When Charter purchased Time Warner Cable and Bright House Networks, federal regulators forced the company to agree to some conditions designed to boost competition in the Internet service market. Charter, now the nation's second largest cable company behind Comcast because of the merger, is required to bring broadband of at least 60Mbps to at least 1 million homes and businesses where there's already a provider offering at least 25Mbps.

This is known as "overbuilding," something that happens infrequently enough that many Americans have only one choice for high-speed Internet. But when Charter fulfills the overbuilding requirement imposed by the Federal Communications Commission, it'll apparently do so without actually competing against other cable companies. Instead, Charter will enter the territory of phone companies like AT&T or Frontier, Charter CEO Tom Rutledge said.

Why is that? Because Charter might want to buy more cable companies later. And the FCC is less likely to approve a merger between two companies competing against each other.

“When I talked to the FCC, I said I can’t overbuild another cable company, because then I could never buy it, because you always block those,” Rutledge said at the recent MoffettNathanson Media & Communications Summit in New York. “It’s really about overbuilding telephone companies.”

Rutledge's comments were reported by Multichannel News last week, and there's an analysis published by The Washington Post today.

Charter also thinks it's easier to win customers away from phone companies than from other cable firms. "Why would we go where we could get killed?" Rutledge said.

While phone companies have upgraded to fiber in some areas, many parts of their network are stuck on older technology that can support 25Mbps but not the faster speeds offered by cable and fiber-to-the-home. Comcast has previously said that it's too expensive to compete against other cable companies.

Charter's agreement with the FCC allows it to buy cable companies and count some of the acquired infrastructure toward the competition requirement. As we've previously reported, Charter could count up to 250,000 locations from acquisitions toward the overbuilding requirement of 1 million new locations, as long as each acquired company competes against a high-speed provider and lacks the resources to upgrade speeds on its own.

Charter could theoretically buy telcos instead of just cable companies, but integrating another cable firm into Charter's network is probably easier since they use the same technology and don't face some of the common carrier regulations imposed only on traditional phone service.

Rutledge mentioned AT&T and Frontier as potential companies for Charter to compete against. “If someone builds a housing development with 20,000 homes in it, there is a phone company in there, usually it’s AT&T, or Frontier in some markets,” Rutledge said, according to Multichannel News. “Usually that plant is in the ground in the same trenches as yours, so you’re in a competitive environment.”

In its newly expanded form, Charter has about 25.4 million customers in 41 states.

Disclosure: The Advance/Newhouse Partnership, which owns about 13 percent of Charter, is part of Advance Publications. Advance Publications owns Condé Nast, which owns Ars Technica.