twc/charter order

8/20/2019 TWC/Charter order

1/93

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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CASE 15- M- 0388

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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


4/93

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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CASE 15- M- 0388

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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 andal 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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CASE 15- M- 0388

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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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CASE 15- M- 0388

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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

twc/charter order

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