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Charter Fails To Offer Broadband To Enough New York Residents, Leading to a Merger Challenge

At a time when federal merger enforcers seem to be relaxing—except when CNN is involved in a deal—some states are cracking down.

On Friday, the New York State Public Service Commission took the incredible step of rescinding its approval for a mega-media merger it had approved more than two years ago. The commission said Charter Communications, the second largest cable provider in the country, had not lived up to its promises in acquiring Time Warner Cable as part of $56.7 billion transaction in 2016. The company was ordered to come up with a plan within 60 days to transition Time Warner Cable to a “successor provider.”

“Charter’s repeated failures to serve New Yorkers and honor its commitments are well documented and are only getting worse,” commission chair John Rhodes said in a statement. “Charter’s non-compliance and brazenly disrespectful behavior toward New York State and its customers necessitates the actions taken today seeking court-ordered penalties for its failures, and revoking the Charter merger approval.”

Shares of Charter (CHTR) initially fell more than 2% on the news, but quickly recovered. The stock, which has lost 15% so far this year largely on fears over cord cutting, was down just 0.3% in afternoon trading on Friday.

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When the commission approved the merger back in January 2016, among other conditions, Charter promised to offer broadband service to at least another 145,000 households in the state in poorly served rural areas. But the company repeatedly missed interim benchmarks over the past two years and the commission found it was trying to include homes in ineligible areas like New York City as part of meeting the commitment.

Charter rejected the charges, citing positive developments in its service under the Spectrum brand name, but didn’t say what its next move would be. “In the weeks leading up to an election, rhetoric often becomes politically charged,” Charter said in a statement. “But the fact is that Spectrum has extended the reach of our advanced broadband network to more than 86,000 New York homes and businesses since our merger agreement with the PSC. Our 11,000 diverse and locally based workers, who serve millions of customers in the state every day, remain focused on delivering faster and better broadband to more New Yorkers, as we promised.”