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Election Consequences In The Cable Business

router detail, with illuminated power, broadband and Wi-Fi icons
photo by Tom Page

From the headlines about Obamacare, immigration, Russian (and maybe American) espionage against Americans and the battle over Neil Gorsuch’s confirmation to the Supreme Court, you might get the idea that the Trump administration has thus far produced little – and then only with great difficulty.

But away from all the noise, the day-to-day activities of government are proving the accuracy of one of the most profound things Barack Obama ever said: Elections do, indeed, have consequences. And those consequences are being felt across the breadth of the regulatory state, from pipeline routes across the open prairies to the living rooms and Wi-Fi routers of ordinary Americans.

This week brought the latest example, when the Federal Communications Commission dropped a requirement that might have forced cable provider Charter Communications to expand its broadband network to 1 million homes that already are served by a hardwired broadband provider.

Under the Obama administration, the FCC imposed a requirement that Charter extend high-speed internet access to 2 million new homes within five years, half of which were to be homes already served by a competitor. On Monday, the FCC released a revised order. The cable company will still need to extend its service area by 2 million customers, but the competition provision would be dropped. Instead, the FCC will require Charter to add service in places without existing broadband access.

FCC Chairman Ajit Pai said in a statement that the condition of counting “overbuild” toward the total required expansion “was not and is not in the public interest, and it runs directly against the goal of promoting greater Internet access for all Americans.” Mignon Clyburn, currently the FCC’s only Democrat, expressed support for the change too, despite saying at the time of the original order that she wished it had extended to a greater number of locations overall.

Unsurprisingly, The American Cable Association disliked the original order and had petitioned the FCC to reverse it. Perhaps less intuitively, Charter itself was not the biggest opponent among cable companies. Instead, the FCC faced complaints from smaller, weaker cable companies, who anticipated that they would be Charter’s most likely targets under the original order. The FCC’s new position focuses on expanding broadband access alone, which addresses most of the industry’s complaints.

So is this a positive development for the public overall? Or, to take it a step further, would freeing Charter completely to expand its network wherever it chooses, to unserved homes or those in competitive neighborhoods, be a good move or a bad one? I have my opinion, and if you have read this far on this topic, you probably have yours. These opinions rest largely on our attitudes about the goals government chooses to pursue and the means it chooses to pursue them.

To me, the FCC inquiry ought to have stopped when it determined that Charter’s merger with Time Warner (and its concurrent absorption of Bright House Networks, which was the cable provider that served my Florida vacation home) would not be adverse to those three companies’ customers. Even “negotiating” the 2 million home expansion at all is, in my view, a form of government overreach. Under the duress of regulatory power, the move conscripts private capital to achieve what the government considers a legitimate government purpose. If the government thought expanding broadband internet access was its purview, it could have spent its own money for it. Heaven knows there are enough taxes and fees associated with telecommunications services to provide the resources for it, and at least those burdens are shared across the citizenry.

But if we are going to mandate such expansion at all, why effectively deny wired broadband to a million households in the interest of providing duplicative (or “competitive,” if you favor this approach) service to a like number, a great many of whom will obviously not switch, thus leaving the buildout cost unrecovered? Why mandate inefficient spending over efficient spending?

It is not as though competitive providers are not emerging. Improvements in wireless broadband, together with more generous monthly data limits or no-limit plans, are already providing competition to cable in many areas. This progress will increase if the FCC facilitates rollout of the next generation of cellular data. Also, in some areas, hardwired broadband competition already exists or will soon arrive. My 315-unit condominium building in downtown Fort Lauderdale is served by Comcast now and is in the process of being wired by AT&T for competitive broadband, which should be available by this summer. Nobody had to extort this investment by AT&T; the company is expanding on its own schedule and for its own reasons.

This, in my view, is how decisions to spend shareholder money ought to be made: by the management those shareholders hire to run their company, rather than by appointed regulators in Washington whose agendas and allegiances lie elsewhere.

Whether you agree with me on this or not, we probably can agree that on this point – President Obama is right again. That election we held last year has real consequences every day, even though they may not appear in the headlines.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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