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New York: Charter Comm. Violated Time Warner Purchase Commitments

Confirming that a cable television service provider had failed to abide by some of the conditions attached to an order approving its acquisition of another multimedia company, the New York Public Service Commission has accepted a settlement under which the carrier, Charter Communications, must pay a penalty of $13 million. The commission found that Charter had not built out its cable network as had been required in the merger order that authorized Charter's acquisition of Time Warner Cable in early 2016. 

According to the commission, the $13 million assessment is the largest cable company financial settlement of its kind in state history, and possibly the largest in the nation. However, the commission remarked, the settlement provides for Charter to be able to "earn back" up to $12 million of the total, depending on its ability to abide by certain performance milestones from here on out. The commission observed that upon the company's merger with Time Warner, Charter became the largest cable provider in the state. 

The commission reported that Charter offers digital cable television, broadband Internet, and voice over Internet protocol telephone service to more than two million subscribers in New York State in more than 1,150 communities, with a potential customer base of five million households in its franchise areas. 

The commission listed such major metropolitan areas as Buffalo, Rochester, Syracuse, Albany, Manhattan, Staten Island, Queens, and parts of Brooklyn as among the areas served by Charter. Although both Charter and Time Warner were providing television, Internet and voice telephone services prior to the merger, the commission had conditioned its approval of Charter's proposed acquisition of Time Warner on Charter upgrading its broadband delivery speed to 100 megabytes per second (Mbps) statewide by the end of 2018 and to 300 Mbps by the end of 2019. 

Charter likewise was instructed to build out its network so as to include an additional 145,000 unserved or underserved homes and businesses within four years of the closing of the transaction. That expansion was to occur in four equal phases of 36,250 premises per year. 

However, the commission stated, it had discovered that while Charter had completed the first speed upgrade ahead of schedule, it had extended its network to reach only 15,164 of the 36,250 premises it was required to pass in the first year. Expressing significant disappointment in Charter's failure to proceed with the build-out as required, and underscoring the importance of the system expansion terms, the commission told Charter that it now must commit to completing its build-out requirement in increments over six periods by May 18, 2020. 

The commission related that in order to ensure the company keeps its promise, the stipulation says that Charter will forfeit its right to earn back up to $1 million of the $13 million payment each time it misses a six-month build-out target. The actual amount forfeited will vary, depending upon the percentage of the target missed and whether or not Charter can demonstrate it has timely performed specific tasks. 

The agreement requires Charter to pay $1,000,000 up front, none of which can be recouped by the company. That initial payment is to be placed into an escrow account within 30 days of approval of the settlement, with the funds used to provide computer and Internet access to low-income users. Charter likewise is required to produce a Letter of Credit for the remaining $12 million, as a further form of compliance insurance. 

Under the stipulation, Charter also consented to a series of interim targets for its build-out going forward, with an ultimate completion date of May 18, 2020. The schedule includes a series of six-month targets. 

The settlement terms state that should Charter miss one of the interim targets, the commission may draw down on the Letter of Credit in an amount up to $1,000,000 for each missed target. Such draw-downs will be forwarded to the State Treasury and will not be recallable. Re Charter Communications and Time Warner Cable, Case 15-M-0388, Sept. 14, 2017 (N.Y.P.S.C.).