California PUC Scheduled to Vote on Charter/Cox Transaction: Additional Bites at the "Conditions" Apple Shouldn't Be Allowed to Upset the Pro-Consumer Cart

Next Thursday, the California Public Utilities Commission (CPUC) at long last is poised to vote on the transfer of control of Cox Enterprises, Inc. (Cox) to Charter Communications, Inc. (Charter). And with little time to spare. The question is, will extra-legal attempts to saddle this pro-consumer transaction with unjustified conditions "jeopardize the Transfer's public benefits altogether"?

In comments filed with both the CPUC and the FCC, a June 2025 Perspectives from FSF Scholars, and a series of blog posts, Free State Foundation President Randolph May and I consistently have argued that the proposed combination of Charter and Cox is likely to generate clear consumer-benefitting efficiencies and, as a result of the de minimis overlap of their service territories as well as the impact of intense competition from Big Tech, no significant offsetting harms.

As we concluded in our submission to the FCC:

[T]he combination of Charter and Cox promises numerous consumer benefits. These include [(1)] lower costs, greater choice, and additional innovation in traditional cable offerings (broadband and video) fostered by an enhanced ability to compete with often much larger rivals, including Big Tech platforms with global reach; (2) the expansion of Charter's hybrid [mobile virtual network operator] offering into Cox's footprint combined with lower costs through greater scale; and (3) the "onshoring" of Cox customer-service jobs. And given the lack of any meaningful overlap in service territories, not to mention the high level of third-party competition in all three marketplace sectors, there appears to be little, if any, basis for concern that the transaction could result in significant harms.

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Regarding the state of play in California, the last hurdle that the transaction must clear, let's start with (potentially) good news: as I noted in my June 23 post to the FSF Blog, the parties expressed concern in a June 18 notice of ex parte communication that the CPUC's failure to act by August 13 – that is, the very day upon which the vote is scheduled – could result in the expiration of the Department of Justice's Hart-Scott-Rodino (HSR) approval. That "would cost the companies $2.5 million in filing fees and require them to wait at least another 30 days for DOJ clearance."

Should a vote to approve proceed as scheduled, those imminent instances of inefficiency and waste would be averted.

And now, let's turn to the (potentially) bad news: as I described in that same blog post, commenters, certainly aware of that looming deadline, had urged the CPUC to impose still more conditions – that is, on top of those agreed to by the parties in comprehensive settlements (Settlements) with the CPUC's Public Advocates Office and the California Emerging Technology Fund (CETF) and described in a May 18 notice of ex parte communication.

(Without getting too far into the weeds, there are two proposals before the CPUC: (1) the Proposed Decision of Administrative Law Judge Ormond (PD), to which Charter and Cox roundly object, and (2) the Alternative Proposed Decision of Commissioner Matthew Baker (APD), which is based upon the Settlements.)

In reply comments, CETF took issue with the PD, contending that "[b]ottom-line, a settlement agreement requires the assent of its parties" (emphasis in original).

Similarly, in their reply comments regarding the PD, Charter and Cox asserted it "deviates from longstanding Commission precedent, resulting in 'clear legal error and technical inconsistency,' by improperly superseding Settlement terms, and imposing extraneous measures with no record support. It would materially impede Charter's ability to compete and jeopardize the Transfer's public benefits altogether" (citations omitted).

By contrast, Charter and Cox noted approvingly in their reply comments on the APD that it "correctly finds that the Transfer, with the Settlements, serves the public interest, and, 'paired with the mitigations' that Joint Applicants accept (subject to modest revisions), also 'address[es] concerns raised by parties outside the [Settlement A]greement[s]'" (emphasis in original).

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The Settlements to which Charter and Cox – as well as the CPUC's Public Advocates Office – are a party appear to be more than sufficient to address any potential harms resulting from this transaction. The CPUC therefore should reject calls to unilaterally supersede those agreements and instead approve the APD at its meeting next week.

Is California Leveraging the Clock to Extract More Concessions From Charter and Cox?

In a March post to the FSF Blog regarding the merger between Charter Communications, Inc., and Charter Holdings, LLC (collectively, Charter) and Cox Enterprises, Inc. (Cox), I identified the California Public Utilities Commission (CPUC) as "the final, time-sensitive hurdle preventing the formation of a combined company better able to compete in broadband, mobile, and video." In recent days that time-sensitive hurdle has grown substantially.

In a video conference that took place on June 15 described in a June 18 notice of ex parte communication, representatives from Charter reiterated its concerns that the CPUC's timeline for action "would not sufficiently account for unforeseen or unanticipated delays that may occur, and that failure to complete the Transaction review prior to the [Hart-Scott-Rodino Act (HSR)] expiration would jeopardize the Transaction and the consumer benefits it would produce."

Meanwhile, Broadband Breakfast (subscription required) reports that "[s]ome advocacy groups in California want the state to tack on more conditions if it approves Charter's $34.5 billion acquisition of Cox Communications." Any such conditions would be in addition to commitments – including, among other things, a "$275 million investment over three years to upgrade Charter's network to support symmetrical gigabit service across its legacy service areas" – already agreed to in comprehensive settlements with the Public Advocates Office and the California Emerging Technology Fund described in a May 18 notice of ex parte communication.

Coincidence? Who can say.

What we do know is that the parties to this transaction – which has obtained the approval of the FCC, the Department of Justice (DOJ), and every other state within which they operate – repeatedly have warned the CPUC that its failure to sign off on the deal by September 15 at a minimum "would cost the companies $2.5 million in filing fees and require them to wait at least another 30 days for DOJ clearance."

Accordingly, the parties have on numerous occasions urged the CPUC to act "promptly." Most recently, and as described in the June 18 notice of ex parte communication referenced above, Charter explained why CPUC action by August 13, rather than its next meeting scheduled for September 3 (that is, a mere 12 days before HSR clearance expires), is "necessary."

As Free State Foundation President Randolph May and I explained in comments submitted to the FCC, and as every other reviewing body has concluded, the combination of these two companies will benefit competition – and, in turn, consumers.

The time for regulatory arbitrage has run out.

The CPUC should act before the DOJ's HSR clearance runs out, too.

Charter/Cox Transaction, Approved by Federal Regulators, Awaits California OK

On March 19, the New York State Public Service Commission approved – with questionable conditions – the transfer of control of Cox Enterprises, Inc. (Cox) to Charter Communications, Inc. (Charter). Weeks before, the FCC signed off on this pro-consumer transaction with no strings attached. The Department of Justice (DOJ), for its part, cleared the deal in September 2025, thereby triggering a one-year countdown during which the transaction must close lest that approval expire.

The California Public Utilities Commission (CPUC) now stands as the final, time-sensitive hurdle preventing the formation of a combined company better able to compete in broadband, mobile, and video. The parties therefore requested on February 27 that, should the CPUC find it necessary to hold an evidentiary hearing, it do so "promptly" – specifically, at some point next week. However, on March 2, the CPUC announced that it would not hold evidentiary hearings until April 20-24.

In a June 2025 Perspectives from FSF Scholars, FCC comments coauthored with Free State Foundation President Randolph May, and a brief submission to the CPUC, I consistently have argued that this transaction likely would deliver tangible consumer benefits without imposing significant offsetting harms. For example, in those comments filed with the CPUC, I wrote that:

[T]he combination of these two companies promises to provide California consumers of broadband, wireless, and video services with cost savings, expanded choice, and accelerated innovation, particularly in Cox service areas. Moreover, potential concerns regarding transaction-specific harms are obviated by (1) the de minimis overlap between the parties' respective geographic footprints, and (2) the substantial competitive pressures cable operators face from Big Tech, rival distribution technologies, and over-the-top content providers.

In a February 27 order, the Chiefs of the FCC's Wireline Competition Bureau, Office of International Affairs, and Wireless Telecommunications Bureau agreed, concluding that there are "certain public interest benefits [that] are likely to be realized, including promoting competition and consumer benefits for broadband and other services the combined company will provide" – and not "a significant likelihood of any material transaction-related public interest harms."

But as these things go, Charter and Cox also must obtain approvals from the states within which they operate. As noted above, New York recently blessed the transaction – though not without first extracting a figurative pound of flesh in the form of commitments to (1) spend at least $100 million on network upgrades to deliver symmetric Gigabit per second broadband speeds (that is, speeds well above the FCC's definition of "broadband": 100 Megabits per second (Mbps) downstream and 20 Mbps upstream), (2) replace 500+ Wi-Fi access points and provide free Wi-Fi access to non-customers, and (3) "fund digital inclusion and community initiatives."

That leaves California.

At the Morgan Stanley Investors Conference earlier this month, Charter Communications, Inc. CEO Chris Winfrey acknowledged that, "[n]o secret, we're working through California as the big state that remains open." And as a Charter spokesperson was quoted in a recent Broadband Breakfast article, "[w]e are working with California state regulators to complete the transaction review soon so we can bring lower prices, higher wages, and our 100% US-based customer service to more communities across the country."

There is now widespread agreement, at both the federal and state levels, that the combination of Charter and Cox would net substantial consumer benefits. California therefore should conclude its review with all due speed. Specifically, it should do so with a watchful eye toward the September 15 expiration date associated with the DOJ's approval – a deadline that, if missed, "would cost the companies $2.5 million in filing fees and require them to wait at least another 30 days for DOJ clearance."

Consumer Choice in Sports Proves that Video Competition Abounds

On February 25, the FCC's Media Bureau released a public notice seeking comment on "current and emerging trends in the distribution of live sports programming." With a particular focus on football, the item longs for a bygone era – and, what's more, views it through rose-colored glasses. Indeed, it seems to presuppose a time when football fans had free access to every game played. In other words, gridiron glory days that never existed.

Setting to the side, at least for the moment, the significant legal authority questions posed by the notice, I submit that, rather than a basis for concern, the current state of live sports carriage demonstrates that video programming distribution is highly competitive; that consumers derive substantial benefits, including expanded viewing options, as a result; and that any impact on legacy business models is an inevitable and necessary consequence of the welcome transition to a broader marketplace defined by abundant choice.

As the notice recalls, "[f]or decades, Americans have enjoyed turning on their television sets and quickly finding the games they wanted to watch for free on an over-the-air broadcast." Let us not forget, however, that a primary driver of that simplicity was a lack of choice. Consumers typically had access, via broadcast network affiliated local television stations, to a half dozen (give or take) NFL games on Sunday as well as Monday Night Football.

Until the launch of the NFL Sunday Ticket subscription service in 1994, that essentially was the whole picture.

Today, however, consumers can choose from a healthy roster of viewing options. That includes, of course, local broadcasters, which continue to offer a comparable number of games and can be received in a wide range of ways: for free using an over-the-air antenna; by subscribing to a traditional, facilities-based multichannel video programming distribution (MVPD) platform (that is, cable, direct broadcast satellite , and telco TV); and, more recently, with a subscription to a virtual MVPD such as YouTube TV, which also is the current home of the NFL Sunday Ticket.

In addition, the existence of numerous, competing video distribution platforms – including cable channels like ESPN (which has carried Monday Night Football games for the past two decades) and streaming services such as Amazon Prime (Thursday Night Football), Peacock (Sunday Night Football), and Netflix (Christmas Day) – creates additional opportunities for consumers to view games. Thursday Night Football games on Amazon Prime, as one example, represent an additive option. Similarly, NFL Sunday Ticket and NFL Red Zone provide diehard pigskin fans new couch-based opportunities that did not exist in the halcyon days of old.

This brings me to an important point. Commenters frequently make apples-to-oranges comparisons between the single-digit game schedules offered when local broadcasters were the only game in town and what it might cost today to view every game – nearly 300 in total, including the playoffs.

The notice itself, citing a CBS News article, states that "[i]n 2025, NFL games aired on 10 different services, which, according to some estimates, could cost a consumer over $1,500 to watch all games." That article in turn references a USA Today story for a total of $651 (although the latter in fact calculates a price somewhere between $811 and $833, figures seemingly inflated by double charges for ESPN, which already is included in the YouTube TV base plan); the $1,500 figure comes from an unsourced X post that appears to overstate the price of NFL Sunday Ticket + YouTube TV and similarly double charges for ESPN. Aside from the unrealistic assumption that more than a very few people – or perhaps anyone at all – would want to watch every single game or be able to do so, it's clear that the price figures cited are likely inflated. 

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As I have documented in a multiyear series of Perspectives from FSF Scholars and posts to the Free State Foundation blog – including one just a few weeks ago – consumers are migrating steadily away from the "Big Bundle" traditionally offered by traditional MVPDs to a self-selected collection of streaming options. In that highly competitive environment, numerous distributors are choosing to offer live sporting events, in addition to the original and licensed content that they carry, to win and retain customers. That competition-fueled decisionmaking benefits consumers through lower costs and greater choice. It therefore should be celebrated, even as it unavoidably disrupts existing revenue models.

The FCC Must Concurrently Consider the Impact of Greater Television Station Consolidation on Retransmission Consent Negotiations

On February 18, FCC Chairman Brendan Carr told reporters that he supports the proposed acquisition of TEGNA Inc. by Nexstar Media Inc. – and, specifically, that the Commission is "going to be moving forward." Because the combined entity would own stations reaching approximately 80 percent of U.S. households (according to the applicants, 54.5 percent after the UHF discount is applied), approval of this $3.54 billion transaction would require a waiver of, or substantial revisions to, the current 39 percent national television ownership cap (the cap).

However, as Free State Foundation President Randolph May and I argued in comments filed last August regarding potential changes to the cap, it would be inappropriately shortsighted to assess the primary justification asserted by the broadcast industry for regulatory relief – that is, the need for greater scale and scope in order to compete for advertising dollars with national online distribution platforms – in a vacuum.

The reason: it is inevitable that any regulatory relief provided regarding the cap (whether in general or specifically in the context of the instant transaction) intended to level the playing field between broadcasters and Big Tech (Amazon, Alphabet, Apple, and so on) will further skew the already lopsided retransmission consent negotiating positions of broadcasters and facilities-based multichannel video programming distributors (MVPDs): cable operators and direct broadcast satellite (DBS) operators.

As DIRECTV, LLC described in great detail in its petition to deny, "[a]mple evidence corroborates Applicants' own statements that the local consolidation proposed here will lead to higher retransmission consent rates." In addition – and echoing the fear recently expressed by Emily Barr, the former CEO of Graham Media Group, which owns multiple television stations in four states, that relief from the cap "is more about driving up stock prices for the few companies that survive consolidation" than it is about greater localism – DIRECTV warned that the transaction "would (notwithstanding Applicants' claims) almost certainly decrease the amount and quality of local news."

Accordingly, when assessing the claimed benefits of the proposed combination of Nexstar and TEGNA, the Commission should simultaneously evaluate – and take steps to mitigate – the impact that substantially larger station groups would have on the already asymmetric, heavily regulated relationships between local television stations and traditional MVPDs. As Mr. May and I wrote:

[I]f the FCC concludes that it should – and can, in a post-Chevron appellate environment – modify the national television ownership cap, at the same time it should (1) urge Congress to modernize the Communications Act, and, in the interim, (2) identify additional ways to eliminate unwarranted rules targeting facilities-based MVPDs.

To that list of remedial measures, at this time, I would add that greater consolidation on the broadcaster side certainly should factor heavily into the agency's consideration of pending, as well as future, transactions involving facilities-based MVPDs. As the Free State Foundation noted in its comments on the proposed combination of Charter Communications, Inc. and Cox Enterprises, Inc. currently before the Commission, "given that the FCC is considering allowing greater concentration in local broadcast television station ownership to facilitate competition vis-à-vis Big Tech platforms with global reach – a one-sided deregulatory step that inevitably would further skew retransmission consent negotiations – it would seem appropriate to afford the applicants similar relief here."

Streaming Continues to Surge as Short-Form Video Reshapes Consumer Habits

In a June 2025 post to the FSF Blog, I noted that streaming video had achieved a remarkable milestone: for the first time, it surpassed cable and broadcast television combined, capturing 44.8 percent of total viewing in May 2025. That trend continues. According to Nielsen's January edition of The Gauge™, streaming video's viewing share reached 47.5 percent in December 2025, setting yet another record. Perhaps even more impressive is the fact that, on two separate occasions, it represented over half of daily video consumption.

But the story of shifting consumer preferences extends beyond the longstanding streaming-versus-traditional-distribution-platforms narrative. An equally significant transformation is underway as social-media platforms – TikTok, YouTube Shorts, Instagram Reels, and so on – increasingly capture consumer attention with short-form content, particularly among younger demographics.

According to a Digiday article citing a report by GCI (subscription required), global consumers on average spend a tremendous amount of time each week watching short-form video content on social-media platforms: six hours and 39 minutes. In fact, the amount of time global consumers spend accessing such content significantly exceeds the amount of time they view streaming video: 5 hours. This represents a fundamental realignment in how people – especially younger generations – consume video.

These twin trends carry significant implications for communications policy. Indeed, the (1) ongoing ascendance of streaming video over legacy distribution platforms, and (2) explosive growth of short-form video underscore what I and others affiliated with the Free State Foundation long have argued: that the video marketplace is intensely competitive and consumer-driven. Consequently, legacy regulations born of a bygone era interfere with marketplace mechanics and artificially constrain competition-fueled growth in consumer welfare.

This reality is particularly relevant in the context of the FCC's ongoing review of the proposed transaction between Charter Communications, Inc. and Cox Enterprises, Inc., currently on day 101 (out of 180) according to the Commission's informal timeline. As the Free State Foundation noted in its comments, the combination of these geographically distinct distribution platforms appears likely to benefit video subscribers, in particular the Cox customers who would gain access to Charter's packages bundled with popular streaming options (HBO Max, Disney+, Paramount+, and ESPN Unlimited, among others).

FCC Deletes, Modernizes, Streamlines Cable Rate Regulation

At today's Commission open meeting, Chairman Brendan Carr's IN RE: DELETE, DELETE, DELETE initiative bore fruit when the agency adopted a Report and Order providing the cable industry with long-overdue relief on the rate regulation front. As long as Section 623 of the Communications Act remains on the books (see below for more on that), the rate a cable operator not facing "effective competition" – essentially a null set, legally speaking, since 2017 –charges for the Basic Service Tier (BST) remains subject to regulation. This item, (circulated version available here), however, "will remove from … regulations approximately 27 pages, 11,475 words, 77 rules or requirements, and 8 forms."

The Report and Order deregulates most cable equipment, exempts smaller systems, and declines to extend its rules to commercial establishments. It also modernizes and streamlines those rules that remain in place, primarily to reflect the sunset, over 25 years ago, of tier regulation beyond that of the BST – that is, the tier (1) upon which local broadcast television stations and public, educational, and government access (PEG) channels must be carried, and (2) to which rate regulation in theory still applies.

In practice, of course, given the ubiquitous presence nationwide of "effective competition" from direct broadcast satellite (DBS) operators, telco TV providers, and virtual multichannel video programming distributors (vMVPDs), rate regulation of the BST no longer occurs. As the item notes, the Commission itself is "unaware of any local communities that are actively regulating cable rates at this time."

In a June 5, 2025, post to the FSF Blog, Free State Foundation President Randolph May described this undertaking broadly as "a meaningful regulatory reform accomplishment" and referenced the following language from our comments: "what primarily stands in the way of unbridled, consumer-benefitting competition are ill-fitting rules that hamstring the subset of participants to which they uniquely apply." The Report and Order, the goal of which is to "unleash prosperity through deregulation," is significant step in the right direction.

Speaking of deregulation, according to Law360 (subscription required), earlier this week House Energy and Commerce Committee Chairman Brett Guthrie (R-KY) stated that "'it's time to have a real conversation and update the 1992 Cable Act.'" Consistent with the position for which I (as well as others associated with the Free State Foundation) long have advocated, most recently in "Deregulation Is the Cure for the Video Regulatory Disparity," a June 9 post to the FSF Blog, Chairman Guthrie indicated that he opposes calls to extend legacy MVPD regulation to virtual alternatives: "'I fear that imposing additional regulation on this industry rather than relieving burdens on others would slow down innovation rather than encourage it.'"

Nielsen: Streaming Surpassed Cable and Broadcast Combined in May

Nielsen's The Gauge™ provides a monthly snapshot of consumer viewing behavior. More to the point, it documents the trend over time away from traditional sources – "cable" and broadcasting – toward streaming options. Over the last four years, I have highlighted a few noteworthy milestones on that path:

• In "Nielsen: Viewership of Streaming Video Has Surpassed That of Broadcast Television," a June 2021 post to the FSF Blog, I noted that, in May 2021, consumers for the first time spent more time watching streaming services (26 percent) than broadcast television (25 percent).

• In September 2022's "A Tale of Two Trends: Traditional Video Distributors Shrink While Streaming Video Grows," a Perspectives from FSF Scholars, I pointed out that, as cable subscriber losses approached 1 million (949,209) during the second quarter of 2022, streaming for the first time exceeded one-third of total viewing.

• In an October 2022 post to the Free State Foundation blog, I reported that, in September 2022, for the first time streaming (36.9 percent) surpassed cable (33.8 percent).

The zero-sum ascendence of streaming continues: according to the most recent edition of The Gauge, in May 2025 streaming (44.8 percent) for the first time exceeded cable and broadcast television combined (44.2 percent):

In a Perspectives published earlier this month, I wrote that "[f]ar from raising competitive concerns, the Charter-Cox merger appears to represent a pragmatic effort to accelerate the modernization of legacy cable offerings to a world where video competition is both fierce and consumer-driven." This latest data point from The Gauge serves to underscore that conclusion.

Deregulation Is the Cure for the Video Regulatory Disparity

In a May 27 op-ed, just-departed FCC Commissioner Nathan Simington, along with his Chief of Staff Gavin Wax, argued that a 2014 proposal by then-Chairman Tom Wheeler to regulate "virtual" video distributors (vMVPDs) the same as facilities-based video distributors (MVPDs) "deserves a second look." Relatedly, Chairman Brendan Carr, in a March 7 letter to YouTube TV and its parent company, Alphabet, noted that "the FCC and Congress have been encouraged by a diverse group of stakeholders to expand the Commission's existing rules and to apply the same or a similar framework to virtual MVPDs like YouTube TV" and that it "has multiple open proceedings seeking comment on whether to do just that."

Without question, the intended goal – in the words of Simington and Wax, "placing [vMVPDs] on equal regulatory footing with cable and satellite operators" – is one that policymakers should prioritize. After all, and as I described most recently in "No Basis Exists in 2025 for Rules Targeting Traditional Video Providers," a March Perspectives from FSF Scholars, facilities-based MVPDs subject to FCC regulations have been shedding subscribers for years while their online competitors – including the vMVPD YouTube TV, which is expected to surpass Charter Communications, Inc.'s Spectrum to become the largest MVPD by the end of 2026 – have been adding subscribers at a breakneck pace.

However, given that the video distribution marketplace is, and grows steadily more, competitive, I (and others affiliated with the Free State Foundation) have argued consistently that the appropriate path to a level playing field is through the deregulation of facilities-based MVPDs, not the expansion of existing regulations to vMVPDs.

In Comments filed in the "IN RE: DELETE, DELETE, DELETE" proceeding, Free State Foundation President Randolph May and I pointed out that "what primarily stands in the way of unbridled, consumer-benefiting competition are ill-fitting rules that hamstring the subset of participants to which they uniquely apply: cable operators and Direct Broadcast Satellite (DBS) providers."

And in "Video Subscriber Updates Underscore Ongoing Shift to Streaming," an August 2023 post to the FSF Blog, I wrote that "the appropriate response to these ongoing trends is to eliminate outdated rules, not expand them."

The proposal to extend rules targeting legacy MVPDs to vMVPDs isn't only the wrong approach from a competition policy perspective, however. It also appears to lack a statutory justification.

In a March 2023 letter to Senator Charles Grassley (R-IA), then-FCC Chairwoman Jessica Rosenworcel explained that the plain language of 47 U.S.C. § 522(4), which defines a "channel" as "a portion of the electromagnetic frequency spectrum which is used in a cable system and which is capable of delivering a television channel," limits the FCC's ability to regulate vMVPDs that stream content over the public Internet:

It is imperative that the Commission give these words full meaning. As reflected in the record, online video programming distributors do not neatly fit in these statutory definitions because they lack a physical connection to subscribers and do not use any electromagnetic frequencies when delivering programming to their viewers. As you know, the Commission lacks the power to change these unambiguous provisions on its own but can do so if Congress changes the underlying law.

This statutory impediment has become more pointed in the wake of the Supreme Court's Loper Bright decision rejecting the Chevron doctrine. Rather than defer to an agency interpretation of an ambiguous statute, reviewing courts now will adopt what they view as the "best reading of the statute." In this case, and assuming for argument's sake that the statute is ambiguous, that seemingly would lead to the judicial conclusion that the FCC's regulatory authority over MVPDs does not extend to vMVPDs that deliver digital bits over the public Internet.

DIRECTV, DISH to Join Forces in Battle for Video Subscribers

Today DIRECTV announced its plans to acquire EchoStar's video programming distribution platforms – the DISH TV direct broadcast satellite (DBS) service and the Sling TV virtual multichannel video programming distributor – to more effectively compete in a rapidly evolving marketplace increasingly dominated by streaming alternatives.

This is not the first time that the two DBS operators have attempted to combine. In October 2002, the FCC effectively blocked their proposed merger by designating their application for a full evidentiary hearing, concluding that "the likelihood of the merger harming competition in the multichannel video program distribution ("MVPD") market outweighs any merger-specific public interest benefits."

Source: directv.com

But over the last 22 years, the widespread deployment of broadband Internet access has turned the video distribution competitive landscape on its head. As I have documented, most recently in a July 2024 post to the FSF Blog, for many years traditional MVPDs – cable operators and DBS providers – have been losing subscribers, financial quarter after quarter, while streaming competitors have been growing by leaps and bounds. By contrast, back in 2002, Netflix – which reported 278 million global streaming subscribers at the end of the second quarter of this year – was still solely in the business of mailing out DVDs. And Hulu, Amazon Prime Video, Disney+, Apple TV+, and Paramount+ did not exist at all.

Given the undisputable dramatic changes that have occurred in the marketplace since DIRECTV and DISH TV first sought to combine, this transaction must be evaluated in an entirely new context. Specifically, by providing DIRECTV with the additional scale needed to compete effectively, it seems that it will generate undeniable pro-consumer benefits. And given the relatively dominant position of streaming alternatives, it certainly doesn't appear to present any competition concerns.

In all, DIRECTV enumerates three specific benefits that will result:

• It "will allow DIRECTV to better meet consumers' demands for smaller packages at lower price points"
• It "[p]ositions DIRECTV to provide better integration of direct-to-consumer services"
• It "[i]mproves EchoStar's financial profile to continue the deployment of its 5G Open RAN wireless network"

With regard to "smaller packages at lower price points," an August 21, 2024, open letter written by DIRECTV Chief Content Office Rob Thun argued that, absent "fundamental change" to the way that traditional MVPDs are able to package their services, "costs will continue to soar, consumer satisfaction will erode, and the entire ecosystem will suffer."

In today's press release, DIRECTV Chief Executive Officer Bill Morrow is quoted as saying that "[w]ith greater scale, we expect a combined DIRECTV and DISH will be better able to work with programmers to realize our vision for the future of TV, which is to aggregate, curate, and distribute content tailored to customers' interests."

FCC, Following White House Lead, Again Targets Cable and DBS

On August 12, 2024, the Biden Administration released a Fact Sheet noting a proposed FTC rule that "would require companies to make it as easy to cancel a subscription or service as it was to sign up for one" and announcing that the FCC "is initiating an inquiry into whether to extend similar requirements to companies in the communications industry" (emphasis added).

A News Release issued the same day by FCC Chairwoman Jessica Rosenworcel revealed that she has circulated to her fellow commissioners a draft Notice of Inquiry that "would seek information on ways to ensure that consumers have appropriate and efficient access to customer service resources when working with their phone, cable and broadband providers" (emphasis added).

Source: whitehouse.gov

When it comes to video distribution, of course, there is a wide chasm between "companies in the communications industry" and "cable." The former, broader category includes both unregulated streaming services and traditional Multichannel Video Programming Distributors (MVPDs) that rely upon facilities within their exclusive control. The latter category presumably is limited to the traditional MVPDs uniquely subject to FCC regulation: cable operators and Direct Broadcast Satellite (DBS) providers.

Given this critical distinction, if adopted, this Notice of Inquiry (and the Notice of Proposed Rulemaking sure to follow) first and foremost would result, not in a net benefit to consumers, but in yet another one-sided restraint on the ability of traditional MVPDs to compete effectively with far larger streaming services that grow more popular by the day. Similar instances in just the last year include:

• A pending Notice of Proposed Rulemaking adopted in April 2024 that would interfere with contracts between traditional MVPDs – and traditional MVPDs alone – and independent programmers by banning most favored nation (MFN) provisions and "unreasonable" alternative distribution method (AMD) provisions.
• A requirement adopted in March 2024 that traditional MVPDs – and traditional MVPDs alone – must "specify the 'all-in' price for video programming in their promotional materials that include pricing information and on subscribers' bills."
• A pending Notice of Proposed Rulemaking adopted in January 2024 that would force traditional MVPDs – and traditional MVPDs alone – to provide subscribers with a rebate whenever they are unable to agree on carriage terms with a broadcast station or programmer, a proposal I critiqued in an October 2023 Perspectives from FSF Scholars.
• A pending Notice of Proposed Rulemaking adopted in December 2023, in response to which the Free State Foundation filed comments and reply comments, that would prevent traditional MVPDs – and traditional MVPDs alone – from employing two cross-industry common billing practices: (1) early termination fees (ETFs), which make it possible for distributors to amortize up-front customer costs over an agreed-upon and enforceable term, and (2) whole-month billing.

For more on this topic, I recommend that you read "FCC's Dated View Drives Dramatic Shifts in Video Strategies," a July 2024 post to the FSF Blog, and "The FCC Is Complicit in the Decline of Traditional MVPDs," a May 2024 Perspectives.

FCC's Dated View Drives Dramatic Shifts in Video Strategies

In a recent post featured in today's Policyband newsletter (subscription required), Golden West Telecommunications Cooperative explained (and apologized to its customers for) a $4 per month price increase for video services. The reason put forth: rising cable programming and retransmission consent fees. Golden West even pointed out that "[o]ther telecommunications cooperatives in South Dakota have discontinued cable TV due in part to rising costs" – an exodus part of "a broader trend" that includes WideOpenWest and Frontier Communications.

I and other Free State Foundation scholars have documented extensively the rapid and relentless ascent of streaming services and the corresponding loss of subscribers by traditional providers subject to the FCC's statutory authority. We have argued that these seismic shifts demand an aggressive deregulatory response from both Congress and the Commission. We have implicated the latter's refusal to eliminate one-sided rules – and confounding desire to impose still more one-sided rules – as an exacerbating factor in the decline of facilities-based Multichannel Video Programming Distributors (MVPDs). And we have explained how that decline harms competition and, in turn, consumers.

Not surprisingly, these marketplace trends are not slowing down. By way of example, Netflix days ago announced that it added 1.45 million subscribers in the United States and Canada during the second quarter, bringing its total to over 84 million. Traditional providers, on the other hand, experienced yet another "worst quarter ever" between January and March – an overall drop in pay television subscriptions that surpassed 12 percent – and analysts anticipate that second quarter results could be just as bleak.

Nevertheless, the FCC remains unwilling to remove its blinders and focus on the reality before it. Consequently, an increasing number of facilities-based MVPDs are adapting to the steadily more inhospitable competitive landscape by embracing an "if you can't beat them, join them" approach that deemphasizes their own legacy bundled offerings. Some, as noted above, are exiting the marketplace altogether and/or outsourcing their video operations to virtual MVPDs (vMVPDs) – WideOpenWest, for instance, has partnered with YouTube TV.

Others are striking deals with programmers and streaming platforms so that they can provide consumers the online alternatives that they prefer over traditional video packages. Examples include:

• Comcast is offering broadband customers the Xfinity StreamSaver™ bundle that includes Apple TV+, Netflix Standard with ads, and Peacock Premium with ads. As I noted in a recent post to the FSF Blog describing the available-at-retail Xumo platform, Comcast provides broadband customers with a Xumo Stream Box – which supports hundreds of third-party apps, including those of multiple vMVPDs that compete directly with its own legacy video products – at no additional cost.
• Charter gives subscribers to certain Spectrum TV® video packages access to Disney+ Basic and ESPN+. It also provides a free-for-six-months Xumo Stream Box to those that subscribe to Spectrum One Stream and add Spectrum TV.
• Altice USA last week announced the launch of Entertainment TV, a vMVPD service that offers over 80 channels for $30 per month and is available to broadband subscribers as part of its Optimum Stream product. As reported by Daniel Frankel, managing editor of Next TV, "[l]ike many cable operators, the company would prefer to leave linear video behind."

Traditional MVPDs find it increasingly challenging to win and retain customers in the vibrantly competitive battle for eyeballs that includes not just streaming alternatives, but social media platforms – particularly YouTube – and gaming. The FCC's dogged determination to saddle them with even more one-sided rules, such as unreasonable constraints on their ability to employ common billing practices, is exacerbating the situation and driving them to retrain their focus. As a result, consumer choice and overall consumer welfare are compromised.

Cable Industry Lobbies FCC to Allow "Reasonable" Billing Practices

During a recent conversation with Commission staff, representatives from NCTA – The Internet & Television Association, Charter, and Comcast (collectively, the cable advocates) asked the agency to reconsider its rash proposals to prohibit traditional Multichannel Video Programming Distributors (MVPDs) – cable operators and Direct Broadcast Satellite (DBS) providers – from employing common billing practices that their larger and still-growing Internet-based competitors also use. At a minimum, they urged that "reasonable" Early Termination Fees (ETFs) be allowed.

As the Free State Foundation's recent comments in the State of the Communications Marketplace proceeding plainly point out, ascendant streaming services – Netflix, Hulu, YouTube, Amazon Prime, and the like – increasingly overshadow cable operators and DBS providers, which have been suffering significant subscriber losses for years.

However, the Commission's ability to regulate is limited by statute to traditional MVPDs, and – willfully ignoring clear competitive trends as well as its own complicit part in accelerating those trends – it has chosen to exercise that authority on numerous recent occasions.

For example, the FCC proposed late last year to ban traditional MVPDs – and traditional MVPDs alone – from (1) utilizing ETFs as a means of enforcing long-term, consumer-benefiting contracts, and (2) marketing their services in standard monthly increments.

As described in their ex parte letter, the cable advocates urged senior staff from Chairwoman Rosenworcel's office and the Media Bureau to reject outright the proposal to require that traditional MVPDs provide service in daily increments, a clear form of impermissible rate regulation. On the topic of ETFs, they similarly championed regulatory restraint – but suggested that, if the Commission is to intervene, it should limit its focus to "unjust or unreasonable" ETFs.

Of course, asking an administrative agency to determine what is and is not "reasonable" creates a separate set of subjective concerns. Accordingly, the cable advocates proposed a series of factual considerations upon which the FCC might base its decisions, including whether consumers:

• Have a choice between options with and without ETFs,
• Are informed clearly about the existence of ETFs before they sign up for service,
• Are afforded an initial window during which they may cancel service without having to pay an ETF,
• Are not subject to ETFs that are "excessive relative to the value received," and
• Face ETFs that decrease over the term of the contract.

In comments and reply comments, FSF President Randolph May and I strongly opposed any agency action in this proceeding. Specifically, we argued that ETFs and monthly billing increments are pro-consumer common practices that lead to lower costs and greater choice; that the Commission's misguided proposals clearly constitute impermissible rate regulation; and that new burdens exclusively targeting cable and DBS providers inappropriately would pick winners – unregulated streaming behemoths – and losers – struggling traditional MVPDs uniquely subject to FCC oversight.

House Commerce Subcommittee to Hold Hearing on Video Marketplace

The House Energy and Commerce Committee's Subcommittee on Communications and Technology will hold a hearing tomorrow at 2 pm ET entitled "Lights, Camera, Subscriptions: State of the Video Marketplace." Promisingly, this hearing will focus, at least in part, on outdated regulations that inappropriately impede traditional video programming distributors' ability to participate in an increasingly competitive marketplace.

When announcing the hearing, House Energy and Commerce Committee Chair Cathy McMorris Rodger (R-WA) and Communications and Technology Subcommittee Chair Bob Latta (R-OH) stated the following:

Over the last decade, the video marketplace has undergone a transformative shift as more media content moves online. The introduction of streaming services expanded the options for consumers to choose where, when, and what content they view. While there is an unprecedented amount of content, like movies, TV shows, and news, available, the rise of these services creates challenges for traditional media providers who continue to compete despite being saddled with regulations. We look forward to discussing the evolution of this market, the steps Congress can take to ensure outdated regulations do not hinder innovation and competition, as well as how to bring the traditional marketplace into the 21st century.

Scheduled witnesses include:

• FuboTV Inc. Board Member and CEO David Gandler (witness testimony)
• National Association of Broadcasters President and CEO Curtis LeGeyt (witness testimony)
• Consumer Reports Senior Policy Counsel and Manager of Special Projects Jonathan Schwantes (witness testimony)
• America's Communications Association – ACA Connects President and CEO Grant B. Spellmeyer (witness testimony)

In a recent post to the Free State Foundation's blog, I presented the latest evidence of longstanding subscriber trends – specifically, that traditional video programming distribution platforms, both facilities-based and virtual, continue to shed customers while countless streaming services add them.

Consequently, and as I argued in "With Pay-TV on the Wane, Legacy Regulations Should Follow," a July Perspectives from FSF Scholars, "consumers have available more than sufficient choices to compel a comprehensive change in course away from government intervention … and toward the exclusive reliance upon efficiently operating market forces."

Perhaps tomorrow's hearing will serve as a significant step in that direction.

Video Subscriber Updates Underscore Ongoing Shift to Streaming

In a July 2023 Perspectives from FSF Scholars, I took aim at the core assumption underlying calls to expand the definition of a "Multichannel Video Programming Distributor" (MVPD) to include virtual substitutes streamed over the Internet (vMVPDs). Contrary to what proponents might have you believe, subscribers cutting the physical cord are not switching en masse to online alternatives. Instead, they're migrating primarily to streaming platforms like Netflix, Hulu, and Amazon Prime.

The latest video subscriber numbers provide further evidence that both facilities-based MVPDs (cable, Direct Broadcast Satellite (DBS), telco TV) and vMVPDs are weathering the impact of a seismic shift in consumer preferences away from the monolithic video "big bundle" to a self-curated collection of more targeted offerings.

Some key data points:

• According to the Leichtman Research Group (LRG), the top cable operators lost 925,532 subscribers during Q2. The two DBS providers, DIRECTV and DISH TV, combined shed nearly 600,000 customers. And Verizon FiOS saw its total drop by 70,000. Overall, LRG found that traditional MVPDs lost 1.61 million customers.
• Wells Fargo analyst Steven Cahall reported even higher traditional MVPD declines: 1.72 million customers, representing 7 percent of the total.
• Overall, LRG saw vMVPD subscriber totals decline in Q2 by 115,000 – despite an estimated 200,000 additional YouTube TV customers. (Note that not all vMVPDs release subscriber data to the public.)
• Steven Cahall, meanwhile, saw vMVPDs add just 8,000 subscribers in Q2.
• Netflix, on the other hand, added 1.17 million customers in the United States and Canada during Q2, for a total of 75.57 million.
• And Hulu added 300,000 subscribers in Q3, for a total of 44 million subscribers.

As I concluded in "With Pay-TV on the Wane, Legacy Regulations Should Follow," the appropriate response to these ongoing trends is to eliminate outdated rules, not expand them:

Put simply, the issue is not that the definition of an MVPD is not sufficiently broad, it's that pay-TV companies confront a marketplace that is dramatically changed…. To fully harness for consumers the benefit-generating engine that is competition, it is time for regulators (and regulations) to step aside and let the marketplace drive optimally efficient outcomes.

Greater Video Competition Should Prompt Less Regulation, Not More

Dormant for nearly a decade, the FCC's misguided proposal to expand the definition of "Multichannel Video Programming Distributors" (MVPDs) – a category limited to facilities-based offerings such as cable, Direct Broadcast Satellite, and telco TV – recently has received renewed attention. In a letter dated March 24, 2023, responding to an inquiry from Senator Charles Grassley (R - IA), FCC Chairwoman Jessica Rosenworcel pointed to statutory definitions as the basis for not subjecting MVPDs that stream content over the public Internet – that is, "virtual MVPDs" (vMVPDs) such as YouTube TV, Hulu + Live TV, Sling TV, and DIRECTV STREAM – to legacy regulations.

This is the right outcome, of course. However, the justification put forth overlooks the forest for the trees. The dramatic rise of vMVPDs, as well as the multitude of other Online Video Distributors (OVDs) that make video content available to consumers – think Netflix, Amazon Prime Video, Hulu, Disney+, Apple TV+, HBO Max, Paramount+, and so on – has rendered the video programming marketplace robustly competitive. Consequently, the goal of the Commission in 2023 should be to identify opportunities to eliminate outdated rules that apply to traditional MVPDs, not extend them to the new entrants whose competitive influence obviates any justification for regulatory intervention.

I, as well as other Free State Foundation scholars, document regularly the rapid growth of streaming services at the expense of traditional MVPDs. Recent examples include "On Video, the FCC's Competition Report Falls Short," a January 2023 Perspectives from FSF Scholars, and "A Tale of Two Trends: Traditional Video Distributors Shrink While Streaming Video Grows," a Perspectives published in September 2022.

In the latter, I followed these changed circumstances to their logical conclusion, writing that:

[I]t is past time for the Commission and Congress to take all necessary steps to eliminate one-sided burdens that impede competition – such as set-top box regulations, program access and carriage requirements, and the network non-duplication and syndicated exclusivity rules [that apply solely to facilities-based MVPDs] – and instead rely on the efficient operation of marketplace forces to drive down prices and expand consumer choices.

Chairwoman Rosenworcel did acknowledge the current competitive reality in her letter to Senator Grassley, highlighting the fact that "the video marketplace has changed significantly with the introduction of streaming services." Nevertheless, and as was the case with the 2022 Communications Marketplace Report, she failed to articulate an appropriate deregulatory response.

While it is true that vMVPDs do not deliver video content within "a portion of the electromagnetic frequency spectrum which is used in a cable system" and therefore do not fall within the statutory definition of an "MVPD," it is equally true that, given the vast array of competitive options available to consumers, regulations premised upon that technical distinction have outlived whatever utility they once may have had and should be eliminated.

Consumer Preferences Steadily Shift to Streaming Video

During the second half of 2022, the percentage of U.S. households with a pay TV subscription (think: "cable") fell below half for the first time. When presented with the choice between accessing a specific show on a linear channel or a subscription video-on-demand (SVOD) service, consumers increasingly opt for the latter – and not just to avoid ads: younger Americans, in particular, "emphasize that SVOD is the place where they already watch shows most of the time." And speaking of SVOD, one analyst expects SVOD services to add 40 million new subscriptions in 2023 – an impressive feat given current economic conditions.

Indeed, each passing week seemingly provides additional evidence that consumers prefer their video streamed – and that, as a result, in 2023 no justification exists for regulations that single out traditional providers of video content. Far from gatekeepers, cable operators and other facilities-based Multichannel Video Programming Distributors (MVPDs) find themselves uniquely stymied by legacy rules predicated upon marketplace conditions that simply do not exist today.

In Comments and Replies filed in the 2022 Communications Marketplace Report proceeding, Free State Foundation scholars (1) documented the rapid consumer migration from traditional MVPDs to Internet-based alternatives, and (2) and argued persuasively that, consistent with its statutory responsibility to identify "laws, regulations, [and] regulatory practices [that]... pose a barrier ... to the competitive expansion of existing providers of communications services," the FCC should take swift steps to eliminate outdated and one-sided carriage- and equipment-related rules that constrain competition, arbitrarily pick winners and losers, and, ultimately and consequently, harm consumers.

However, as I pointed out in "On Video, the FCC's Competition Report Falls Short," a January 2023 Perspectives from FSF Scholars, the ensuing Report failed to articulate an appropriate deregulatory agenda in response to the markedly transformed video programming landscape that it described. (Keep in mind, too, that that Report focused on the years 2020 and 2021 – a lifetime ago given the pace at which video distribution is evolving.)

Going forward, Free State Foundation scholars will continue to highlight data points compelling Commission deregulatory measures that afford every participant in the vibrantly competitive video programming marketplace an equal opportunity to compete.

Google's YouTube Scores Rights to NFL Sunday Ticket

Late last year, it was announced that, beginning with the 2023 National Football League season, Google's YouTube will be the exclusive home of the NFL Sunday Ticket game package. This represents a watershed moment in the rapidly transforming video programming distribution marketplace.

For the past 28 years, the NFL Sunday Ticket has been available only to subscribers of the DIRECTV Direct Broadcast Satellite (DBS) service, a traditional, facilities-based multichannel video programming distributor (MVPD). And for much of that time, it served as a potent customer-acquisition tool for DIRECTV, a key product differentiator vis-à-vis other traditional MVPDs (cable operators, DISH Network, telco TV providers) well worth the $1.5 billion in licensing fees DIRECTV reportedly paid annually.

In "Pixel by Pixel, Video Streaming's Ascension Comes Into Focus," a September 2021 Perspectives from FSF Scholars, I noted that two other Big Tech titans, Amazon and Apple, had emerged as potential bidders for the NFL Sunday Ticket and recounted the significance of that package in the pre-streaming era:

When most consumers subscribed to one – and only one – package of primarily live, linear cable and broadcast channels from a facilities-based MVPD, DIRECTV's longstanding exclusive agreement to distribute the NFL Sunday Ticket was seen as the quintessential example of "must-have" content, a crown jewel able to win customers from rival distributors. So much so that in 2014, AT&T's offer to acquire DIRECTV for $48.5 billion hinged upon the DBS provider's ability to renew its deal with the NFL.

By early 2020, however, the landscape had changed dramatically, thanks in large part to the immense popularity of streaming video. DIRECTV had lost more than 4 million subscribers over the previous two years, the NFL Sunday Ticket had become a "money loser," and AT&T was looking to exit the video distribution business altogether – a step it took in August 2021.

The agreement between the NFL and Google provides further evidence of the steady consumer migration away from traditional MVPDs and toward video streaming in all of its forms: beginning next fall, the NFL Sunday Ticket will be offered, not by a DBS, cable, or telco TV provider, but rather by a virtual MVPD (vMVPD) – YouTube TV – and an Online Video Distributor (OVD) – YouTube Primetime Channels.