Time can often kill a deal, but this time it may help one

On Wednesday, newly appointed FCC Chairman, Ajit Pai, stated that he would allow an independent review by commission attorneys of his decision not to examine the proposed AT&T-Time Warner merger because there are no broadcast license transfers in the $85B deal. 

Assuming the position stands, that leaves the DOJ as the sole regulatory agency reviewing the merger.  And, it is likely that, with the passage of time (last 6-months or so), the deal is much more likely to get approved in the months ahead, in spite of President Trump’s disdain for the deal when first announced.  What has changed?  Believe it or not, there are greater consumer choices for distribution and content and the providers continue to chip away at the stranglehold traditional Pay TV operators (AT&T) have had in the vertical chain.  Choices from Hulu, Apple TV, Amazon Prime, Netflix, SlingTV, PlayStation Vue and now YouTube TV are formidable competitors, so let them duke it out in the marketplace.

The unraveling begins!

Once in the minority position of FCC decisions under the Wheeler administration, the new Chairman, Ajit Pai, is working quickly to dismantle/unravel some of those previous decisions.  

First up…nine (of the 900) ISPs sanctioned to provide subsidized communication services to low income households through the FCC’s Lifeline program have been stopped from doing so.  The FCC wants to address fraud in the program before advancing it further.

Second up…not pushing cable providers, at the moment, to unlock the set-top so that others could interconnect their own boxes with TV programming.  If it ever came to pass, the “competition” would take a huge bite out of the lucrative monthly cable box rental fees enjoyed by the cable guys.  And, while that sounds too good to be true, it is.  Copyright and technical issues have to be addressed for it to work and be fair.

Third up…stopping inquiries into zero-rating plans thought to be anti-competitive.  On the issue, Pai said “Going forward, the Federal Communications Commission will not focus on denying Americans free data. Instead, we will concentrate on expanding broadband deployment and encouraging innovative service offerings.”

Is Net Neutrality next up?

It's time

In response to New York State’s petition to receive Verizon’s share of the Connect America money it turned down in 2015, the FCC voted YES.  The State of New York plans to auction off the $170 million (combined with additional state funding of $200 million) to ISPs willing to ensure access to high-speed Internet service to all residents by the end of 2018.  While the State of Pennsylvania filed comments on the NY petition, it did not file its own.  It’s now time to do so!

Zero Rating ≠ Net Neutrality

Last week, the FCC Wireless Telecommunications Bureau released its Policy Review of Mobile Broadband Operators’ Sponsored Data Offerings for Zero-Rated Content and Services.  The report examined the 2016 sponsored data and zero-rating initiatives of mobile broadband providers.  Specifically, the Commission examined T-Mobile’s Binge One, AT&T’s Data Perks, AT&T’s Sponsored Data, and Verizon’s FreeBee Data 360.    The focus of the evaluation was “the potential harm to consumers and competition in downstream industry sectors that could result from upstream network operators’ unreasonably discriminating in favor of select downstream providers that are affiliates”. 

The FCC found that T-Mobile’s Binge One and AT&T’s Data Perks “did not discriminate against or disadvantage edge providers or end users.”  However, the FCC found that AT&T’s Sponsored Data to third party content providers were offered at less favorable terms and conditions compared to what was offered to DIRECTV (benefiting DIRECTV NOW), an AT&T affiliate.   (Note: Verizon’s sponsored data plan was also shown to benefit its affiliate service, go90, but since go90 is much smaller than DIRECTV NOW, the magnitude of the current anticompetitive harm was estimated to be much less.)

The Commission concluded that “Given the powerful economic incentives of network operators to employ these practices to advantage themselves and their affiliates in various edge service markets, we are equally concerned that – absent effective oversight – these practices will become more widespread in the future.”

Why shouldn’t Pennsylvania get to keep the CAF Phase II money?

A brief overview of the Connect America Fund (CAF).  As an extension of the Universal Service Fund, CAF is the FCC's program to expand access to voice and broadband services to un[der]served, rural communities.  Phase I, which began in 2012 and ended a year later, combined millions of public and private funds to expand broadband services to unserved, rural areas.  Phase II began in 2015.  In the second phase, the FCC will provide over $1.5 billion per year for six years to price-cap carriers to subsidize their “cost of building new network infrastructure or performing network upgrades to provide voice and broadband service in areas where it is lacking” (fcc.gov).  

The support comes with strings attached.  After all, there is NO SUCH THING AS A FREE LUNCH!  If a carrier accepts CAF Phase II money, it must provide the broadband service at speeds of at least 10 megabits per second (Mbps) downstream and 1 Mbps upstream, and at reasonably comparable rates found in urban areas.  Verizon evaluated the tradeoff as not being worth it.  But, where does that leave residents of rural communities in the state of Pennsylvania?   The PUC and Sen. Bob Casey believe that the PA funds should not be at risk for leaving the state in a competitive bidding process.  Instead, the state should be entitled to “keep” the CAF funds.  Specifically, other providers in the state who have agreed to participate in the program (like CenturyLink or Windstream) should get the money.  Let’s see what the FCC thinks of that idea.

https://www.fcc.gov/reports-research/maps/connect-america-phase-ii-final-eligible-areas-map/

Blackout averted, for now!

There was no resolution, just delay, in the contract talks between Charter, the MVPD, and Comcast, the content owner, over carriage of NBC-U programming on Charter's distribution pipes.

See:  http://delivermyshows.com/

Will today be the day that…

Comcast cuts the cord (feed) of its NBC-U channels to 17+ million Charter Communications customers? 

Emboldened by its scale and negotiating heft after its 2016 purchases of Time Warner Cable and Bright House Networks to become the second largest cable/broadband provider, Charter is pushing back on a proposed deal offered by Comcast to continue carrying its valued content, including NBC, CNBC, MSNBC, Bravo, and Telemundo. 

Will one firm blink before the highly anticipated professional football game between the Green Bay Packers and Detroit Lions airs on Sunday night?  Since the largest MVPD, Comcast, does not compete in local markets against the third largest MVPD, Charter, the beneficiary of a badly-timed or prolonged dispute could be AT&T/DirecTV.  At least this time around!