New York threatens to revoke Charter’s purchase of Time Warner Cable

The New York State Public Service Commission today ordered Charter Communications to pay a $2 million fine and complete network construction that was required as a condition of Charter’s purchase of Time Warner Cable.

If Charter doesn’t meet its merger-related obligations, the company will “face the risk of having the merger revoked,” the commission said in an announcement.

The commission said that state law gives it the authority to rescind merger approvals and threatened to start a proceeding to rescind or change the merger approval order if Charter refuses to comply.

The threatened action could reverse Charter’s 2016 purchase of Time Warner Cable’s telecommunications network in New York, although Charter would likely contest such a decision in court. (This would not affect the merger in other states.)

“We’re evaluating our options at this point,” a Charter spokesperson told Ars today.

Charter disputed New York authority

Public Service Commission Chair John Rhodes blasted Charter in a statement:

As a condition of our approval of Charter’s merger two years ago, we required Charter to make significant investments in its network. Our investigation shows that Charter failed to meet its obligations to expand the reach of its network to unserved and underserved customers at the required pace and that it failed to justify why it wasn’t able to meet its obligations.

Charter has previously disputed the legal force of the merger conditions, saying that the state’s powers are limited by federal law and that the state is asking for more than what Charter agreed to.

“The Commission does not have the authority to compel broadband providers to offer service to particular customers at particular speeds or at particular locations or to establish any other obligations in a cable television and telecommunications service merger related to the provision of broadband services,” Charter told the commission in a recent filing.

Rhodes is not buying Charter’s argument.

“[S]ince the company has taken the unfortunate position of refusing to adhere to all conditions set forth in our initial decision two years ago, we now demand the company unconditionally accept all of the conditions as the Commission unambiguously required in 2016 or run the risk of more severe consequences,” Rhodes said.

Charter is using bad math, New York says

Charter continued to dispute the construction allegations today, telling Ars that it “has expanded its network infrastructure to bring broadband to tens of thousands of residences and businesses in New York State.” Charter “exceeded” the latest construction deadline in December 2017, “and we continue to meet our merger obligations,” the company said.

But New York says that Charter has been wrongly counting addresses that already had service toward the requirement for new construction. The commission previously threatened to terminate Charter’s franchise agreements with New York City.

The 2016 merger order required Charter to extend its network to “145,000 unserved and underserved residential housing units and/or businesses within four years” and meet interim deadlines along the way, the commission said.

Charter agreed to a fine and a revised buildout schedule last year after missing a deadline to pass 36,250 homes and businesses within one year of the merger approval. But the company says it has met subsequent deadlines.

Today’s commission announcement rejected Charter’s claim that it has met the latest deadlines:

[T]he Commission rejected 18,363 addresses—including 12,467 in New York City and 4,096 in the cities of Buffalo, Rochester, Syracuse, Schenectady, Albany, and Mt. Vernon—to which Charter claimed it expanded [its] network as part of its required buildout requirement. The Commission found that these addresses were already passed by Charter or another company providing high-speed broadband or that Charter was separately required to pass the addresses pursuant to state regulations and/or franchise agreements.

Charter must revise its construction plan “to remove the rejected addresses and file a revised buildout plan for going forward within 21 days,” the commission said.

The $2 million fine consists of $1 million for failing to meet the December 2017 deadline, and another $1 million because “Charter did not ‘cure’ this miss by March 16, 2018, nor did it demonstrate that it had good cause for its failure to do so,” the commission said.

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