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Charter, interest groups battle over broadband data caps, interconnection fees

Much has changed in the online video market in recent years, and federal regulators must soon decide whether to keep or discard a series of merger conditions imposed on Charter Communications Inc. in an effort to protect competition in that market.

Earlier this summer, Charter petitioned the U.S. Federal Communications Commission to sunset merger conditions imposed as part of the company's 2016 acquisition of Time Warner Cable Inc. and Bright House Networks LLC. Specifically, the FCC prohibited Charter from imposing data caps or usage-based pricing on its residential broadband services for seven years. Additionally, the agency prohibited the combined company from raising prices on companies that deliver internet traffic — including online video traffic — through interconnection fees.

In imposing the conditions, the FCC said Charter could petition to end the conditions on the five-year anniversary of the deal closing. With the anniversary approaching in 2021, Charter says the conditions are no longer necessary, while various interest groups argue they are essential to protecting consumers and competition. Comments on the matter were due to the FCC this month.

"In light of dramatic changes in the online video marketplace and the nature of the internet service market, the FCC should conclude that ending these two conditions in 2021 as it contemplated is in the public interest," wrote the cable company in its petition.

Regarding interconnection fees, Charter pointed to interconnection agreements signed between Netflix Inc. and several major internet providers, including Comcast Corp., Verizon Communications Inc. and AT&T Inc. The Comcast deal, for instance, allows the streaming company to transmit content directly to Comcast customers instead of using intermediaries known as content delivery networks. The Verizon deal allows Netflix to bypass any potential congestion at interconnection points.

"Even with these agreements in place ... the [online video] marketplace has continued to grow and thrive," Charter said.

The Free State Foundation, a free-market-oriented think tank, sided with Charter and urged the commission to drop the conditions.

"There is no evidence of anticompetitive practices by Charter that harm OVD competition or consumer access to OVD services," wrote the organization. "And it is bad policy to subject only Charter to regulatory burdens that are not needed to protect consumers or competition," added the group.

However, multiple interest groups, including INCOMPAS, a trade group that represents internet, streaming, communications and technology groups and advocates for competition policy across all networks, argued in favor of denying the petition.

"Charter has failed to demonstrate throughout this proceeding that its anticompetitive incentives that the Commission found in its Merger Order and accompanying economic analysis have altered so that consumers will not be harmed if the conditions are no longer in force," wrote the group.

Media advocacy group Free Press also urged the commission to reject Charter's petition, arguing that the COVID-19 pandemic should erase all doubts of the need for public interest benefits of uncapped broadband service and settlement-free interconnection.

Roku Inc., a digital media player service, urged the commission to deny the petition to prevent possible anti-competitive conduct among broadband providers.

"If it [the FCC] were to sanction data caps in the absence of competitive broadband internet access services, the Commission would not only allow Charter to act on its incentives to act anti-competitively, but also signal to other broadband providers who are unconstrained by competition that they too are free to adopt anti-competitive measures," wrote Roku.

"Data caps should become a relic of the past," added the company.

Charter, however, notes that seven of the top 10 U.S. broadband providers — including Comcast, AT&T and Altice USA Inc. — have incorporated data caps or some form of data usage policy in their offerings. Comcast, for instance, charges customers who use more than 1 TB of data each month an additional $10 for each 50 GB of extra data used. It also offers those high-usage customers an Unlimited Data Option for an additional $50 per month.

Altice and AT&T both offer a variety of plans, some of which come with data caps and some of which are unlimited.

However, Roku warned against imposing data caps amid soaring internet usage. Citing projections from OpenVault LLC, which provides technology and industry analytics for broadband operators, Roku noted that in 2020, 12% of all broadband subscriptions are projected to consume 1 TB or more of data per month.

"The numbers demonstrate that we are rapidly approaching a world where monthly data consumption on terrestrial broadband networks will no longer be measured in gigabytes of data, but in terabytes," Roku said.