NEW YORK — Federal regulators will impose several conditions meant to protect online video services as they back Charter's bid to buy Time Warner Cable and create the country's second-largest home Internet provider.
The Justice Department approved the deal Monday, subject to court approval on the conditions, while Federal Communications Commission Chairman Tom Wheeler circulated a draft order to OK the combination. That leaves California's utility regulator, whose approval is expected in May.
Buying Time Warner Cable and Bright House Networks will turn Charter Communications, a mid-size cable company, into the country's No. 2 home Internet provider, after Comcast. The new Charter will be No. 3 in video, trailing Comcast and AT&T, which bought DirecTV last year.
To preserve competition from online video services, the Justice Department is forbidding Charter from restricting what media companies make available online. The government says Time Warner has been aggressive at imposing such restrictions in contracts, and without a ban, a bigger company could make online services less competitive.
Meanwhile, the FCC is expected to prohibit Charter from charging consumers more for using more data, the way wireless and some home services are priced. Video is one of the biggest consumers of data, and caps or usage-based prices could make consumers reluctant to watch online video.
Public-interest groups have protested industry consolidation, saying it has led to high prices and will give big companies the power to undermine online video rivals. But opposition to Charter's deal was muted compared with the backlash in recent years to Comcast's failed bid for Time Warner Cable. That's because a bigger Charter would still be smaller than Comcast. And Charter, learning from Comcast's failures, has made several promises to address concerns.
What does this $67 billion cable deal mean for consumers?
The conditions being imposed by the government don't necessarily make it easier for a company like Apple to launch a streaming TV service.
"The real limiter of online video hasn't been restrictions from distributors. It's been the self-interest of the programmer," MoffettNathanson analyst Craig Moffett said. The traditional big bundle has lined the pockets of entertainment companies like Disney. A skinny bundle of channels online isn't as lucrative and could steal viewers away from the fat TV packages supporting hundreds of channels.
But Moffett says the Internet video market is going to develop, and the government "wants to ensure that the distributors don't stand in the way when the time comes."
If online video companies like Netflix have to pay a cable company a lot of money to connect to its network, that could keep the video business from taking off.
Time Warner Cable is already one of the country's biggest cable companies.