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Cable deal offers faster broadband, few savings

Western New York cable customers can expect access to faster internet speeds – but not necessarily lower bills – after federal regulators approved Charter Communications’ $65.5 billion acquisition of Time Warner Cable and the creation of the nation’s second-biggest home internet provider.

While the restrictions that federal regulators imposed on the deal include provisions to protect streaming video companies and provide cheaper broadband services to low-income families, the biggest impact on Western New York came four months ago, when the state Public Service Commission imposed a series of conditions on Charter when it gave its blessing to the merger.

Those conditions would expand the availability of high-speed internet service across Time Warner’s upstate service territory and also require that maximum internet speeds upstate double by 2018 and increase six-fold from their current levels by 2019.

State regulators are requiring Charter to upgrade Time Warner’s network so it can provide Internet service with a minimum speed of 60 megabits per second to all New Yorkers by 2019, along with speeds of as much as 300 Mbps. Speeds would be required to reach 100 Mbps by 2018. Time Warner currently offers 300 Mbps service only in the New York City market, but not upstate, where top speeds now are 50 Mbps.

Whether the conditions imposed by New York regulators will result in savings for consumers is harder to calculate, since many Time Warner customers currently purchase phone, TV and internet service as part of a bundled package at a discounted price. The deal with New York regulators requires Charter to allow existing Time Warner customers to keep their current bundled or standalone service “without material changes” aimed at discouraging consumers from renewing them for three years from the time that the merger is completed.

Federal regulators took a bigger picture view in orders issued late Monday by the Federal Communications Commission and Justice Department. Those provisions to protect streaming video companies and providing cheaper broadband services to low-income families are meant to ensure competition in the online video business and to improve Internet connectivity.

The restrictions could limit the power of Charter, which will become the country’s second-largest broadband provider with 19.4 million users and the third-largest cable television provider with 17.4 million customers.

With Charter, Comcast and Altice, the European company that recently made a deal for Cablevision, now controlling so much of the nation’s Internet and cable television access, they also are gaining more influence on television networks and programming providers.

On the plus side, the bigger cable companies have a stronger negotiating position to strike deals that reduce the steadily rising cost of programming, which could help hold down consumer bills. But it also could allow it to use its commanding position to stifle competition, especially from streaming services like SlingTV and Netflix.

“The enhanced leverage that Charter will now have will give it the ability to impose restrictions on programmers that could hold back video competition,” said John Bergmayer, senior staff attorney at consumer interest group Public Knowledge.

The FCC and Justice Department have asked Charter to agree to abstain from negotiations with programmers that would keep shows and movies off competing streaming services like Netflix and Amazon Prime Video.

Charter also promised that for seven years it would not impose data caps on broadband users who can run up big bills when watching online video, and that it would not charge companies like Netflix extra to connect to Charter customers.

“They’re protecting Netflix. They’re playing favorites,” said Harold Star, a University at Buffalo management professor. “They like Netflix better than they like the cable companies.”

The Stop Mega Cable Coalition, which includes consumer groups and Charter competitor Dish Network, said the federal order “still falls short of addressing all of the threats to competition and consumers posed by this transaction.”

The orders were coupled with many restrictions that illustrate how regulators are increasingly using their power to further policy goals that are not covered by current regulations for the industry.

“At first blush, it appears that the commission may have operated well outside the four corners of the merger application to pursue unrelated matters and policies,” Michael O’Rielly, a Republican commissioner for the agency, said in a statement.

But regulators said the conditions they are placing on the merger will enhance competition. “Online video distributors offer consumers greater choices for video services,” said Renata B. Hesse, the head of the Justice Department’s Antitrust Division, in a statement. “This merger would have threatened competition by increasing the merged company’s leverage to demand that programmers limit their licensing to these online providers.”

email: The New York Times contributed to this story.