Can Californian activism derail cable consolidation?

6 July 2014 by Steve Blum
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The California Public Utilities Commission might have something to say about the proposed Comcast/Time-Warner merger and the follow-on market swapping with Charter Communications. Most of the regulatory and legal approval focus has been on Washington, where the department of justice and the FCC are looking at issues such as compliance with anti-trust laws and the impact on the national broadband and television service markets. But according to an article in the Capitol Weekly, there’s an argument to be made that the CPUC has a major role to play too.

The CPUC barely regulates cable companies as video providers, but has a bit more authority when it comes to telephone service, which those companies also provide. It would be difficult – impossible, I’d say – to claim that the proposed merger/market swap would be anti-competitive in regards to phone service, since AT&T still dominates the landline business in California. But, so the argument goes, the decision by a federal appeals court last January that upset the network neutrality apple cart also opens the door to both federal and state intervention in broadband markets under certain conditions, such as anti-competitive behavior.

Directly addressing control of the Internet service market would be tricky for the CPUC. Although state law still allows the commission to dangle carrots in the form of infrastructure construction subsidies, its stick was whittled down – to nothing, some say – by a law passed two years ago that barred it from regulating Internet services. On the other hand, it has extended telephone-style regulation to telephone-style infrastructure, even when used for broadband purposes.

The CPUC hasn’t said yet if it’s going to do much, if anything – at this point its attention is focused on state-level technicalities. The commission is scheduled to consider modifications to its rules regarding statewide video franchises on Thursday – a matter delayed from the previous meeting. But as currently drafted, all that decision would do it reaffirm that franchise renewals and, by extension, transfers are all but automatic.

There’s no playbook for the CPUC to follow. To get involved, the commissioners would have to take an activist approach on their own initiative. Allowing one company duopoly control of as much as 80% of the California broadband market is no small matter. If there’s a case to be made for activism, this is it.