twc/charter order
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STATE OF NEW YORKPUBLI C SERVI CE COMMI SSI ON
CASE 15- M- 0388 - J oi nt Pet i t i on of Chart er Communi cat i ons and Ti me War ner Cabl e f or Appr oval of a Tr ansf er ofCont r ol of Subsi di ar i es and Franchi ses, Pr oFor ma Reor gani zat i on, and Cer t ai n Fi nanci ngAr r angement s.
ORDER GRANTI NG J OI NT PETI TI ON SUBJ ECT TO CONDI TI ONS
I ssued and Ef f ect i ve: J anuar y 8, 2016
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TABLE OF CONTENTS
I NTRODUCTI ON. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
NOTI CE I NVI TI NG COMMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
STATUTORY TEST FOR APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Scope of THE PUBLI C I NTEREST ANALYSI S. . . . . . . . . . . . . . . . . . . . . . . . . 22
THE J OI NT PETI TI ON. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Net wor k I nvest ment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Net wor k Moder ni zat i on and I ncreased Speeds . . . . . . . . . . . . . . . . . . 36
Low- i ncome Broadband Servi ces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Cust omer Ser vi ce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Enhanced Vi deo Pr ogr ammi ng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Net Neut ral i t y and Vi deo Compet i t i on . . . . . . . . . . . . . . . . . . . . . . . . 39
Publ i c Benef i t Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
RECOMMENDED CONDI TI ONS AND REPLY COMMENTS. . . . . . . . . . . . . . . . . . . . . 41
Cust omer Ser vi ce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
J ob Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Net wor k I nvest ment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Low- i ncome and Broadband Avai l abi l i t y . . . . . . . . . . . . . . . . . . . . . . . 44Net wor k Moder ni zat i on and I ncreased Speeds . . . . . . . . . . . . . . . . . . 46
I ssuance of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Mi scel l aneous I ssues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
MERGER CONDI TI ONS AND ENFORCEABI LI TY. . . . . . . . . . . . . . . . . . . . . . . . . . 49
Net wor k Moder ni zat i on and I ncreased Speeds . . . . . . . . . . . . . . . . . . 50
Net work Speed Enhancements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Net wor k Expansi on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Low- i ncome Broadband Servi ces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Br oadband Avai l abi l i t y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Cust omer Ser vi ce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Pr ot ect i on Agai nst J ob Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Mi scel l aneous Condi t i ons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Dat a Caps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Most Favor ed St at e Cl ause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
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Enf or cement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
CONCLUSI ON. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
APPENDI X A - CONDI TI ONS OF APPROVAL
APPENDI X B - SUMMARY OF COMMENTS
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STATE OF NEW YORKPUBLI C SERVI CE COMMI SSI ON
At a sessi on of t he Publ i c Ser vi ceCommi ssi on hel d i n t he Ci t y of
Al bany on J anuary 8, 2016
COMMI SSI ONERS PRESENT:
Audr ey Zi bel man, Chai rGr egg C. Sayr eDi ane X. Burman
CASE 15- M- 0388 - J oi nt Pet i t i on of Chart er Communi cat i ons and Ti me War ner Cabl e f or Appr oval of a Tr ansf er ofCont r ol of Subsi di ar i es and Franchi ses, Pr o
For ma Reor gani zat i on, and Cer t ai n Fi nanci ngAr r angement s.
ORDER GRANTI NG J OI NT PETI TI ON SUBJ ECT TO CONDI TI ONS
( I ssued and Ef f ect i ve J anuar y 8, 2016)
BY THE COMMI SSI ON:
I NTRODUCTI ONBy J oi nt Pet i t i on f i l ed J ul y 2, 2015 ( J oi nt Pet i t i on) ,
Ti me War ner Cabl e I nc. ( Ti me War ner or TWC) and Char t er
Communi cat i ons, I nc. ( Char t er ) ( col l ect i vel y, t he Pet i t i oner s)
r equest Commi ssi on aut hor i zat i on f or a hol di ng company- l evel
t r ansact i on t hat woul d r esul t i n t he t r ansf er of cont r ol of Ti me
War ner ’ s New Yor k subsi di ar i es t o “New Char t er . ”1 A t hi r d
ent i t y, Br i ght House Net wor ks, LLC ( Br i ght House or BHN) , a
subsi di ar y of Advance/ Newhouse Par t ner shi p, t hat i s not a par t y
t o the J oi nt Pet i t i on and does not oper at e i n New Yor k, woul d
al so become part of New Chart er f ol l owi ng t he pr oposed
t r ansact i on. As st r uct ur ed, t he pr oposed t r ansact i on i nvol ves
1 The par ent ent i t y r esul t i ng f r om t he mer ger wi l l ul t i mat el yassume t he name “Char t er Communi cat i ons, I nc. ”
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al l of Ti me Warner ’ s New Yor k br oadband I nt ernet , t el ephone, and
cabl e t el evi si on systems, f r anchi ses and asset s.
Appr oval was i ni t i al l y request ed under Publ i c Ser vi ce
Law ( PSL) §§100, 101 and 222. 2 On J ul y 10, 2015, t he Pet i t i oner s
f i l ed a suppl ement seeki ng Commi ss i on appr oval under PSL §99( 2) ,
as wel l . Under t hese appl i cabl e and, i n t he case of Sect i on 222
r ecent l y- amended, pr ovi si ons of t he PSL, t he Commi ss i on must
det er mi ne whet her t he benef i t s of t he pr oposed t r ansact i on
out wei gh t he det r i ment s, such that consummat i on of t he merger
woul d pr oduce an over al l net benef i t f or al l cur r ent TWC and
Char t er New Yor k cust omer s. I n t he cour se of t hi s pr oceedi ng,
St af f of t he Depar t ment of Publ i c Ser vi ce ( St af f ) and ot her
comment er s i dent i f i ed sever al measur es t hat , i n t hei r vi ew,
coul d be under t aken by the Pet i t i oner s t o br i ng t he pr oposed
mer ger i nt o al i gnment wi t h t he publ i c i nt er est .
For t he reasons el aborated bel ow, t he Commi ss i on
agr ees t hat i n or der f or t he pr oposed mer ger t o be i n t he publ i c
i nt er est , t he Pet i t i oner s must agr ee t o make concr et e and
enf orceabl e commi t ment s t o moderni ze t hei r cabl e syst emand
servi ces, expand access, addr ess t he di gi t al di vi de and i mpr ove
cust omer servi ce. To t hi s end, we f i nd t hat wi t h t he accept ance
by t he Pet i t i oner s of t he enf or ceabl e condi t i ons, as di scussed
i n t he body of t hi s Or der and Appendi x A, t he pr oposed merger i s
i n t he publ i c i nt er est . These condi t i ons ar e desi gned t o hel p
ensure a near ubi qui t ous wor l d- cl ass communi cat i ons net wor k t hat
meet s t he needs of al l New Yor ker s. Absent accept ance of t hese
condi t i ons, t he publ i c i nt er est st andar d cannot be met , and t he
pet i t i on f or t r ansact i on appr oval i s deni ed.
2 Si mul t aneousl y wi t h, but separ at e f r om t he pr oposedt r ansact i on, as par t of i t s r eor gani zat i on i nt o New Char t er ,Char t er wi l l i nt er nal l y r eassi gn 16 of i t s 27 f r anchi ses hel dby i t s New Yor k oper at i ng subsi di ar i es i nt o a si ngl e ent i t y,Char t er Communi cat i ons Ent er t ai nment I , LLC ( CCE- I ) .
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Ever y day, cl ose t o 20 mi l l i on New Yorker s r el y on
some f or m of communi cat i on as par t of t hei r per sonal ,
pr of essi onal or publ i c l i ves. Whet her communi cat i ng by voi ce,
e- mai l or t ext message, or r ecei vi ng cont ent over t he I nt er net ,
access t o t er r est r i al , wi r el ess or sat el l i t e communi cat i ons ar e,
wi t hout quest i on, an essent i al component of our soci et y. The
needs of New Yor k r esi dent s and i nst i t ut i ons, such as our
busi nesses, uni ver si t i es, and hospi t al s, ar e suppl ement ed by t he
mi l l i ons of vi si t or s t o our St at e who al so r el y on our
communi cat i on net wor ks t o r emai n i n cont act wi t h f ami l y, f r i ends
and busi nesses. Addi t i onal l y, numer ous New Yor k busi nesses i n
t he ar eas of adver t i si ng, medi a and dat a pr oduct i on r el y on an
open communi cat i ons network t o r each consumers nat i onal l y and
i nt ernat i onal l y.
Consequent l y, t her e i s a subst ant i al publ i c i nt er est
i n ensur i ng t hat t he pol i ci es and pr act i ces t hat t he Commi ssi on
est abl i shes f or over seei ng communi cat i on servi ce pr ovi der s are
desi gned t o enabl e and suppor t markets t hat meet nat i onal and
i nt er nat i onal st andar ds f or speed, qual i t y, access, and
i nnovat i on. 3 The condi t i ons set f or t h i n t hi s Or der are
consi st ent wi t h, and hel p t o achi eve, Governor Andr ew Cuomo’ s
commi t ment t o br oadband i nvest ment and i nf r ast r uct ur e expansi on
i n t he St at e. 4
Access - Too many r egi ons of t he St at e cont i nue t o
suf f er f r om out - dat ed or non- exi st ent cabl e ser vi ce. By
3 See, Case 14- C- 0370, I n t he Mat t er of a St udy on t he St ate of Tel ecommuni cat i ons i n New Yor k Stat e ( a comprehensi ve r evi ewof t he St at e’ s communi cat i ons l andscape) .
4 Gover nor Andr ew Cuomo has est abl i shed a $500 mi l l i oni nf r ast r uct ur e f und t o pr omote depl oyment of br oadbandi nf r ast r uct ur e capabl e of pr ovi di ng speeds of 100 Mbps. See,2015 Opport uni t y Agenda: Rest or i ng Economi c Opport uni t y, Re:St atewi de Br oadband Access f or Every New Yor ker ( i ssued J anuar y 16, 2015) .
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r equi r i ng t he Pet i t i oner s ( and by extensi on New Char t er ) t o
bui l d- out t hei r net wor k t o pass an addi t i onal 145, 000 “unserved”
( downl oad speeds of 0- 24. 9 Megabi t s per second ( Mbps) ) and
“under ser ved” ( downl oad speeds of 25- 99. 9 Mbps) r esi dent i al
housi ng uni t s and/ or busi nesses wi t hi n f our year s of t he cl osi ng
of t he t r ansact i on - wi t h annual mi l est ones and excl usi ve of any
avai l abl e St at e gr ant moni es f r om t he Br oadband 4 Al l Pr ogr am -
we wi l l be wel l on our way to ensur i ng t hat al l New Yor ker s,
r egar dl ess of l ocat i on, have access t o essent i al br oadband
of f er i ngs. The Pet i t i oner s al so must conver t t hei r exi st i ng New
York f oot pr i nt t o an al l - di gi t al net wor k ( i ncl udi ng upgradi ng
t he Col umbi a Count y Char t er cabl e syst ems t o enabl e br oadband
communi cat i ons) capabl e of del i ver i ng f ast er br oadband speeds.
The Pet i t i oner s wi l l be r equi r ed t o of f er al l cust omer s
broadband speeds of up t o 100 Mbps by t he end of 2018 and 300
Mbps by t he end of 2019. 5 Wi t h t he conver si on t o an al l - di gi t al
network, New Chart er wi l l i nt r oduce i t s 60 Mbps broadband
servi ce, enabl i ng many Ti me War ner subscr i ber s t o obt ai n f ast er
speeds at l ower pr i ces. 6 For cust omer s cur r ent l y subscr i bed t o
Ti me War ner ’ s Standar d ser vi ce ( 15 Mbps) t he pr i ce benef i t woul d
be modest , whi l e Upst ate cust omers subscr i bed t o f ast er Ti me
War ner of f er i ngs ( e. g. , 30 and 50 Mbps) wi l l exper i ence
addi t i onal savi ngs.
Digital Divide – I n or der t o pr omot e br oadband
af f or dabi l i t y and uni ver sal ser vi ce, we wi l l r equi r e t he
Pet i t i oner s t o of f er a di scount ed br oadband ser vi ce t o cer t ai n
l ow- i ncome cust omers. The pr ogr am must be of f ered t o homes
el i gi bl e f or t he Nat i onal School Lunch Pr ogr am ( NSLP) and seni or
5 Wi t h r espect t o t he Col umbi a Count y syst ems, we r ecogni ze t hatt he t i mi ng of accompl i shi ng thi s upgr ade i s dependent on NewChar t er ’ s abi l i t y t o get l ocal appr oval s.
6 Thi s servi ce pr ovi des speeds of 60 Mbps down and 4 Mbps up.
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ci t i zens r ecei vi ng benef i t s f r om t he Suppl ement al Secur i t y
I ncome Ass i st ance ( SSI ) pr ogr am. I n addi t i on t o a l ow- i ncome
pr ogr am, t he Pet i t i oner s wi l l be r equi r ed t o of f er t o new
subscr i bers Ti me Warner ’ s st andal one $14. 99 Ever yday Low Pr i ce
ser vi ce f or t wo year s f ol l owi ng t he cl ose of t he mer ger , at
exi st i ng speeds and cur r ent pr i ce. The Pet i t i oner s wi l l al so be
r equi r ed t o al l ow cust omer s t o r et ai n t hat ser vi ce f or t hr ee
year s f r om t he cl ose of t he t r ansact i on, whi ch wi l l r un
concur r ent l y wi t h t he t wo- year per i od di scussed above. They
wi l l al so be r equi r ed t o al l ow exi st i ng cust omer s t o r et ai n,
wi t hout mat er i al changes t hat have t he i nt ent t o di scour age, al l
other exi st i ng Ti me Warner st andal one and bundl ed br oadband
ser vi ces f or t hr ee year s f ol l owi ng t he cl ose of t he mer ger .
Fi nal l y, Pet i t i oner s wi l l be r equi r ed t o pr ovi de f r ee br oadband
servi ce t o 50 communi t y anchor i nst i t ut i ons not al r eady
r ecei vi ng such servi ce f r om Ti me War ner or Char t er , i n l ow-
i ncome or under served ar eas wi t hi n t he Pet i t i oner s’ servi ce
f oot pr i nt , i ncl usi ve of f r ee l i ne ext ensi ons, i f necessar y.
Customer Service – To ensure no r educt i on i n cust omer
ser vi ce st andar ds, t he Pet i t i oner s wi l l be pr ecl uded f r om
r educi ng cust omer - f aci ng j obs i n New Yor k f or f our year s
f ol l owi ng t he i ssuance of t hi s Or der . I n addi t i on, t he
Pet i t i oner s must f ocus on i mpr ovi ng servi ce qual i t y and
sat i sf yi ng t he needs of t hei r New Yor k cust omer s and ar e
r equi r ed t o i nvest $50 mi l l i on i n servi ce qual i t y i mpr ovement s
i n New Yor k over t wo year s f ol l owi ng t he cl ose of t he merger and
achi eve a 35% r educt i on i n Ti me Warner ’ s 2014 cabl e PSC
Compl ai nt Rate by t he end of 2020, wi t h hal f achi eved by t he end
of 2018. I f t he i mpr ovement t ar get s are not achi eved, t he
Pet i t i oner s wi l l be r equi r ed t o i nvest addi t i onal moni es i n
cust omer servi ce.
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The Commi ssi on est i mat es t hat i f t he Pet i t i oner s
accept t he condi t i ons, New Yor k consumer s wi l l r eal i ze
appr oxi mat el y $435 mi l l i on i n net i ncr ement al benef i t s over t he
t en year s f r om t he cl ose of t he t r ansact i on and appr oxi mat el y
$655 mi l l i on i n associ at ed i nvest ment s.
At t he t i me of t he i ssuance of t hi s Or der , t he
Pet i t i oners have not made any speci f i c commi t ment s r egardi ng
net wor k expansi on, br oadband speed, or af f or dabi l i t y i n ot her
stat e j ur i sdi ct i ons . 7 I f , subsequent t o t hi s Or der , such
commi t ments ar e made t hat exceed the r equi r ement s t he Commi ssi on
i mposes her e, we wi l l r equi r e t he Pet i t i oner s t o al so pr ovi de
t hose same benef i t s i n New Yor k.
These condi t i ons wi l l be enf or ced t hrough a
combi nat i on of i ncent i ve payment s, sel f - ef f ect uat i ng commi t ment s
( i ncl udi ng r epor t i ng r equi r ement s and col l abor at i on wi t h var i ous
st akehol der s) , and penal t y act i ons pur suant t o PSL §25, and, i f
necessary, enf orcement pr oceedi ngs pur suant t o PSL §26. These
condi t i ons ar e essent i al t o ensur e achi evement of net benef i t s
f or t he Pet i t i oner s’ New Yor ker cust omer s.
BACKGROUND
On May 23, 2015, Chart er , al ong wi t h CCH I , LLC, t he
cur r ent Char t er subsi di ar y t hat wi l l become New Char t er , ent er ed
i nt o agr eement s ( t he Agr eement s) wi t h Ti me Warner , Li bert y
Br oadband Cor por at i on ( Li ber t y Br oadband) , Li ber t y I nt er act i ve
7
The Hawai i Depar t ment of Commer ce and Consumer Af f ai r s’ ( DCCA)Cabl e Tel evi si on Di vi si on, r ecent l y appr oved t he pr oposedt r ansact i on and among other t hi ngs r equi r es New Chart er t oof f er wi t hi n t hr ee year s of t he cl ose of t he t r ansact i on al ow- i ncome br oadband ser vi ce wi t h speeds of 30 Mbps f or$14. 99/ mo. Thi s pr ogr am i s part of a nat i onal commi t ment madeby Char t er , whi ch, as di scussed i n det ai l bel ow, t hi sCommi ss i on al so r equi r es i n New Yor k wi t hi n 15 mont hs of t hecl ose of t he t r ansact i on.
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Cor por at i on ( col l ect i vel y Li ber t y) , and Advance/ Newhouse, a
par ent company of BHN. Under t he t erms of t he Agreement s, Ti me
War ner wi l l ul t i mat el y mer ge i nt o a subsi di ar y of New Char t er
t hr ough a ser i es of mer ger s. Those mer ger s wi l l r esul t i n Ti me
War ner st ockhol der s, ot her t han Li ber t y, r ecei vi ng a combi nat i on
of cash and shar es of New Char t er Cl ass A common st ock t hat
val ues TWC at appr oxi mat el y $78. 7 bi l l i on i n exchange f or t hei r
shar es of Ti me War ner st ock, and Li ber t y r ecei vi ng shar es of New
Chart er Cl ass A common st ock i n exchange f or i t s shar es of Ti me
War ner st ock. I n addi t i on, subj ect t o separ at e condi t i ons set
f or t h i n Char t er ’ s agr eement wi t h Advance/ Newhouse, New Char t er
wi l l acqui r e BHN f or appr oxi mat el y $10. 4 bi l l i on, compr i sed of
cash and equi t y of New Chart er and an i ndi r ect subsi di ary of New
Char t er . Li ber t y wi l l i nvest a t ot al of $5 bi l l i on i n
connect i on wi t h t he pr oposed t r ansact i on i n exchange f or
addi t i onal shar es of New Char t er Cl ass A common st ock.
Fol l owi ng t he cl ose of t he pr oposed t r ansact i on, New
Char t er wi l l be t he t hi r d- l ar gest cabl e pr ovi der behi nd
AT&T/ Di r ecTV and Comcast Corpor at i on ( Comcast ) . New Char t er
wi l l own and/ or manage syst ems servi ng appr oxi mat el y 19. 4
mi l l i on br oadband cust omer s, 17. 3 mi l l i on vi deo cust omer s, and
9. 4 mi l l i on voi ce cust omer s acr oss 41 st at es. I n New Yor k,
Char t er cur r ent l y pr ovi des cabl e t el evi si on and ot her
communi cat i on servi ces t o a r el at i vel y smal l number of cust omer s
t hr ough i t s Cabl e Franchi see Subsi di ar i es, whi ch oper at e t wo
cabl e syst em cl ust er s i n and ar ound Pl at t sbur gh and Col umbi a
Count y, New Yor k. The Cabl e Fr anchi see Subsi di ar i es pr ovi de
servi ce t o appr oxi mat el y 14, 000 r esi dent i al and busi ness
cust omer s i n t he Pl at t sbur gh servi ce ar ea, and appr oxi mat el y
2, 500 resi dent i al and busi ness cust omer s i n t he Col umbi a Count y
ser vi ce ar ea. The Pl at t sbur gh ar ea net wor ks ar e f ul l y
i nt er act i ve, t wo- way syst ems, capabl e of pr ovi di ng vi deo, voi ce
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and br oadband ser vi ces, whi l e t he Col umbi a Count y networks are
one- way, vi deo ser vi ce- onl y syst ems.
Accor di ng t o t he r ecor d i n t hi s case, Ti me War ner
cur r ent l y pr ovi des cabl e t el evi si on, br oadband, and t el ephone
ser vi ces t o appr oxi mat el y 2. 6 mi l l i on subscr i ber s i n
appr oxi mat el y 1, 150 ci t i es, t owns, and vi l l ages t hr oughout New
York Stat e. Ti me War ner i s al so a maj or presence i n f our out of
t he f i ve New Yor k Ci t y bor oughs ( Manhat t an, St at en I sl and,
Queens, and Br ookl yn) and t he maj or Upst at e ci t i es, i ncl udi ng
Buf f al o, Rochest er , Syr acuse, and Al bany. The J oi nt Pet i t i on
does not seek aut hor i t y f or changes t o New Yor k cust omers’
r at es, t er ms or condi t i ons of ser vi ce, or f or di r ect assi gnment
of Ti me War ner ’ s f r anchi ses, cer t i f i cat es, asset s or cust omer s;
af t er t he cl ose of t he pr oposed t r ansact i on, t he Pet i t i oner s
asser t t hat i f New Char t er wi shes t o make changes t hat r equi r e
r egul at or y appr oval , i t wi l l f ol l ow appl i cabl e New Yor k f i l i ng
and not i ce r equi r ement s.
The proposed t r ansact i on wi l l i ncl ude t he pl edge of
asset s and t he i ssuance of subst ant i al debt . Accor di ng t o t he
J oi nt Pet i t i on, cer t ai n oper at i ng subsi di ar i es of New Char t er ,
i ncl udi ng t he Ti me War ner Subsi di ar i es and t he Char t er Fi ber l i nk
Subsi di ar y, wi l l become guar ant or s of , and, wi t h r espect t o any
secur ed f aci l i t i es, wi l l pl edge t hei r asset s t o secur e, ( 1)
i ndebt edness bei ng i ncur r ed t o f i nance t he t r ansact i on i n par t ,
and ( 2) l egacy i ndebt edness of Ti me War ner and i t s subsi di ar i es
t hat wi l l become i ndi r ect subsi di ar i es of New Char t er . The
J oi nt Pet i t i on st at es t hat Chart er expect s t o f i nance par t of
t he consi der at i on f or t he pr oposed t r ansact i on wi t h addi t i onal
i ndebt edness of appr oxi mat el y $24 bi l l i on. Thi s addi t i onal
i ndebt edness, accor di ng t o t he Pet i t i oner s, i s expect ed t o be i n
t he f or m of new seni or secur ed bank l oans, seni or secur ed not es,
and unsecur ed i ndebt edness made avai l abl e to two of Chart er ’ s
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subsi di ar i es, CCO Hol di ngs, LLC, and Char t er Communi cat i ons
Oper at i ng, LLC ( Char t er Oper at i ng) , t he i mmedi at e hol di ng
company f or al l of Char t er ’ s oper at i ng subsi di ar i es. I n
connect i on wi t h t he compl et i on of t he pr oposed t r ansact i on t he
J oi nt Pet i t i on f ur t her st at es t hat Char t er Oper at i ng and i t s
subsi di ar i es, i ncl udi ng t he Ti me War ner Subsi di ar i es and t he
Char t er Fi ber l i nk Subsi di ar y, expect t o guar ant ee appr oxi mat el y
$23 bi l l i on i n i ndebt edness of Ti me War ner and i t s subsi di ar i es
t hat wi l l become New Char t er subsi di ar i es.
NOTI CE I NVI TI NG COMMENTS
Fol l owi ng t he f i l i ng of t he J oi nt Pet i t i on, t he
Commi ssi on i ssued a Not i ce I nvi t i ng Comment s ( Not i ce) on J ul y
22, 2015. 8 The t i mes f or submi ssi ons i n r esponse t o t he Not i ce
expi r ed on September 14, 2015 ( f or comment s) and Sept ember 30,
2015 ( f or r epl y comment s) . I n addi t i on, pur suant t o t he St at e
Admi ni st r at i ve Pr ocedur e Act ( SAPA) §202( 1) , a Not i ce of
Proposed Rul emaki ng was publ i shed i n t he St ate Regi st er on
J ul y 29, 2015. 9
The Commi ssi on al so hel d f i ve I nf or mat i onal For ums and
Publ i c St at ement Hear i ngs i n t hr ee ci t i es concer ni ng t he J oi nt
Pet i t i on and t he pr oposed t r ansact i on: i n Al bany on Sept ember
17, 2015, New Yor k Ci t y on Sept ember 21, 2015, and Buf f al o on
8 Under §617 of t he Federal Communi cat i ons Act ( 47 U. S. C. §537) ,when t he sal e or t r ansf er of a cabl e t el evi si on f r anchi ser equi r es t he appr oval of a f r anchi si ng aut hor i t y, t he
f r anchi si ng aut hor i t y must act wi t hi n 120 days or t he r equestwi l l be deemed gr ant ed, unl ess t he r equest i ng par t y and thef r anchi si ng aut hor i t y agr ee t o an extensi on of t i me. On J ul y17, 2015, t he Pet i t i oner s sent a l et t er t o t he Secret ar y t ot he Commi ss i on agr eei ng t o ext end t he t i me f or act i on by t heCommi ssi on t hrough December 22, 2015; a subsequent l et t er wasf i l ed on December 17, 2015, agr eei ng t o f ur t her extend thet i me f or Commi ss i on act i on t hr ough Febr uary 11, 2016.
9 SAPA No. 15- M- 0388SP1.
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Sept ember 24, 2015, t o al l ow f or on- t he- r ecor d publ i c comment s
f r om i nt er est ed consumer s, non- pr of i t organi zat i ons, l ocal
government s, busi ness gr oups, and members of t he general publ i c.
The Commi ssi on al so r ecei ved over 75 el ect r oni cal l y- f i l ed
comment s f r om t he publ i c at l ar ge. Gener al l y, comment s
suppor t i ng t he pr oposed t r ansact i on asser t t hat , among ot her
t hi ngs, t he mer ger wi l l cr eat e j obs and pr ovi de bet t er pr oduct s
at mor e af f or dabl e r at es. Those opposi ng t he t r ansact i on st at e
t hat t he mer ger wi l l i nevi t abl y l ead t o hi gher r at es and
pot ent i al dat a caps on br oadband servi ces i n t he f ut ur e. A
summary of al l t he comment s r ecei ved f r omt he above- r ef erenced
sources i s pr ovi ded i n Appendi x B. Al l comment s have been t aken
i nt o consi der at i on i n r ender i ng a deci si on on t he J oi nt
Pet i t i on.
STATUTORY TEST FOR APPROVAL
Ther e i s no di sput e over t he st at utes appl i cabl e t o
t he Commi ssi on’ s r evi ew of t he pr oposed t r ansact i on. Ti me
Warner curr ent l y operates under dul y aut hor i zed and appr oved
Cer t i f i cat es of Publ i c Conveni ence and Necessi t y ( CPCNs) as a
pr ovi der of t el ecommuni cat i ons ser vi ces i n New York. PSL §99( 2)
r equi r es t he consent of t he Commi ssi on to any pr oposed t r ansf er
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of i t s “wor ks or system. ”10 As we noted i n another merger case,
" [ a] l t hough PSL §99( 2) does not speci f y a st andar d of r evi ew,
al l such ut i l i t y t r ansf er s have been i nt er pr et ed as r equi r i ng an
af f i r mat i ve publ i c i nt er est det er mi nat i on by t he Commi ssi on. ”11
PSL §§100( 1) and ( 3) r equi r e t he Commi ss i on’ s consent
t o t he acqui si t i on of t he st ock of a t el ephone cor por at i on. 12
Unl i ke §99( 2) , however , t hese pr ovi si ons expr essl y bar t he
Commi ssi on f r om gi vi ng i t s consent unl ess t he appl i cant has
shown t hat t he acqui si t i on i s i n t he publ i c i nt er est . PSL §101
r equi r es t he Commi ss i on' s consent when t el ephone cor porat i ons
i ssue debt . 13
PSL §222( 3) gover ns t he t r ansf er of t he f r anchi se, or
of f aci l i t i es const i t ut i ng a si gni f i cant par t of t he syst em, of
10 Al t hough consent i s pr esumed i f t he Commi ss i on t akes no act i onwi t hi n 90 days af t er bei ng not i f i ed of t he t r ansact i on,expr ess wr i t t en consent by t he Commi ss i on must be pr ovi dedwhere, as here, t he Commi ss i on determi nes t hat t he publ i ci nt er est so r equi r es. On J ul y 23, 2015, t he Act i ng Di r ect orof t he Of f i ce of Tel ecommuni cat i ons and t he Di r ect or of t heOf f i ce of Account i ng, Audi t & Fi nance i ssued a l et t er t o t he
Pet i t i oner s i ndi cat i ng t hat t he publ i c i nt er est war r ant edf ur t her r evi ew under PSL §§99, 100 and 101, hence st oppi ng t he90- day/ 45- day r espect i ve cl ocks f or Commi ssi on r evi ew. See, J ul y 23, 2015 Let t er f r om Pet er McGowan, Act i ng Di r ect or ,Of f i ce of Tel ecommuni cat i ons, and Dor i s St out , Di r ect or ,Of f i ce of Account i ng, Audi t s & Fi nance t o Char t er and Ti meWarner .
11 Case 05- C- 0237, J oi nt Pet i t i on of Ver i zon Communi cat i ons etal . , Or der Asser t i ng J ur i sdi ct i on and Appr ovi ng Mer ger Subj ectt o Condi t i ons ( i ssued November 22, 2005) , n. 46.
12 Agai n, consent i s pr esumed af t er 90 days unl ess t he Commi ss i ondet er mi nes, as we have her e, t hat t he publ i c i nt er est r equi r esour r evi ew and wr i t t en opi ni on. See n. 10, supr a.
13 PSL §101 st at es t hat an appl i cat i on i s deemed appr oved af t er45 days unl ess t he Commi ssi on or i t s desi gnee not i f i es t hepet i t i oner i n wr i t i ng, wi t hi n t he t i me per i od, t hat t he publ i ci nt er est r equi r es t he Commi ssi on' s r evi ew and i t s wr i t t enopi ni on. Agai n, such wr i t t en not i f i cat i on was pr ovi ded. See,n. 10, supr a.
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any cabl e t el evi si on pr ovi der . Thi s st at ut e was amended i n 2014
t o r equi r e an af f i r mat i ve showi ng by the Pet i t i oner s t hat t he
pr oposed t r ansact i on i s i n t he publ i c i nt er est . 14
Ther e i s l i t t l e di sput e t hat t hese sect i ons of t he
Publ i c Ser vi ce Law, i ndi vi dual l y and col l ect i vel y, r equi r e us t o
concl ude t hat t he pr oposed t r ansact i on i s i n ( or ot her wi se i s
consi st ent wi t h) t he publ i c i nt er est t o obt ai n appr oval . I n t he
mat t er bef or e us, however , t her e i s consi der abl e di sagr eement
among t he par t i es over how t he “publ i c i nt er est ” st andar d set
f or t h expl i ci t l y i n PSL §§99, 100, 101 and 222( 3) shoul d be
i mpl ement ed.
The Pet i t i oner s asser t t hat t he several i ni t i at i ves
and commi t ment s descr i bed i n t he J oi nt Pet i t i on are more t han
suf f i ci ent t o pr ovi de "subst ant i al net publ i c i nt er est benef i t s"
( emphasi s added) f or New Yor k. 15 However , whi l e Pet i t i oner s’ own
wor ds her e r ef er t o "net publ i c i nt er est benef i t s", t he J oi nt
Pet i t i on f ai l s t o adequat el y expl ai n how t he consummat i on of t he
14 Pr i or t o amendment , t he st atut e r equi r ed t he Commi ss i on t oappr ove an appl i cat i on unl ess i t f ound t hat appr oval “woul d bei n vi ol at i on of l aw, any r egul at i on or st andar d pr omul gat ed byt he Commi ssi on or t he publ i c i nt er est . ” Ef f ect i ve Apr i l 1,2014, however , PSL §222( 3) was amended. ( L. 2014, Chap. 57.Par t R) . The or i gi nal l anguage of t he sect i on was desi gnat edsubsect i on ( a) and was r est r i ct ed t o t he renewal or amendmentof f r anchi ses. A new subsect i on ( b) was added t o govern t het r ansf er of f r anchi ses and f aci l i t i es f r om one f r anchi sehol der t o a succeedi ng f r anchi se hol der . PSL §222( 3) nowpr ovi des t hat t he Commi ss i on “shal l not appr ove” such an
appl i cat i on “unl ess t he appl i cant demonst r at es t hat appr ovalwoul d not ” vi ol at e any l aw, r egul at i on, or Commi ssi onst andar d, “and t hat t he t r ansf er i s ot her wi se i n t he publ i ci nt erest . ”
15 Case 15- M- 0388, J oi nt Pet i t i on of Char t er Communi cat i ons and Ti me War ner Cabl e f or Appr oval of a Tr ansf er of Cont r ol ofSubsi di ar i es and Fr anchi ses, Pr o For ma Reor gani zat i on, andCer t ai n Fi nanci ng Ar r angement s, J oi nt Pet i t i on ( f i l ed J ul y 2,2015) , p. 35.
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pr oposed t r ansact i on wi l l ul t i mat el y pr ovi de concr et e net
benef i t s .
I ni t i al l y, we not e t hat t he pr oposal may have
det r i ment s f or some or al l of t he Pet i t i oner s' New Yor k
cust omer s. I f t hese det r i ment s ar e si gni f i cant , t hey cannot be
di sr egar ded or omi t t ed f r om our publ i c i nt er est anal ysi s. The
J oi nt Pet i t i on i mpl i es t hat t her e ar e no such det r i ment s.
Any assessment of t he benef i t s shoul d al so be reduced
t o t he extent t he act i ons pr oduci ng t hose benef i t s coul d or
woul d have occur r ed even i n t he absence of t he pr oposed
t r ansact i on. I n New Yor k St at e, t he mer ged ent i t y wi l l consi st
pr i mar i l y of TWC asset s, and t he publ i c r ecor d i s cl ear t hat TWC
has a number of on- goi ng i ni t i at i ves t o i mpr ove t he servi ces
pr ovi ded t o i t s New Yor k cust omer s. The J oi nt Pet i t i on,
however , does not i dent i f y t hese i mpr ovement s, est i mat e t he
schedul e f or i mpl ement at i on i n t he absence of a Chart er / TWC
mer ger , or compar e t hem t o t he i ni t i at i ves t hat t he Pet i t i oner s
asser t wi l l accompany t he pr oposed t r ansact i on.
St af f asser t s t hat our anal ysi s of t he publ i c i nt er est
wi t h r espect t o PSL §222( 3) , must be pat t erned on our
i mpl ement at i on of PSL §70 anal ysi s. We do not bel i eve t hat our
PSL §222( 3) anal ysi s i s necessar i l y so l i mi t ed. Sect i on 70
pr ovi des f or our r evi ew of cer t ai n t r ansact i ons bet ween el ect r i c
cor por at i ons, gas cor por at i ons, or combi ned el ect r i c and gas
cor por at i ons. Ther e ar e many ways i n whi ch t hose t r ansact i ons
woul d or coul d be di f f er ent f r om t hose encompassed by PSL §§99,
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100, 101 and 222. 16 Wi t h t hese di f f er ences i n mi nd, we bel i eve
St af f ' s ar gument does not go f ar enough i n expl ai ni ng how t he
Commi ssi on shoul d eval uat e t he publ i c i nt er est .
Any si mi l ar i t i es t hat may exi st bet ween our anal ysi s
under PSL §§99, 100, 101, and 222 here and an anal ysi s under PSL
§70 f l ow f r om t he f act s of each case and not f r om t he st at ut es
t hemsel ves. Our anal ysi s wi l l be t ai l or ed t o t he speci f i c
t r ansact i on under r evi ew t o det er mi ne whet her t here ar e benef i t s
r el at ed t o t he t r ansact i on and whet her t he benef i t s out wei gh t he
har ms depends on t he speci f i cs of t he i ndust r y and f act s of t he
case.
Whi l e we have br oad di scr et i on t o choose t he scope of
r evi ew t hat best f i t s t he t r ansact i on at hand, we ar e cogni zant
of Pet i t i oner s’ ar gument s t hat , on t he one hand, t her e ar e cabl e
f r anchi se t r ansf er s whi ch have exper i enced a ver y l i mi t ed
r evi ew, and, on t he ot her , t her e ar e Sect i on 70 r evi ews whi ch
r el i ed on onl y a “l i ght ened” r evi ew of t he pr oposed
t r ansact i ons. The cabl e t el evi si on f r anchi se t r ansf er s t o whi ch
t he Pet i t i oners r ef er were deci ded i n t he wake of t he amendment
of PSL §222. I t i s asser t ed t hat t hese r evi ews di d not
mat er i al l y di f f er f r om det er mi nat i ons on cabl e f r anchi se
t r ansf er pet i t i ons pr i or t o t hat dat e i n r el yi ng on an
abbr evi at ed exami nat i on of t he publ i c i nt er est . However , i n t he
f i r st deci si on, i nvol vi ng t he t r ansf er of t wo cabl e f r anchi ses
16 For exampl e, and i n cont r ast t o many Sect i on 70 t r ansact i ons,t he PSL §§99, 100, 101, or 222 t r ansact i ons may i nvol ve r et ai lcust omer s and ar e unl i kel y t o i nvol ve whol esal e cust omer sonl y; may not i nvol ve r egul at ed r at es set accor di ng t o cost -of - ser vi ce anal ysi s; may not i nvol ve ent i t i es t hat do notpar t i ci pat e i n an or der l y, cl ear i ng pr i ce mar ket such as t heNew Yor k I ndependent Syst em Operator ( NYI SO) ; may r epr esentt he New Yor k por t i on of a si gni f i cant nat i onal t r ansact i on;and coul d be r egul at ed on t he f eder al l evel by the Feder alCommuni cat i ons Commi ss i on ( FCC) , r at her t han t he FederalEnergy Regul atory Commi ss i on ( FERC) .
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f r om Haef el e TV, I nc. t o TWC, t he Commi ssi on f ound t hat t he
pr oposed t r ansact i on met t he publ i c i nt erest because TWC had
commi t t ed to i mpr ovi ng subst ant i al l y t he over al l per f or mance of
t he acqui r ed syst em, woul d of f er access t o br oader pr ogr ammi ng,
and had a pr oven t r ack r ecor d as “an exper i enced pr ovi der of
advanced cabl e, I nt ernet access and t el ecommuni cat i ons
ser vi ces. ”17 The same f i ndi ngs, modi f i ed t o mor e accur at el y
r ef l ect t he ci r cumst ances of t he i ndi vi dual f r anchi se, wer e made
i n t he second f r anchi se t r ansf er ci t ed by Pet i t i oner s. 18
We cannot agr ee wi t h Pet i t i oner s t hat t hese t wo cabl e
t el evi si on f r anchi se t r ansf er cases ar e exampl es of t he
Commi ssi on usi ng a t est ot her t han a net posi t i ve benef i t t est
t o assess t he publ i c i nt er est associ at ed wi t h t he pr oposed
t r ansf er s. I ndeed, as t he Commi ssi on expl i ci t l y st at ed i n t hese
cases:
Whi l e ever y cabl e t r ansf er i s r evi ewed on a case-by- case basi s t o det er mi ne i f i t meet s t he publ i ci nt er est , her e the benef i t s ar e adequat e becauset he t r ansact i on poses ver y l i t t l e r i sk t ocust omers as Ti me Warner has a pr oven t r ack
r ecor d and pl ans t o pr ovi de mor e ser vi ceof f er i ngs i n t he Towns of Gr eene and Smi t hvi l l e.Addi t i onal l y, unl i ke a mer ger or t he acqui si t i onof an ent i r e cabl e company, t he i nst antt r ansact i on i nvol ves t he sal e of onl y two smal lcabl e syst ems and the associ at ed f r anchi ses.Haef el e wi l l cont i nue t o oper at e i n ot her
17 Case 14- V- 0023, Appl i cat i on of Ti me Warner Cabl e Nort heast LLC
i n Connect i on wi t h t he Acqui si t i on of Cer t ai n Cabl e Tel evi si onFaci l i t i es and Fr anchi ses i n t he Towns of Gr eene andSmi t hvi l l e f r om Haef el e TV, I nc. , Or der Appr ovi ng Tr ansf er s,( i ssued Apr i l 29, 2014) , pp. 5- 6.
18 Case 15- V- 0090, J oi nt Pet i t i on of Adams CATV, I nc. and OquagaLake Cabl e, I nc. f or Appr oval of Tr ansf er of Cont r ol of Cabl e Tel evi si on Syst em Fr anchi se, Cer t i f i cat es and Faci l i t i es i nBr oome Count y, Or der Appr ovi ng Tr ansf er ( i ssued May 21, 2015) ,pp. 4- 5.
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j ur i sdi ct i ons on a st and- al one basi s f ol l owi ngt he pr oposed t r ansact i on. 19
Thus, not onl y di d t he Commi ssi on' s deci si ons i n t hose cases
emphasi ze, as we do her e, t hat t he scope of t he publ i c i nt er est
anal ysi s necessar i l y depends on t he speci f i cs of t he par t i cul ar
t r ansact i on at hand, t hose deci si ons cl ear l y appl i ed a net
posi t i ve benef i t t est by f i ndi ng t hat t he benef i t s of cabl e
f r anchi se t r ansf er s out wei ghed t he det r i ment s because the
t r ansf er ees woul d br i ng bet t er cabl e, I nt er net and t el ephone
servi ces t o cust omer s t han wer e of f er ed by t he t r ansf er or s. 20
Assumi ng, ar guendo, t hat §70 suppl i ed t he def i ni t i ve
descr i pt i on of t he net posi t i ve benef i t s t est t o be used t o
gauge t he publ i c i nt erest under PSL §§99, 100, 101 and 222, we
not e t hat Pet i t i oner s asser t t hat t he publ i c i nt er est anal ysi s
used here shoul d be di f f erent and of a narr ower scope t han t he
anal ysi s descr i bed by St af f . Speci f i cal l y, t he Pet i t i oner s
ar gue t hat a si gni f i cant number of t r ansact i ons appr oved under
§70 i nvol vi ng compet i t i ve el ect r i c gener at or s and mer chant
t r ansmi ss i on compani es have been deci ded under a “l i ght ened”
publ i c i nt er est st andar d r at her t han t he net benef i t s t est
19 Case 14- V- 0023, supr a, Or der Appr ovi ng Tr ansf er s, n. 2. Seeal so, Case 15- V- 0090, supr a, Or der Appr ovi ng Tr ansf er , n. 1.
20 Pet i t i oner s al so suggest t hat t he scope of t he Commi ssi on’ si nqui r y and, hence, t he st andar d i t i s l egal l y capabl e ofappl yi ng, i s l i mi t ed by f eder al l aw. They cont end t hat undert he FCC’ s r ul es i mpl ement i ng §617 of t he Cabl e Act , t he scopeof t r ansf er r evi ew aut hor i t y i s conf i ned t o i ssues r el at ed t oa t r ansf er ee’ s f i nanci al , l egal and t echni cal abi l i t y t ooper at e the cabl e syst ems proposed t o be t r ansf er r ed ( Repl yComment s of Pet i t i oners, f i l ed Sept ember 30, 2015( Pet i t i oner s’ Repl y Comment s) , p. 55) . That suggest i onhowever i gnores t he i nst r uct i ons accompanyi ng For m 394 whi chst at e t hat t he appl i cant must , “[ i ] n addi t i on t o t hei nf or mat i on r equest ed on t hi s f or m . . . submi t al l i nf or mat i onr equi r ed by the cabl e f r anchi se agr eement or appl i cabl e l ocall aw or t hat t he f r anchi si ng aut hor i t y deems necessary orappr opr i at e i n connect i on wi t h t he t r ansf er det er mi nat i on. ”
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appl i ed t o r et ai l ut i l i t i es under t hat secti on. 21 Accor di ng t o
t he Pet i t i oner s, i f any anal ysi s i s r equi r ed under t he PSL §70
st andar d f or t r ansact i ons bet ween “l i ght l y” r egul at ed ent i t i es,
t he eval uat i on i s gener al l y l i mi t ed t o i ssues r egar di ng mar ket
power and i mpact s on capt i ve r atepayers, and t he Commi ss i on' s
deci si on i s made wi t hout r egar d t o t he net publ i c benef i t s
st andar d t hat woul d be appl i ed t o f ul l y r egul at ed gas and
el ect r i c ut i l i t i es. 22
However , t he Commi ss i on’ s st andard of r evi ew f or
mer ger s and sal es of l i ght l y r egul at ed compet i t i ve el ect r i c
gener at or s and mer chant t r ansmi ssi on compani es i s i napposi t e,
and t he Pet i t i oner ’ s r el i ance on t hese cases t o est abl i sh t he
st andar d her e i s unper suasi ve. Pet i t i oner s ar gue t hat t he
pr esence of compet i t i ve pr ovi der s i n t he t el ephone, cabl e, and
broadband market s must be consi der ed, and t hat such a pr esence
mi t i gat es any need t o consi der whet her t he net posi t i ve benef i t
t est shoul d be appl i ed, or whet her condi t i onal appr oval - as
pr evi ousl y appl i ed by t he Commi ssi on t o monopol y pr ovi der s - i n
New Yor k i s necessar y.
The Pet i t i oner s’ compar i son i s f l awed because t hose
l i ght l y r egul at ed ent i t i es are al most al ways i ndi vi dual mar ket
par t i ci pant s, do not di r ect l y ser ve r et ai l cust omer s, and
oper at e i n ef f ect i vel y compet i t i ve el ect r i c commodi t y mar ket s
t hat ar e admi ni st er ed by an i ndependent ent i t y responsi bl e f or
assur i ng ef f i ci ent oper at i on. Ther e i s vi r t ual l y not hi ng
comparabl e t o t he ci r cumst ances pr esent ed here. The r evi ew
21 See e. g. , Case 91- E- 0350, Wal l ki l l Gener at i ng Company L. P. –Pet i t i on For a Decl ar at or y Rul i ng t hat t he Publ i c Ser vi ce Lawi s I nappl i cabl e, or That Fur t her Regul at i on Ther e under i sUnnecessary, or i n t he Al t er nat i ve, That Li ght - HandedRegul at i on be Appl i ed, Decl ar at ory Rul i ng on Regul at or yPol i ci es Af f ect i ng Wal l ki l l Gener at i ng Company and Not i ceSol i ci t i ng Comment s ( i ssued Aug. 21, 1991) .
22 Pet i t i oner s’ Repl y Comment s, pp. 53- 54.
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af f or ded under PSL §70 t o t r ansf er s i n cases i nvol vi ng
par t i ci pant s i n t hose mar ket s ar e speci f i c t o t hem and t hei r
char act er i st i cs. Mor eover , t he degr ee of PSL §70 r egul at i on
t hat wi l l be appl i ed t o each such ent i t y i s det er mi ned at t he
t i me i t ent er s t he r el evant mar ket , subj ect , however , t o
subsequent modi f i cat i on i f new f act s concer ni ng t hat mar ket
ar i se. No such determi nat i on has been made f or cabl e compani es.
Mor eover , l i ght l y regul at ed pr ovi der s awar ded r educed scr ut i ny
r evi ew under PSL §70 oper at e at t hei r own r i sk i n mar ket s t hat
i nvol ve mul t i pl e compet i t or s oper at i ng on t he same pl ayi ng
f i el d, agai n di st i ngui shi ng t hem f r om cabl e compani es.
As di st i nct f r om l i ght l y r egul at ed pr ovi der s, wher e
f ul l y r egul at ed pr ovi der s f ur ni sh r et ai l el ectr i c ser vi ce, t he
Commi ssi on does, i n f act , conduct a br oad net posi t i ve benef i t
anal ysi s under PSL §70, whi ch has hi st or i cal l y r esul t ed i n a
subst ant i al por t i on of syner gy savi ngs accrui ng t o r at epayer s.
We r ecogni ze t hat , i n compar i son t o el ect r i c and gas ut i l i t i es,
whi ch ar e monopol y pr ovi ders, Char t er and Ti me Warner operate i n
r el at i vel y compet i t i ve t el ephone and vi deo mar ket s. These
mar ket s, however , ar e not per f ect and, i n t hei r oper at i on, may
not pr ovi de New Yor k consumers wi t h t he f ul l measur e of benef i t s
t hat woul d ot her wi se be expect ed i n a t r ul y compet i t i ve
envi r onment . 23 The Commi ss i on' s regul atory r esponse t o a
pr oposed mer ger shoul d act as t he next best subst i t ut e f or
compet i t i on when market f orces may not ensure that consumers
r ecei ve t he f ul l benef i t s t hat shoul d be der i ved f r om
23 St af f ' s pr oposed condi t i ons, di scussed i nf r a, r ecogni ze t hatNew Char t er , whi ch i s cr eat ed as a r esul t of t hi s mer ger , wi l lbe abl e t o exer t some mar ket power i n t he ret ai l mar ket s, butwi l l al so be subj ect t o compet i t i ve f or ces. We not e her e, anddi scuss bel ow, St af f ' s r ecommendat i on t hat onl y 50% of syner gysavi ngs, r at her t han al l or a maj or i t y of t hose savi ngs, beshar ed wi t h New Yor k consumers.
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t r ansact i ons of t hi s t ype. 24 Whi l e some of t he ser vi ces of f er ed
by t he Pet i t i oner s may i nvol ve l evel s of compet i t i on si mi l ar t o
t hose of l i ght l y regul at ed pr ovi der s r ecei vi ng r educed scrut i ny
under PSL §70, ot her s, especi al l y br oadband, si mpl y do not .
Ti me War ner ser ves cl ose t o 50% of New Yor k Stat e and we have a
l egi t i mat e i nt er est i n ensur i ng t hat , when a company of t hi s
si ze pr ovi des cust omer s wi t h a servi ce so af f ect ed by the publ i c
i nt er est , as i s communi cat i ons, t hat r eal benef i t s accr ue t o
consumer s as a r esul t of a gi ven t r ansact i on.
As est abl i shed above, we are not compel l ed by st atut e
t o appl y any of t he anal yses f r om any par t i cul ar §70 pr oceedi ng
t o t hi s case. Never t hel ess, wher e we f i nd t hose hol di ngs
hel pf ul and appr opr i at e, we can seek gui dance f r omt hem. Thus,
we f i nd usef ul t he f ol l owi ng f r om a recent §70 pr oceedi ng
i nvol vi ng a f ul l y r egul at ed r et ai l el ectr i c pr ovi der , 25 wher e we
st at ed t hat t he publ i c i nt er est anal ysi s:
[ S] t ar t s by r equi r i ng Pet i t i oner s t o make at hr ee- par t showi ng t hat t he t r ansact i on woul dpr ovi de cust omer s posi t i ve net benef i t s, af t er
consi der i ng ( 1) t he expect ed benef i t s pr oper l yat t r i but abl e t o t he t r ansact i on, of f set by ( 2)any r i sks or det r i ment s t hat woul d r emai n af t erappl yi ng ( 3) r easonabl e mi t i gat i on measur es.
Once we have gauged t he net benef i t s by compar i ngt he t r ansacti on’ s i nt r i nsi c benef i t s ver sus i t sdet r i ment s and r i sks, we can assess whether t he
24 The Pet i t i oners have not pr esent ed any concr et e pr oof t hat t hesyner gy savi ngs at t r i but abl e t o t hi s t r ansact i on wi l l i ndeed
be shared wi t h cust omers as we woul d expect i n a t r ul ycompet i t i ve mar ket . Fur t her mor e, Pet i t i oner s st at e i n t hei rRepl y Comments t hat New Yor k consumer s may not share i n anysyner gy savi ngs at al l as t hese savi ngs may al r eady beexper i enced under t he i ncumbent , Ti me Warner . See,Pet i t i oner s’ Repl y Comment s, p. 57.
25 Case 12- M- 0192, For t i s I nc. Acqui si t i on of CH Ener gy Gr oup,Or der Aut hor i zi ng Acqui si t i on Subj ect t o Condi t i ons ( i ssued J une 26, 2013) ( For t i s Mer ger Or der ) .
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achi evement of net posi t i ve benef i t s r equi r est hat t he i nt r i nsi c benef i t s be suppl ement ed wi t hmonet i zed benef i t s ( somet i mes descr i bed as“posi t i ve benef i t adj ust ment s” or PBAs) . Then, i fnecessary, we est abl i sh a quant i f i ed PBA
r equi r ement , “as an exerci se of i nf ormed j udgmentbecause t here i s no mathemat i cal f ormul a on whi cht o base such a deci si on. ”26
When appl yi ng t hi s gui dance we ar e al so cogni zant of
t he br oad aut hor i t y pr ovi ded t hr ough t he publ i c i nt er est t est t o
det er mi ne what const i t ut es t he publ i c i nt er est , and as def i ned
bel ow, t he appl i cabl e def i ni t i on i s r easonabl y r el at ed t o t he
Commi ssi on’ s gener al r egul at or y aut hor i t y, t he nat ur e of t he
t r ansact i on, and i t s pot ent i al i mpact on New Yor ker s. 27
Thus, we di sagr ee wi t h t he Pet i t i oner s t hat t he
amendment t o Sect i on 222 f ai l ed t o al t er t he appl i cat i on of t he
publ i c i nt er est r evi ew by mer el y shi f t i ng t he bur den of pr oof
f r om t he Commi ssi on t o the Pet i t i oner s. 28 The new PSL §222( 3) ( b)
suppor t s a mor e t hor ough revi ew of t he pr oposed t r ansact i on.
Under Pet i t i oner s’ i nt er pr et at i on of PSL §222( 3) ( b) , t he
Commi ssi on woul d have t o assume t hat t he Legi sl at ure amended the
st at ut e wi t h t he expect at i on that t he nat ur e of t he Commi ssi on’ s
26 I d. , p. 59, quot i ng Case 07- M- 0906, I ber dr ol a, S. A. et al . –Acqui si t i on Pet i t i on, Or der Aut hor i zi ng Acqui si t i on Subj ect t oCondi t i ons ( i ssued J anuar y 6, 2009) ( I ber dr ol a Or der ) , p. 136.
27 I n New Yor k Tel ephone Co. v. Pub. Serv. Comm’ n of t he St ate ofNew Yor k, 72 N. Y. 2d 419, 429- 30 ( 1988) , t he Cour t of Appeal sconst r ued t he pr ovi si on of PSL §110( 3) t hat a managementcont r act be i n t he “publ i c i nt er est ” and concl uded t heappl i cat i on of t he t er m “publ i c i nt er est ” was a mat t er ofCommi ssi on di scr et i on and exper t i se.
28 Pet i t i oner s’ Repl y Comment s, p. 49.
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r evi ew of cabl e mer ger s or acqui si t i ons woul d be no di f f er ent
t han t he publ i c i nt er est st andar d i n PSL §§99, 100, and 101. 29
Legi sl at i ve i nt ent and meani ng i s best det er mi ned f r om
st at ut or y l anguage. Sami ent o v. Wor l d Yacht I nc. , 10 N. Y. 3d 70,
77- 78 ( 2008) ; Ri l ey v. Count y of Br oome, 95 N. Y. 2d 455, 463
( 2000) . I n addi t i on, a cour t must at t empt t o har moni ze al l
l egi sl at i ve pr ovi si ons and gi ve meani ng t o al l par t s of a
st at ut e. Peopl e v. Fi nl ey, 10 N. Y. 3d 647, 655 ( 2008) . “The
pr i mar y consi der at i on of cour t s i n i nt er pr et i ng a st at ut e i s t o
ascer t ai n and gi ve ef f ect t o t he i nt ent i on of t he Legi sl at ur e. ”
Ri l ey v. Count y of Br oome, 95 N. Y. 2d 455, 463 ( 2000) [ i nt er nal
quot at i on mar ks and ci t at i on omi t t ed] .
Appl yi ng t hese pr i nci pl es, i t i s vi r t ual l y cer t ai n
t hat t he amendment t o PSL §222( 3) was i nt ended t o br i ng i t more
i n l i ne wi t h our publ i c i nt er est r evi ew enumer at ed i n t he ot her
sect i ons of t he PSL di scussed above. Addi t i onal l y, i t i s our
bel i ef t hat t he Legi sl at ur e i nt ended t hat t he scope of t he
publ i c i nt er est anal ysi s i n cabl e mer ger s and acqui si t i ons
necessar i l y depends on t he speci f i cs of t he par t i cul ar
t r ansact i on at hand and whet her t hat t r ansact i on wi l l serve t he
publ i c i nt er est . 30
29 Even when t he publ i c i nt er est st andar d i s prescr i bed by ot hersect i ons of PSL ( i . e. , §§70, 83 and 89- h) , t he nat ur e of t heCommi ssi on r evi ew wi l l be gui ded by t he i ndi vi dual f act ssur r oundi ng a par t i cul ar t r ansact i on.
30 Thi s appl i cat i on i s done as a pur e mat t er of st at ut or ypr i nci pl es wi t hout r esor t t o t he “real i st i c appr ai sal ”or di nar i l y done i n PSL const r uct i on. Mat t er of New Yor k St at eEl ect r i c & Gas Cor por at i on v. Pub. Ser v. Comm’ n of t he St at eof New Yor k, 308 A. D. 2d 108, 111, 114 ( 3r d Dept 2003) .
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SCOPE OF THE PUBLI C I NTEREST ANALYSI S
The Commi ssi on’ s publ i c i nter est r evi ew i s as broad as
i t s st at ut or y obl i gat i ons and r el at ed pol i ci es concer ni ng cabl e
and t el ecommuni cat i on servi ces. I n t hi s regar d, t he PSL
pr ovi des gener al and br oad over si ght aut hor i t y t o t he Commi ssi on
over t el ecommuni cat i ons and cabl e pr ovi ders t hr ough PSL §91:
adequat e t el ephone servi ce at j ust and r easonabl e r at es; t hr ough
PSL §94: general powers of t he Commi ss i on over
t el ecommuni cat i ons pr ovi der s t o exami ne condi t i ons of servi ce
and f aci l i t i es; and PSL §211: gener al power s of t he Commi ssi on
t o set St ate communi cat i ons pol i cy and ensure cabl e compani es
pr ovi de adequat e, economi cal , and ef f i ci ent ser vi ce t o
subscr i ber s. Under t hese and ot her st at ut or y pr ovi si ons of t he
PSL, di scussed supr a, t he Commi ss i on must determi ne whether or
not t he t r ansact i on, as a whol e, pr ovi des net publ i c benef i t s t o
al l New Yor k consumers i n t he Ti me Warner f oot pr i nt .
The det er mi nat i on and eval uat i on of publ i c benef i t
must be under t aken i n t he cont ext of exi st i ng publ i c pol i cy
obj ect i ves and t he r eal i t i es of t he t el ecommuni cat i ons and cabl e
t el evi si on mar ket pl aces. At t he out set , we not e t he
Commi ssi on’ s hi st or i cal pol i cy wi t h r egar d t o bot h t el ephone and
cabl e t el evi si on has been t o pr omot e t he publ i c wel f ar e t hr ough
r el i ance on mar ket - based compet i t i on. 31
I n conduct i ng our r evi ew of t hi s pr oposed mer ger , we
not e t hat TWC compani es i n New Yor k present l y ser ve more t han
t wo mi l l i on cust omer s i n 1, 150 communi t i es. Whi l e Char t er
cur r ent l y has onl y a ver y l i mi t ed pr esence i n New Yor k, t he
combi ned company, l i ke TWC al one bef ore the merger , wi l l be the
si ngl e l ar gest suppl i er of communi cat i ons- r el at ed ser vi ces i n
31 See e. g. , Case 05- C- 0616, Tr ansi t i on t o I nt er modalCompet i t i on, St atement of Pol i cy on Fur t her St eps Towar dCompet i t i on i n t he I nt ermodal Tel ecommuni cat i ons Market andOr der Al l owi ng Rat e Fi l i ngs ( i ssued Apr i l 11, 2006) .
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t he St ate. On a nat i onal scal e, t he combi ned company wi l l have
mor e t han 19 mi l l i on subscr i ber s. The si ze of t he r esul t i ng
company wi l l have bot h posi t i ve and negat i ve i mpl i cat i ons t o New
York’ s i nt er est s i n f ost er i ng a r obust communi cat i ons
i nf r ast r uct ur e and compet i t i ve mar ket f or communi cat i on
ser vi ces.
As Staf f not es, based on t he si ze and scope of t he
post - mer ger New Char t er , t he pr oposed t r ansact i on i s expect ed t o
gener at e si gni f i cant syner gi es, a por t i on of whi ch shoul d i nur e
t o the benef i t of New Yor k consumers. 32 One of t he Commi ssi on’ s
obl i gat i ons i s t o ensur e t hat t he pot ent i al benef i t s of t he
pr oposed t r ansact i on t r ansl at e i nt o tangi bl e benef i t s t o New
Char t er ’ s New Yor k consumer s. Fur t her , t hese benef i t s shoul d be
consi st ent wi t h t he Commi ssi on’ s publ i c pol i ci es f avor i ng t he
act i ons of compet i t i ve mar ket s over r egul at i on, wher e war r ant ed.
Our r evi ew of t he pr oposed t r ansact i on al so t akes i nt o
account t he changed, and changi ng, natur e of t he communi cat i ons
mar ket pl ace and of t he l aws t hat gover n i t . I n Mar ch 2015, t he
FCC r econsi der ed i t s pr i or deci si ons t hat cl assi f i ed br oadband
I nt er net access ser vi ce as an i nf or mat i on servi ce, and concl uded
t hat br oadband I nt er net access ser vi ce i s a t el ecommuni cat i ons
ser vi ce subj ect t o r egul at i on as a common car r i er under Ti t l e I I
of t he Tel ecommuni cat i ons Act . 33 The FCC has obser ved t hat
consumer s t oday pr i mar i l y use br oadband I nt er net access servi ce
as a condui t . 34 As Pet i t i oner s, St af f , and ot her comment er s t o
t hi s pr oceedi ng observe, t he r api d evol ut i on of t echnol ogy
32 Redacted Comment s of t he Depart ment of Publ i c Ser vi ce St af f( St af f Comment s) , pp. 19- 21.
33 GN Docket No. 14- 28, I n t he Mat t er of Protect i ng and Promot i ngt he Open I nt ernet , Repor t and Or der on Remand, Decl aratoryRul i ng, and Or der , ¶306 et seq. ( i ssued March 12, 2015) ( OpenI nt er net Or der ) .
34 I d. , ¶350.
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spur r ed by t he devel opment of t he I nt er net i s pr of oundl y
changi ng t he f undament al concept of communi cat i on ser vi ces
t hr oughout t he wor l d. Thus, i n r evi ewi ng t he pr oposed
t r ansact i on and i t s i mpact on the mar ket s and consumer i nt er est s
i n New York, t he Commi ssi on must consi der t he i mpact i t wi l l
have on t he abi l i t y of consumer s t o gai n access t o, and r el y on,
br oadband net wor ks t o exer ci se ef f ect i ve communi cat i on choi ces.
Much as t el ephone was an essent i al ser vi ce f or
consumers i n t he second hal f of t he 20t h Cent ur y, so t oo t oday i s
br oadband. Br oadband ser vi ce, whether provi ded by wi r e, such as
cabl e, di gi t al subscr i ber l i ne ( DSL) , and f i ber opt i c
t echnol ogi es, or wi r el essl y t hr ough Wi Fi and LTE cel l ul ar
t echnol ogi es, r epr esent s not onl y a communi cat i ons pl at f or m ( i n
t he f or m of voi ce, t ext , e- mai l , vi deo conf er enci ng, and ot her
soci al medi a ser vi ces) , but a pl at f or m f or soci al r el at i onshi ps,
heal t h i nf or mat i on, news, ent er t ai nment , educat i on, medi cal
di agnosi s, t he payment of bi l l s, navi gat i on, shoppi ng,
gover nment busi ness, document st or age, and j ob appl i cat i ons.
Gr owi ng f r om a nascent i ndust r y f ewer t han 20 years ago,
broadband has become a cor e communi cat i ons servi ce r el i ed upon
by hundr eds of mi l l i ons of peopl e acr oss t he count r y and t he
wor l d. New Yor k has exper i enced t hi s evol ut i on f i r st hand, as
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i t s medi a pr oduct i on i ndust r y, 35 educat i onal i nst i t ut i ons, 36
hospi t al s and heal t hcar e i ndust r i es, 37 and f i nanci al
i ns t i t ut i ons38 r el y heavi l y on br oadband connect i vi t y t o del i ver
ser vi ces and ai d t o mi l l i ons of New Yor ker s.
35 New Yor k Ci t y’ s medi a i ndust r y empl oys more t han 300, 000peopl e or appr oxi mat el y 10 per cent of t he Ci t y’ s pr i vat esect or , and account s f or $30 bi l l i on i n annual r evenue. See,Medi a & Emer gi ng Tech, NYCEDC,ht t p: / / www. nycedc. com/ i ndust r y/ medi a- emer gi ng- t ech.
36 New Yor k’ s wi de r angi ng educat i on i nst i t ut i ons ar e at t hef or ef r ont of ut i l i zi ng t he I nt er net as a means t o educat est udent s. See, The Advanced Communi cat i ons Law & Pol i cyI nst i t ut e at New Yor k Law School , The I mpact of Br oadband on
Educat i on (December 2010) , avai l abl e atht t ps: / / www. uschamber . com/ si t es/ def aul t / f i l es/ l egacy/ about / USChamber _Paper_on_Br oadband_and_Educat i on. pdf ; see al so,Educat i onSuperHi ghway, St ate of t he St ates Report on SchoolBr oadband Connect i vi t y ( November 19, 2015) , avai l abl e atht t p: / / st at eof t hest at es. educat i onsuper hi ghway. or g/ .
37 The New Yor k St ate Legi sl at ur e’ s Legi sl at i ve Commi ssi on onRural Resources and the Senat e and Assembl y Heal t h andI nsurance Commi t t ees r el eased a r eport i n 2012 det ai l i ng t heemer gence of t el emedi ci ne i n New Yor k, i t s r el i ance onbr oadband, and recommendat i ons f or i t s cont i nued i mport ance,
i ncl udi ng i ncr eased br oadband depl oyment . See, Legi sl at i veCommi ss i on on Rur al Resour ces, Tel emedi ci ne and Tel eheal t h:Put t i ng t he Pi eces Toget her ( Mar ch 2012) , avai l abl e at ht t p: / / www. nysenat e. gov/ si t es/ def aul t / f i l es/ ar t i cl es/ at t achment s/ Tel emedi ci ne%20and%20Tel eheal t h%20Repor t . pdf . I nr ecogni t i on of t hi s emer gence, t he New Yor k St at e Legi sl at ur epassed and Gover nor Cuomo si gned Bi l l A2552A ( L. 2015 Chapter6) , whi ch r equi r es cover ser vi ces vi a t el emedi ci ne i f pr ovi dedby hospi t al s, home car e and hospi ce agenci es, l i censedphysi ci ans, PAs, dent i st s, nur si ng, mi dwi ves, podi at r i st s,opt omet r i st s, opht hal mi c di spenser s, psychol ogi st s, soci al
wor ker s, or speech l anguage pat hol ogy and audi ol ogi st s. Thebi l l became ef f ect i ve on J anuar y 1, 2016,
38 Fi nanci al servi ces compani es, many of whi ch ar e based, i n andoper at e extensi vel y, i n New Yor k St at e ar e i nt er act i ng wi t ht hei r cust omer s onl i ne, wi t h 68% of consumer s r epor t i ng t heuse of onl i ne banki ng. See, Consumer s and Mobi l e Fi nanci alSer vi ces, Feder al Reserve ( Mar ch 2012) ,ht t p: / / www. f eder al r eserve. gov/ econr esdat a/ mobi l e- devi ces/ 2012-consumer s- f i nanci al - i nst i t ut i ons. ht m.
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Wi t hi n t hi s cont ext of r api d and dr amat i c change, i t
i s under st andabl e t hat st at e commi ssi ons, i ncl udi ng t hi s
Commi ss i on, are r equi r ed by f ederal l aw t o encour age t he
depl oyment of advanced tel ecommuni cat i ons i nf r ast r uct ur e,
capabl e of del i ver i ng br oadband servi ces t o al l New Yor ker s. 39
I n appl yi ng t he publ i c i nt er est st andar d i n t hi s case, our
eval uat i on of t he pr ovi si on of t el ephone and cabl e servi ces
compel s us t o al so consi der br oadband because al l of t hese
servi ces compet e agai nst one anot her and ar e i ncr easi ngl y
i nt erchangeabl e. Gi ven Ti me Warner ’ s br oadband presence i n New
York Stat e, and t he i mpor t ance of broadband ser vi ce f or New
Yorker s, t hi s t r ansact i on present s an i mpor t ant oppor t uni t y f or
t he Commi ssi on t o assess t he extent t o whi ch r egul at ed servi ces
l i ke cabl e and tel ephone i nt eract wi t h br oadband, and how t he
Commi ss i on, as r equi r ed by f ederal l aw, must encour age the
depl oyment and adopt i on of hi gher speed br oadband servi ces. 40
The Commi ssi on must al so consi der t hat , i n t oday’ s
market , many New Yor kers l ack adequat e access t o communi cat i on
choi ces and t hat t he publ i c i nt er est i s not wel l ser ved i f we
appr ove t hi s mer ger wi t hout addr essi ng t hat def i ci t . I n
addi t i on, i t i s cr uci al t o consi der whet her t he pr oposed
t r ansact i on woul d har m or benef i t New Yor ker s who, because of
39 47 U. S. C. §1302( a) st at es i n r el evant par t t hat “each St at ecommi ssi on wi t h r egul at or y j ur i sdi ct i on overt el ecommuni cat i ons servi ces shal l encour age the depl oyment ona reasonabl e and t i mel y basi s of advanced t el ecommuni cat i onscapabi l i t y t o al l Amer i cans ( i ncl udi ng, i n par t i cul ar ,
el ement ar y and secondar y school s and cl assr ooms) by ut i l i zi ng,i n a manner consi st ent wi t h t he publ i c i nt er est , conveni ence,and necessi t y, pr i ce cap r egul at i on, r egul at or y f or bear ance,measures t hat pr omot e compet i t i on i n the l ocalt el ecommuni cat i ons mar ket , or ot her r egul at i ng met hods t hatr emove bar r i er s t o i nf r ast r uct ur e i nvest ment . ”
40 Ti me War ner ’ s br oadband servi ce i s cur r ent l y t he most wi del yavai l abl e i n New Yor k and i t s cabl e ser vi ce i s avai l abl e t oappr oxi mat el y 61% of t he St at e’ s 8. 2 mi l l i on househol ds.
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t hei r l evel of i ncome, have di f f i cul t i es af f or di ng br oadband
I nt er net access. 41 The Commi ssi on al so r ecogni zes t hat many
r esi dent i al and busi ness cust omer s i n r ur al ar eas of t he St at e
l ack access t o such servi ces at speeds or l evel s t hat pr ovi de
r eal val ue f r om t he compet i t i ve communi cat i ons market .
Ther ef or e, j ust as i n t he case of af f or dabi l i t y, t he publ i c
i nt er est i nqui r y necessar i l y r equi r es an assessment on how t he
t r ansacti on wi l l har m or benef i t t he St at e’ s i nt er est i n r ur al
and busi ness cust omer br oadband expansi on.
Based upon t he f oregoi ng consi der at i ons, t he
Pet i t i oner s must show, among ot her t hi ngs, t hat t he t r ansact i on
wi l l f aci l i t at e a gr eat er commi t ment t o communi cat i on net wor k
moder ni zat i on t hr oughout t hei r New Yor k f oot pr i nt s t han woul d
otherwi se occur wi t h a st andal one Ti me Warner or gani zat i on. The
Pet i t i oner s must al so show how t he t r ansact i on wi l l f aci l i t at e
i ncr eased access t o t hei r net wor k f or r ur al New Yor ker s and
busi ness cust omers who today do not have the f ul l val ue of a
compet i t i ve market . As St af f and many comment ers poi nt out , t he
pr omi se of t el ecommuni cat i ons and cabl e compet i t i on i s el usi ve
i f cust omers do not have access t o t he cabl e network or are not
abl e t o access advanced net wor ks because st andal one broadband
ser vi ces ar e not af f or dabl e. Accor di ngl y, as par t of t hei r
bur den, we expect t he Pet i t i oner s t o demonst r at e that t he
pr oposed t r ansact i on pr omot es New Yor k’ s i nt er est i n a r obust
compet i t i ve br oadband market t hrough expandi ng and enhanci ng
net wor k access and assur i ng af f or dabl e st andal one ser vi ces.
Al ong wi t h t hese consi der at i ons, as a whol e, New Yor k
consumer s ar e f ar t oo of t en di ssat i sf i ed wi t h t he ser vi ce
41 See, Pew Resear ch Center , Home Br oadband 2015 ( December 21,2015) , avai l abl e atht t p: / / www. pewi nt ernet . org/ 2015/ 12/ 21/ 2015/ Home- Br oadband- 2015 ( exami ni ng t he rel at i onshi p between i ncome and br oadbandadopt i on) .
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qual i t y of t r adi t i onal cabl e compani es. 42 As par t of our publ i c
benef i t anal ysi s we wi l l consi der t he i mpact of t he pr oposed
t r ansact i on on cust omer servi ce.
Fi nal l y, as i n al l cases of t hi s t ype, t he Commi ssi on
i s concerned about t he economi c devel opment ef f ect s of t he
mer ger , i ncl udi ng how t he pr oposed t r ansact i on wi l l i mpact
exi st i ng and new empl oyment oppor t uni t i es. Because Ti me Warner
i s a New Yor k based company, t her e i s par t i cul ar i nt er est i n
ensur i ng that syner gi es ar e not achi eved t hr ough reduct i ons i n
t he cust omer - f aci ng l abor wor kf or ce i n New Yor k.
St af f of f er s t hat t her e may be condi t i ons or
r equi r ement s not descr i bed i n t he J oi nt Pet i t i on t hat coul d be
i mposed and t hat coul d mi t i gate one or more of t hese det r i ment s,
or ot her wi se i ncr ease t he ext ent t o whi ch t he t r ansact i on may be
char act er i zed as i n t he publ i c i nt er est . Recogni zi ng, as we
must , t hat monet i zed benef i t s, somet i mes descr i bed as posi t i ve
benef i t adj ust ment s or PBAs, ar e at best “an exer ci se of
i nf ormed j udgment because t here i s no mathemat i cal f ormul a on
whi ch t o base such a deci si on, ”43 we addr ess bel ow addi t i onal
speci f i c pr oposal s t hat we f i nd necessar y t o assur e t hat t he
Pet i t i oner s’ pr oposed t r ansact i on meet s t he posi t i ve net
benef i t s t est and i s i n t he publ i c i nt er est . I n consi der i ng
addi t i onal enf or ceabl e condi t i ons t hat coul d be appl i ed t o our
appr oval of t he pr oposed t r ansact i on, we al so consi der St af f ' s
assessment of t he syner gi es l i kel y t o f l ow f r om t he mer ger t o
New Char t er ' s shar ehol der s, and t he shar e of t hese syner gi es
t hat shoul d be expected t o pr ovi de benef i t s t o Ti me Warner and
Char t er ’ s New Yor k consumers.
42 St af f Comment s, pp. 39- 40. See al so, Peopl e Ut i l i t i es LawProj ect ( PULP) comment s f i l ed Sept ember 16, 2015 ( PULPComment s) , pp. 10- 11.
43 I ber dr ol a Or der , p. 136.
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At t he out set , St af f asser t s t hat t he val ue of t he
syner gi es t hat may be r eal i zed f r om t he pr oposed t r ansact i on i s
appr oxi matel y $402 mi l l i on. 44 I n i t s met hodol ogy, St af f not es
f i r st t hat publ i shed r epor t s “pr oj ect t hat t he mer ger of Ti me
War ner and Char t er wi l l pr oduce $800 mi l l i on of syner gy
savi ngs. ”45 St af f t hen cal cul at es t hat , post acqui si t i on, TWC’ s
and Char t er ’ s New Yor k cust omers woul d r epr esent appr oxi matel y
10. 879% of New Char t er ’ s t ot al cust omer base ( appr oxi mat el y
2, 600, 000 out of 23, 900, 000) . St af f concl udes, t hat a
conservat i ve pr esumpt i on of a 50% cust omer / 50% shar ehol der
shar i ng of t hese syner gi es, appl i ed t o New Char t er ’ s expect ed
New Yor k cust omer percent age, est abl i shes t hat t he combi ned
company’ s cust omers shoul d r ecei ve appr oxi matel y $43. 5 mi l l i on
( 10. 879% x $400 mi l l i on) i n benef i t s annual l y f r om t he pr oposed
t r ansact i on. 46 The J oi nt Pet i t i oner s, however , t ake i ssue wi t h
St af f ’ s cal cul at i on of t he New Yor k shar e of t he pr oj ect ed
synergy savi ngs. 47 They argue t hat St af f overst ates t he amount
44 Staf f Comment s, p. 21
45 Char t er t o Merge wi t h Ti me Warner Cabl e and Acqui r e Br i ghtHouse Networks Combi nat i ons Benef i t Sharehol ders, Consumersand Cabl e I ndust r y, May 26, 2015, avai l abl e atht t p: / / i r . t i mewar ner cabl e. com/ i nvest or - r el at i ons/ event s- and-pr esent at i ons/ upcomi ng- event s/ event - det ai l s/ 2015/ Char t er -Communi cat i ons- t o- Merge- wi t h- Ti me- Warner- Cabl e- and- Acqui r e-Br i ght - House- Net wor ks- Conf er ence- Cal l / def aul t . aspx.
46 St af f cal cul at es t hat over t he f i r st t en post - t r ansact i onyears, New Yor k cust omer synergy savi ngs shoul d t otal
appr oxi mat el y $402 mi l l i on, usi ng a pro forma r un r ate where50% of t he syner gi es ar e achi eved i n t he f i r st year , 75% oft he synergi es ar e achi eved i n t he second year , and 100%t her eaf t er ( $43. 5 mi l l i on X 50% + $43. 5 mi l l i on X 75% + $43. 5mi l l i on X 8 = $402. 375 mi l l i on) . See, St af f Comment s, pp. 20-21. The net pr esent val ue of t he St af f cal cul at ed consumershar e i s appr oxi mat el y $280 mi l l i on usi ng a di scount r at e of12%.
47 Pet i t i oner s’ Repl y Comment s, pp. 56- 58.
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of syner gy savi ngs t hat shoul d be at t r i but abl e t o cust omer s i n
sever al r espect s.
Fi rs t , t he Pet i t i oners assert t hat St af f f ai l s t o
comput e t he net pr esent val ue of t he $402 mi l l i on i n est i mat ed
synergy savi ngs t hat shoul d accr ue t o New Yor k Ti me Warner and
Char t er cust omer s over t he f i r st t en year s f ol l owi ng t he
pr oposed t r ansact i on. Thi s f ai l ur e, accor di ng t o t he
Pet i t i oner s, over st at es t he quant i t at i ve amount of benef i t s t o
be del i ver ed under t he net benef i t s t est . The Pet i t i oner s st at e
t hat a net pr esent val ue anal ysi s woul d br i ng t he over al l number
down t o $241 mi l l i on i nst ead of $402 mi l l i on. 48 Both t he net
pr esent val ue and t he t ot al nomi nal val ue can be i nst r uct i ve.
To t he ext ent t hat net savi ngs or benef i t s accr ue over di f f er i ng
per i ods of t i me, t he Commi ss i on shoul d compare t he syner gy
savi ngs or benef i t packages usi ng a net pr esent val ue appr oach,
however , t he nomi nal val ue i s al so i nf or mat i ve as i t r epr esent s
t he t ot al val ue r ecei ved over t i me.
Second, t he Pet i t i oner s ar gue t hat , i n capi t al
i nt ensi ve and t echnol ogi cal l y dynami c busi nesses such as cabl e,
br oadband and tel ephony, i t i s more reasonabl e t o assume t hat a
subst ant i al por t i on of syner gy savi ngs wi l l be r e- i nvest ed i n
net wor k i nf r ast r uct ur e and new t echnol ogi es r at her t han si mpl y
r et ur ned t o cust omer s or shar ehol der s. 49 We agr ee t hat t hese are
“capi t al i nt ensi ve and t echnol ogi cal l y dynami c busi nesses. ”50
Thi s busi ness envi r onment i s present whet her t he proposed mer ger
goes f or war d or not . However , i n or der t o guar ant ee t hat t he
pr oposed t r ansact i on i s i n t he publ i c i nt er est f or New
York, concr et e commi t ment s ar e necessar y her e because, as
48 I d. , p. 56.
49 I d.
50 I d.
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i ndi cated above, New Chart er wi l l be abl e t o exer t some market
power i n t he r et ai l mar ket s.
Thi r d, Pet i t i oner s st at e t hat Staf f i ncor r ect l y
assumes t hat syner gy savi ngs wi l l be uni f or ml y r eaped i n each
geogr aphi c area ser ved by t he mer gi ng ent i t i es i n pr opor t i on t o
t hat ar ea’ s shar e of t he combi ned company’ s t ot al subscr i ber
base. Accordi ng t o Pet i t i oners, each syner gy may not have t he
same ef f ect acr oss t he mer ged ent i t y’ s f oot pr i nt . 51 These
asser t i ons, however , cut agai nst Pet i t i oner s' pr evi ous argument
t hat , i n a compet i t i ve envi r onment , cust omer s wi l l necessar i l y
be r ecei vi ng t hei r shar e of syner gy savi ngs. Mor eover , i f New
York cust omer s ar e net cont r i but or s r at her t han net r eci pi ent s
of t he syner gy savi ng, t hen i t conf i r ms St af f ’ s posi t i on t hat
addi t i onal condi t i ons ar e necessary t o ensur e an act ual net
benef i t f or New Yor k cust omer s.
I n the absence of any persuasi ve argument t o t he
cont r ar y, we concl ude t hat St af f ' s est i mat e of t he syner gy
savi ngs t hat shoul d be avai l abl e f or t he benef i t of New Yor k
cust omer s ( $402 mi l l i on i n nomi nal val ue) i s a usef ul est i mat e
t o measure the net benef i t s associ at ed wi t h t he pr oposed
t r ansact i on. At a mi ni mum, t hi s amount i n syner gy savi ngs
shoul d be avai l abl e t o cust omer s t hr ough t he f ol l owi ng
condi t i ons di scussed bel ow.
THE J OI NT PETI TI ON
Accor di ng t o t he Pet i t i oner s, t he pr oposed t r ansact i on
wi l l enhance compet i t i on and pr ovi de cur r ent Ti me Warner and
Char t er cust omer s wi t h f ast er I nt er net speeds and del i ver ot her
publ i c i nt er est benef i t s. The pur por t ed benef i t s put f or war d
ar e as f ol l ows.
51 I d. , p. 57.
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Net work I nvest ment
The Pet i t i oner s asser t t hat , af t er t he t r ansact i on i s
compl eted, t hey wi l l make sever al i nvest ment s i n t he combi ned
syst ems. Mor e speci f i cal l y, t he Pet i t i oner s descr i be f our t ypes
of i nvest ment s that New Char t er wi l l be maki ng. Fi r st , t he
Pet i t i oner s wi l l commi t t o t he compl et i on of one mi l l i on l i ne
ext ensi ons nat i onal l y i n t he f i r st f our year s af t er t he mer ger
i s compl et e. Second, t hey wi l l make a $2. 5 bi l l i on i nvest ment
wi t hi n f our year s of t he mer ger cl osi ng t o bui l d- out unserved or
underser ved commerci al areas i n t he exi st i ng Char t er - TWC- BHN
ser vi ce t er r i t or i es. Thi r d, t he Pet i t i oner s asser t t hat t hey
wi l l creat e 300, 000 addi t i onal I nt er net over wi r el ess (Wi Fi )
“hot spot s” wi t hi n f our year s of t he mer ger cl osi ng. 52 Four t h,
t hey asser t t hat New Char t er wi l l conver t i t s f aci l i t i es t o an
al l - di gi t al syst em f or 99% of i t s cust omer s wi t hi n 30 mont hs of
t he i mpl ement at i on of t he pr oposed mer ger , al t hough Pet i t i oner s
st at e t hat i t i s possi bl e t hat syst ems ser vi ng l ess t han 1% of
homes i n t he exi st i ng f oot pr i nt , i ncl udi ng Col umbi a Count y
systems, may not be t r ansi t i oned t o al l - di gi t al ser vi ce due t o
t he chal l enges of i nt er connect i ng cer t ai n r emai ni ng Char t er
net wor ks.
Pet i t i oner s, however , decl i ne t o speci f y wher e i n t he
nat i onal f oot pr i nt of Char t er , TWC and BHN t hese i nvest ment s
wi l l be made or t o i dent i f y t he deci si onal f act or s t o be used t o
channel t hese capi t al r esour ces t o speci f i c ar eas or cust omer s.
Ther e i s no anal ysi s t o i ndi cat e t hat a r easonabl e propor t i on of
t hese i nvest ment s wi l l be t o syst ems i n New Yor k or f or t he
benef i t of New Yor k cust omer s. Si mi l ar l y, t her e i s no pr oposal
by the Pet i t i oner s t o descr i be t he speci f i c commi t ment s t hat ar e
52 A hot spot i s a physi cal l ocat i on si t uat ed wi t ht el ecommuni cat i ons equi pment t hat al l ows users i n t he vi ci ni t yof t he hot spot ar ea, t o access t he Wi Fi connect i on t o t heuser ’ s Smar t Phone, t abl et or ot her mobi l e devi ce.
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bei ng made or t he speci f i c enf orcement mechani sms t hat woul d be
used i n t he event t he Pet i t i oner s’ i mpl ement at i on f el l shor t of
t hei r commi t ment s. Fur t her , i n or der f or t hese i nvest ment s t o
be char act er i zed as par t of a net publ i c benef i t , St af f
concl udes, and we agr ee, t hat Pet i t i oner s woul d have t o
est abl i sh t hat t hese i nvest ment s woul d not have been made i n the
absence of t he proposed merger . 53 I n t he absence of a
demonst r at i on t hat t here i s “a t angi bl e commi t ment t o make new
i nvest ment s or i nvest beyond Ti me War ner ' s curr ent capi t al
i nvest ment budgets, ”54 i t i s di f f i cul t t o charact er i ze t hese
capi t al expendi t ur es as a cer t ai n benef i t t o New Yor k cust omer s
or a sat i sf act i on of t he publ i c i nt er est under t he New Yor k
stat ut es.
Beyond t hi s gener al observat i on, appl i cabl e t o each of
t he i nvest ment s l i st ed above, i t i s possi bl e t o i dent i f y
speci f i c char act er i st i cs of each of t hese i nvest ment s t hat al so
f r ust r at e or obvi at e t he concl usi on t hat t hey woul d cont r i but e
t o a net posi t i ve benef i t f or New Yor ker s. For exampl e, wi t h
r espect t o t he l i ne extensi on i nvest ment s, we not e t hat t he
Pet i t i oners t ake i ssue wi t h a pr oposal by one comment er who
suggest s t hat t he Pet i t i oner s shoul d commi t t o bui l d- out t he
system t o reach densi t y l evel s as l ow as 10- 12 r esi dent s per
mi l e. I n r esponse, t he Pet i t i oner s ar gue t hat " [ t ] he Commi ssi on
shoul d not ci r cumvent muni ci pal aut hor i t y t o negot i at e bui l d- out
commi t ment s i n f r anchi ses, or i t s own r ul emaki ng pr ocess, by
adopt i ng a bui l d- out r equi r ement t hat exceeds exi st i ng
r equi r ement s i n t he St at e. " 55 Ther e i s no i ndi cat i on, however ,
t hat t hi s caut i onary ar gument can be squared wi t h t he
Pet i t i oner s’ nat i onal commi t ment t o make one mi l l i on l i ne
53 St af f Comment s, p. 26.
54 I d.
55 Pet i t i oner s' Repl y Comment s, p. 29.
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ext ensi ons. I f t he bui l d- out oppor t uni t i es i n New Yor k St at e
ar e pr i mar i l y bui l di ng down t o densi t y l evel s al r eady speci f i ed
i n f r anchi se agr eement s, t hen i t i s t he f r anchi se t er ms, not t he
mer ger , t hat woul d r equi r e t hose l i ne ext ensi ons. I f t her e ar e
no such oppor t uni t i es, and t he Pet i t i oner s r esi st bui l di ng- out
based on l ower densi t y l evel s, t he oppor t uni t y t o meet t hi s one
mi l l i on l i ne ext ensi on commi t ment must depend on l i ne ext ensi ons
t hat wi l l be made i n f r anchi se t er r i t or i es ot her t han t hose i n
New Yor k. I n t hi s event , t he l i ne ext ensi on commi t ment cannot
be char act er i zed as a net benef i t f r om t he st andpoi nt of t he
merger wi t hout speci f i c commi t ment s f or New Yor k.
Si mi l ar l y, we not e t hat t he $2. 5 bi l l i on i nvest ment
commi t ment t o bui l d- out i n commerci al areas i s unaccompani ed by
any commi t ment f or New Yor k. Fur t her , and i n cont r ast t o other
i nvest ment “commi t ment s, ” t he $2. 5 bi l l i on bui l d- out has no
mi l est ones at whi ch pr ogr ess t owar d t he commer ci al bui l d- out
goal woul d be measur ed. Wi t h t hese char act er i st i cs, i n addi t i on
t o t he gener al char acter i st i cs descr i bed above, i t i s di f f i cul t
t o recogni ze thi s $2. 5 bi l l i on “commi t ment ” as a benef i t f or New
York r esul t i ng f r om t he mer ger .
The t hi r d el ement of t he Pet i t i oner s' capi t al
i nvest ment commi t ment i s t he est abl i shment of 300, 000 new Wi Fi
hot spot s over t he f i r st t hr ee year s af t er t he mer ger ’ s cl osi ng.
The depl oyment of addi t i onal Wi Fi hot spot s i s, accor di ng t o
St af f , a benef i t t o consumer s who use cer t ai n appl i cat i ons on
cer t ai n mobi l e phones. 56 Thi s val ue cannot be quant i f i ed i n t he
absence of a pl an t hat descr i bes whet her , or t he extent t o
whi ch, t hese hot spot s wi l l be depl oyed i n New Yor k. I n
addi t i on, St af f underst ands t hat TWC has, up t o now, pur sued a
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