in any significant public interest harms,” the staffers wrote. “We find that the transaction is likely to result in some public interest benefits of increased broadband speeds and more affordable options for low income consumers in Cablevision’s service territory. Although we find that the public interest benefits are limited, the scales tilt in favor of granting the Applications because of the absence of harms.”

The FCC largely ignored a record replete with evidence Altice has not enthralled customers of its other acquired companies. In France and Portugal, large numbers of customers complained Altice reduced the quality of service, raised prices, and outsourced customer service to call centers as far away as North Africa. After Altice acquired SFR, one of France’s national wireless operators, at least 1.5 million customers canceled their accounts, alleging poor service. Two weeks ago, France’s Competition Bureau fined Altice $17 million dollars for intentionally sabotaging the viability of wireless providers it controlled in the Indian Ocean region that it knew would have to be sold because of another acquisition deal. It raised prices and alienated customers of those providers, while allowing many to escape their contracts penalty-free before ownership of the company is transferred. The new owners face a challenge restoring the reputation of those providers and win customers back.

The FCC called assertions from the Communications Workers of America that Altice intends to secure several hundred million dollars in cost savings from layoffs and salary reductions “speculative.” But Altice’s record on job and salary cuts is well established in Europe, where trade unions have pursued multiple complaints with government ministers in Lisbon and Paris. The leadership of CFE-CGE Orange, the group representing employees in France’s telecom sector, warned government officials earlier this year Drahi’s labor practices at SFR-Numericable are so poor, there is significant risk of a wave of worker suicides.

‘Not our problem’ was the effective response by the FCC staffers.

“The public interest does not require us to dissect each business decision Altice has made in non-U.S. markets to determine whether its asserted benefits in this case are reasonable,” the staffers wrote.

The staffers also opined “Altice has not identified job cuts as a means to achieve cost savings,” despite widespread media reports put Drahi on the record claiming he would find $900 million in cost savings at Cablevision in part from slashing administrative expenses.

Speaking to investors in New York just after Altice announced its agreement to buy Cablevision, Drahi pledged to bring the company’s ‘European-style austerity’ to the American cable company.

“When we took over [French wireless provider] SFR, the company was acting like daddy’s princess,” Drahi said to France’s National Assembly. “The princess spent money left and right, but it was mother company Vivendi that picked up the bills. Well, now the princess has a new dad, and this isn’t how my money gets spent.”

Drahi

“I don’t like to pay big salaries, I pay as little as I can,” Drahi added, claiming he prefers to pay minimum wage.

“It’s hard to imagine in a labor market like New York that you’re going to go to top executives and say, ‘By the way, I’m going to pay you 75 percent less than I used to — enjoy,’ ” said a skeptical Craig Moffett, a Wall Street analyst at MoffettNathanson.

Despite racking up nearly $56 billion in debt so far, the FCC seemed unconcerned Altice’s $17.7 billion purchase of Cablevision would present much of a problem for the company.

Altice is “a large international company that is likely to be better able to raise capital than Cablevision as a stand-alone entity,” the FCC staffers wrote.

Several Wall Street analysts pointedly disagree.

“My main worry is that Altice is pilling up new debts again and, needing increasingly more cash to pay back debt, may push Numericable into a direction were it shouldn’t be,” said François Godard, an analyst at Enders Analysis.

“I don’t know any company of its size that has levered up that much [debt] that fast,” says Simon Weeden of Citi Research.

Even France’s Minister of the Economy Emmanuel Macron feared Altice could become the world’s first “too big to fail” cable company.

“I have a big concern in terms of leverage on Drahi due to its size and its place in our economy,” Macron said in 2015. “He is looking to run faster than the music.”

In April alone, Altice sought $9.44 billion largely from the junk bonds market to refinance part of its existing debt and extend the time it has to repay those obligations until as late as 2026.

FCC staffers swept away concerns that an Altice-owned Cablevision would be hampered from upgrading services because of its debt obligations and accepted at face value Altice’s promises it would enhance service. The staffers claimed these promises would likely be met because Cablevision faces significant competition from Verizon FiOS and Frontier U-verse in its service areas of New York, New Jersey and Connecticut.

Cablevision serves communities surrounding the metropolitan New York region

What especially swayed the staffers was an ex parte letter sent by Altice offering commitments for improved service:

1. Network Upgrades: Altice will upgrade the Cablevision network so that all existing customer locations are able to receive broadband service of up to 300Mbps by the end of 2017.
2. Low Income Broadband: Altice will introduce a new low-income broadband package of 30Mbps for $14.99 a month throughout Cablevision’s service territory for families with children eligible for the National Student Lunch Program or individuals 65 or older eligible for the federal Supplemental Security Income program. Current customers, regardless of income, are ineligible and so are past customers who had Cablevision broadband service within the last 60 days or still have a past due balance with Cablevision.

Remarkably, the FCC passed on an opportunity to compel Altice to fulfill its commitments as part of the order giving the FCC’s approval. Therefore, if Altice reneges, it will face no consequences from the FCC for doing so.

“Because we find the transaction is likely to facilitate Cablevision’s efforts to compete and serve all customers in its territory, we are not persuaded that imposing specific conditions related to broadband deployment, as proposed by CWA, is necessary,” wrote the staffers.

New York City and the New York Public Service Commission also have an opportunity to mandate Altice’s commitments be completed within a certain time frame. Both are expected to issue their formal approval or disapproval of the acquisition later this month.

Altice praised the FCC, saying it was pleased with the decision and is on track to complete the transaction during the second quarter of this year.

Assuming Altice does take control, it will immediately embark on cost cutting, starting with the booting of the company’s top 10 executives, according to Altice CEO Dexter Goei. Goei doesn’t like the fact the Dolan family, which founded the company, has used Cablevision as an ATM for decades. The Dolan clan collectively took $46 million in compensation in 2014. Last year, CEO James pocketed $24.6 million, up one million from the year before.

Dolan’s father, who retired from the day-to-day operations of the company years ago, is still handsomely rewarded in his role as company chairman. In 2015, Charles Dolan received a $3 million pay raise, from $15.3 million to $18.3 million.

“Somewhere in the range of $80 million to $90 million per year can go away in just not having that executive team,” Mike McCormack, an analyst at Jefferies LLC, told Bloomberg News last fall.

Cruz

Although running a distant second behind Donald Trump in the Republican presidential primary, Texas Sen. Ted Cruz is still managing to have an influence in the U.S. Senate, where his office is filing a plethora of amendments to various telecommunications bills. Among his top priorities: throwing up roadblocks to keep municipalities from offering broadband to their communities.

Cruz and Sen. Deb Fischer, a fellow Republican from Nebraska, are jointly proposing to attach an amendment to the FCC Process Reform Act that would prohibit the FCC from preempting state laws that limit or prohibit municipal broadband networks. The amendment would “prohibit the FCC from preventing states from implementing  laws relating to provision of broadband Internet access service by state and local governments.”

Several Republicans in Congress have been highly critical of public broadband, despite the fact many local governments in their districts are clamoring for better broadband solutions for their residents.

Cruz and other municipal broadband opponents are responding to FCC Chairman Thomas Wheeler’s decision to effectively overturn those restrictions in Tennessee and North Carolina. Wheeler is considering expanding preemptions in other states where lawmakers passed bills restricting or prohibiting municipal broadband expansion.

The FCC is currently defending its actions in court.

With the FCC’s increasing skepticism that Comcast’s data caps are about fairness and not an attempt to discourage cable TV customers from cutting the cord and watching all of their shows online, Comcast today announced it was overhauling its data cap allowance and unlimited add-on plan.

Effective June 1, Comcast will increase its current 300GB monthly data cap to a terabyte (1,000GB) for all speed plans. For those exceeding one terabyte in usage, Comcast will sell you an unlimited add-on plan for an extra $50 a month to avoid the overlimit fee of $10 per 50GB of excess usage.

“In our trials, we have experimented with different offers, listened to feedback, and learned a lot,” said Marcien Jenckes, executive vice president of Consumer Services at Comcast Cable. “That is what we said we would do when we launched our trials four years ago – analyze and assess our customers’ reaction to the data plans, including being open to increasing them over time. We have learned that our customers want the peace of mind to stream, surf, game, download, or do whatever they want online. So, we have created a new data plan that is so high that most of our customers will never have to think about how much data they use.”

Comcast is also likely responding to thousands of customer complaints filed with the FCC complaining about Comcast’s data caps and the cost of their insurance plan (previously $30-35 depending on market) to avoid overlimit fees.

Despite near universal opposition to Comcast’s data caps, the company has gradually introduced them in a growing number of cities, mostly in the southern United States.

“Comcast doesn’t listen to its customers,” complains Miguel Santos, a Comcast customer in Miami. “It never has and never will. Our family was facing a $200 Internet bill after Comcast introduced caps in Miami-Dade. Now we grudgingly pay them more than $100 a month just for unlimited Internet. It is totally ridiculous.”

Comcast’s decision comes almost a month to the day after AT&T announced it was increasing usage allowances for its U-verse and DSL customers, albeit less generously than Comcast. Most AT&T DSL customers will face 300GB caps, while most U-verse customers will get a boost to 600GB. Only U-verse customers with speeds over 100Mbps will get 1TB of usage.

“We’ve always said that we’d look carefully at the feedback from our trials, continue to evolve our offers, and listen to our customers,” said Jenckes. “We’re currently evaluating our plans to roll this out in other markets, we’ll keep listening – and we’ll be open to making further changes in the future to deliver the best high-speed data service to our customers.”

“That probably means Comcast’s version of generosity will be coming to your city soon,” predicts Santos.

The Justice Department and FCC Chairman Thomas Wheeler are prepared to accept a massive $55 billion merger between Charter Communications, Time Warner Cable, and Bright House Networks, but at a cost of stringent conditions governing the creation of America’s second largest cable conglomerate.

In a joint agreement with the U.S. Department of Justice and the FCC, Charter executives have agreed to do nothing to harm online video competition or implement usage caps or usage-based billing for at least seven years. Charter will also be forced to broaden its cable service to reach at least two million additional homes, some already served by other providers, setting the stage for potential head-to-head competition between two closely-matched competitors.

The deal will directly affect 19.4 million customers of the three companies, which will eventually combine under the Charter Communications brand name and marketing philosophy — selling customers simplified television, phone, and broadband packages that reduce customer options. Little is expected to change for the rest of 2016, however, with Time Warner Cable and Bright House likely to continue operations under existing packaging and pricing until sometime in 2017. Technicians told Stop the Cap! earlier in April they were told not to acquire new outfits with the Time Warner Cable logo and branding, and the cable company is also making preparations to gradually repaint its massive fleet of vans and service vehicles with the Charter logo.

Wheeler

Most of the concessions seemed to have originated from FCC Chairman Thomas Wheeler, who has been one of the strongest proponents of online video competition, improved broadband, and direct head-to-head competition between cable operators. The Justice Department focused its attention on challenging the cable industry’s almost-united front against online video competition. Under former CEO Glenn Britt’s leadership, Time Warner Cable was considered “the industry leader” in contract language that guaranteed it would share the lowest price negotiated by any other cable, satellite, telephone company or online video provider. Those agreements also often included clauses that restricted programmers from putting streamed programming online for non-subscribers. That explains why cord-cutters frequently run into barriers watching networks online unless they can prove they are already a pay-TV customer.

Under conditions from the Justice Department, those sections of agreements with Charter, Time Warner Cable and Bright House Networks will become invalid and unenforceable. But that doesn’t mean restrictions will disappear overnight. Comcast, Cox, Cablevision, and other cable companies also enforce similar conditions which will be unaffected by the Justice Department decision, at least for now. But the precedent has sent shudders across an industry concerned about protecting its still-profitable cable TV business, under assault from increased programming costs and a greater reluctance by consumers to tolerate annual rate increases.

Gene Kimmelman, chief executive of consumer interest group Public Knowledge, told the Wall Street Journal the conditions were “a clear signal to the content industry and entertainment companies that the enforcement agencies are giving them a green light to grow online video and experiment as a direct competitor to cable, and they will prevent cable from interfering.”

Of greater interest to consumers are the deal conditions proposed by Chairman Wheeler. As Stop the Cap! reported almost a year ago, sources told us the FCC would “get serious” about data caps if companies like Comcast imposed them on customers nationwide. At the moment, Comcast is testing caps affecting just under 15% of their total customer base, already generating thousands of customer complaints with the FCC in response. Although Charter promised three years of cap-free service, Wheeler and his staff obviously felt it was important to send a message that they agree with cap opponents that data caps are more about preventing competition than technical need. By making long term data cap prohibition a core part of a settlement agreement with Charter, Wheeler sends a strong message to Comcast that the FCC isn’t drinking cable industry Kool Aid about the rationale for usage caps and usage billing.

Some consumer groups worry Charter has overextended itself in debt over-acquiring other cable companies.

“New Charter will not be permitted to charge usage-based prices or impose data caps,” Wheeler said in a statement. “Second, New Charter will be prohibited from charging interconnection fees, including to online video providers, which deliver large volumes of internet traffic to broadband customers. Additionally, the Department of Justice’s settlement with Charter both outlaws video programming terms that could harm online video distributors (OVDs) and protects OVDs from retaliation– an outcome fully supported by the order I have circulated today. All three seven-year conditions will help consumers by benefitting OVD competition. The cumulative impact of these conditions will be to provide additional protection for new forms of video programming services offered over the Internet. Thus, we continue our close working relationship with the Department of Justice on this review.”

Wheeler is also intent on proving there is a viable market for cable operators overbuilding into new territories. To prove that point, Wheeler has gotten an agreement that Charter will introduce service to one million new customers where it will intrude on another operator’s service area and directly compete with it. The other provider has to already offer service at 25Mbps or greater. That could mean Charter competing directly with a cable company like Comcast or building service into an area already served by Verizon FiOS, AT&T U-verse, or another provider offering something beyond traditional DSL.

Copps

Another million customers just outside of areas served by the three cable companies may also finally get service, as Charter will be compelled to wire at least another million homes for cable service for the first time.

Despite the conditions, many consumer groups and former public officials remain unhappy the merger won approval.

“Creating broadband monopoly markets raises consumer costs, kills competition, and points a gun at the heart of the news and information that democracy depends upon,” said Michael Copps, a former Democratic commissioner at the FCC and a special adviser to the Common Cause public interest group. “FCC approval of this unnecessary merger would be an abandonment of its public interest responsibilities.”

“There’s nothing about this massive merger that serves the public interest. There’s nothing about it that helps make the market for cable TV and Internet services more affordable and competitive for Americans,” said Craig Aaron, president and CEO of Free Press. “Customers of the newly merged entity will be socked with higher prices as Charter attempts to pay off the nearly $27 billion debt load it took on to finance this deal. The wasted expense of this merger is staggering. For the money Charter spent to make this happen it could have built new competitive broadband options for tens of millions of people. Now these billions of dollars will do little more than line the pockets of Time Warner Cable’s shareholders and executives. CEO Rob Marcus will walk away with a $100 million golden parachute.”

Wheeler’s draft order is likely to receive a final vote in the coming days before the Commission. The only remaining holdout is California’s telecom regulator, which is expected to reach a decision by May 10.