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New York regulators rescind Charter/Time Warner deal approval

New York's largest cable operator may have to sell off some of its operations due to a dispute with state regulators regarding its compliance with conditions imposed on a 2016 merger.

The New York State Public Service Commission voted July 27 to rescind its approval of the Charter Communications Inc. merger with Time Warner Cable Inc., alleging the cable operator failed to fulfill its promise to build out internet service to underserved state residents. Unless resolved, the move will require Charter to sell its legacy Time Warner Cable operations in New York to another operator.

In approving the Charter/Time Warner Cable transaction, the New York Public Service Commission required Charter to build out broadband service to certain homes and businesses in the state that were at the time unserved or underserved in terms of internet service. The state set an overall goal 145,000 passings, which Charter was to meet over four years with 36,250 new locations each year.

In May 2017, Charter filed a build-out update stating it had passed 15,164 new premises, or 41.8% of the approval order's initial target. The commission and the company came up with a settlement agreement that stipulated Charter must pass 36,771 new locations by Dec. 16, 2017, and 58,417 by June 18, 2018. After Charter submitted its initial compliance report in early 2018, the state disqualified 18,363 of the identified passings, saying they were located in "densely populated urban areas" including New York City, whereas the merger order required the new passings to be located in less densely populated areas across the state.

Charter objected to this interpretation, saying in a July filing that "the Merger Order's Appendix A … contains no such requirement, requiring only that the 'residential housing units and/or businesses' be 'unserved' or 'underserved,' not that they also be located in low-density areas."

In an emailed statement, the company said it had expanded its reach "to more than 86,000 New York homes and businesses since our merger agreement." The company "remain[s] focused on delivering faster and better broadband to more New Yorkers, as we promised," it added.

In its decision revoking the merger approval, the commission ordered Charter to file a plan within 60 days "to ensure an orderly transition to a successor provider."

"Charter's non-compliance and brazenly disrespectful behavior toward New York State and its customers necessitates the actions taken today seeking court-ordered penalties for its failures, and revoking the Charter merger approval," said New York Public Service Commission Chair John Rhodes in a news release.

Charter provides digital cable television, broadband internet and telephone service to more than 2 million subscribers in New York State in more than 1,150 communities, including major metropolitan areas such as Buffalo, Rochester, Syracuse, Albany and the boroughs of Manhattan, Staten Island, Queens and parts of Brooklyn.