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Breaking News: N.Y. Fines Charter $2 Million for Failure to Meet Broadband Targets

The New York State Public Service Commission today fined Charter/Spectrum $2 million after the company failed to meet its obligations to expand its cable network to more than ten thousand homes and businesses the company committed to serve in the time allotted. In addition, the PSC warned the company, which claimed in a response to the state’s “show cause” order that it was not obligated to meet the terms of its 2016 merger agreement, faces the threat of having its merger with Time Warner Cable revoked, which could end Spectrum’s ability to operate in New York State.

“As a condition of our approval of Charter’s merger two years ago, we required Charter to make significant investments in its network,” said Commission chair John B. Rhodes. “Our investigation shows that Charter failed to meet its obligations to expand the reach of its network to unserved and underserved customers at the required pace and that it failed to justify why it wasn’t able to meet its obligations. Furthermore, since the company has taken the unfortunate position of refusing to adhere to all conditions set forth in our initial decision two years ago, we now demand the company unconditionally accept all of the conditions as the Commission unambiguously required in 2016, or run the risk of more severe consequences.”

In its order regarding Charter’s failure to meet its buildout obligations, the Commission rejected 18,363 addresses — including 12,467 in New York City and 4,096 in the cities of Buffalo, Rochester, Syracuse, Schenectady, Albany, and Mt. Vernon — to which Charter claimed it expanded network as part of its required buildout requirement. The Commission found that these addresses were already passed by Charter or another company providing high speed broadband, or that Charter was separately required to pass the addresses pursuant to state regulations and/or franchise agreements.

As a result, Charter must revise its overall 145,000 addresses-buildout plan to remove the rejected addresses and file a revised buildout plan for going forward within 21 days. In its initial 2016 order approving Charter’s acquisition of Time Warner Cable, the Commission required that Charter extend its network to pass within its statewide service territory, an additional 145,000 unserved and underserved residential housing units and/or businesses within four years.

About a year later, it became evident that Charter had failed to meet its May 2017 target. To get the company back on track, the Commission approved a settlement under which Charter was required to pass 36,771 eligible premises by December 2017, and meet regular six-month milestones or else pay up to $1 million for each miss, and up to $1 million should the company fail to correct any miss within three months.

Rhodes

Earlier this year, Commission staff, audited Charter’s compliance filing of proposed passings to be counted toward its December 2017 target, and determined that 14,522 passings should be
disqualified, which meant that the company failed to meet its required target. In its May response to the Commission, Charter argued that not all of the Commission’s 2016 merger order applies to the company as part of its rationale for including ineligible addresses. Given the company’s continued intransigence, the Commission today ordered that the company unconditionally accept all of the conditions and requirements spelled out in its 2016 order or face subsequent Commission action.

With today’s decision, the Commission ordered Charter to pay $1 million in accordance with the settlement agreement for failing to satisfy the December 2017 target and failing to demonstrate that it missed the target due to circumstances beyond its control. The Commission similarly  found that Charter did not “cure” this miss by March 16, 2018, nor did it demonstrate that it had good cause for its failure to do so, requiring an additional $1 million payment to the state.

Comcast Bids $65 Billion in Cash to Acquire Fox Media Assets

(Reuters) – Comcast Corp offered $65 billion on Wednesday for 21st Century Fox’s media assets, emboldened by AT&T prevailing over the Trump administration’s attempt to block a merger with Time Warner, Inc..

The all-cash offer for Fox’s movie and TV studios and other assets including the X-Men franchise, opens a war with Walt Disney, which has bid $52 billion in stock. Comcast described the bid as 19 percent higher than Disney’s bid today. The transaction does not include the FOX television network, network owned-and-operated local television stations, or its cable news channels Fox News and Fox Business.

Comcast is expected to lead a wave of traditional media companies trying to combine distribution and production to compete with Netflix Inc and Alphabet Inc’s Google. The younger firms produce content, sell it online directly to consumers and often offer lucrative targeted advertising.

AT&T won a court victory over skeptical U.S. antitrust regulators on Tuesday when a federal judge allowed it to buy Time Warner for $85 billion, which was widely taken as a green light for Comcast to submit its expected bid.

Comcast may face more difficulty than AT&T and other would-be acquirers, though, since Comcast already has its own TV and movie studios in the NBC Universal division, a content overlap AT&T-Time Warner lacked.

Shares of Comcast, Fox and Disney were barely changed in after-hours trade.

Comcast in a statement outlined an offer that was similar to Disney’s, including a commitment to the same divestitures. It said that it would agree to litigate any action taken by the Justice Department to block the deal.

In a letter to the Fox board, Comcast chairman and CEO Brian Roberts said, “We are also highly confident that our proposed transaction will obtain all necessary regulatory approvals in a timely manner and that our transaction is as or more likely to receive regulatory approval than the Disney transaction.”

Justice Department lawyers who tried to stop AT&T’s $85 billion deal expect consumers will lose out as bigger companies raise prices, and some lawyers saw that as a concern in a Comcast-Fox deal which would put two movie studios and two major television brands under one roof.

“One cannot ignore the fact that there’s less independent content to go around,” after the AT&T deal, said Henry Su, an antitrust expert with Constantine Cannon LLP.

Still, the AT&T court fight gave Comcast valuable information about how to structure a Fox deal, said David Scharf, a litigation expert with Morrison Cohen.

“Any deal that’s coming down the pike that’s not baked yet knows the government’s playbook. They know what the government is concerned about,” he said. “They can learn how to structure a deal to make it more palatable.”

Disney itself has “surgically” structured a transaction that “might be doable,” avoiding Fox Broadcasting and big Fox sports channels, U.S. antitrust chief Makan Delrahim said last week.

Comcast may have a tough time winning over Fox’s largest shareholder, Rupert Murdoch’s family. They own a 17-percent stake and would face a multi-billion dollar capital gains tax bill if he accepted an all-cash offer from Comcast, tax experts have told Reuters.

Craig Moffett, an analyst with MoffettNathanson, said in a research note that Disney could prevail for other reasons.

“Disney has the superior balance sheet, cost of debt, equity and rationale to emerge victorious over Comcast in a bidding war,” Moffett said.

Reporting by Sheila Dang in New York and Diane Bartz in Washington; Additional reporting by Arjun Panchadar in Bengaluru; Writing by Peter Henderson; Editing by Maju Samuel and Lisa Shumaker.

CNBC reports Comcast has officially submitted its $65 billion all-cash offer to acquire assets of 21st Century Fox. Disney is also a contender and may respond by sweetening its own offer. (2:29)

AT&T/Time Warner Win Merger Deal With No Consumer Protection Conditions

AT&T has won its $85 billion bid to acquire Time Warner, Inc., overturning Justice Department opposition in a court case and completely rejecting allegations the merger was anti-consumer and would raise prices by suppressing competition. The favorable decision is expected to signal the business community the time is right for several more multi-billion dollar media mergers.

U.S. District Court Judge Richard Leon ruled the deal can proceed without any consumer-protecting deal conditions, and warned Department of Justice lawyers not to appeal if the purpose was to stymie the deal from closing before the companies’ agreed on deal expiration date runs out, saying it would be “manifestly unjust” and damaging to the faith of America’s shareholders and business community.

Leon read his decision to a packed courtroom, telling the government’s lawyers they had failed to prove their case the merger would harm consumers. Observers called it one of the worst antitrust court losses the Justice Department has faced in its history.

“Today is a bad day for all internet users and media consumers,” said Free Press policy director Matt Wood. “The Justice Department’s failure to bring a winnable case will now set off a wave of communications and media consolidation that was unthinkable even a few years ago. All of us, regardless of our broadband carrier and no matter what we watch, are about to see higher bills, fewer choices, worse quality for competing options and a further erosion of our privacy rights.”

During a six-week trial held this spring, the government argued AT&T’s combination of DirecTV’s 20 million subscribers with its own U-verse TV customers, and its ownership of Time Warner’s pay television networks including HBO and Cinemax and Turner Broadcasting’s news, entertainment, and sports networks, would give the phone company too much power, allowing AT&T to unfairly raise prices for competing cable, satellite, and online streaming companies. AT&T acquired DirecTV in 2015, but regulators were already concerned about AT&T’s size, only approving the transaction with deal conditions.

AT&T argued it was willing to offer arbitration to make sure its competitors received fair deals, and volunteered to not cut off TV networks from customers during arbitration proceedings to resolve contract renewal disputes.

The decision has dramatic implications far beyond the merger at hand. Waiting in the wings are other media companies, Wall Street bankers, and advisers waiting to begin a frenzy of other blockbuster merger deals. Had the court blocked the merger, it would send a strong signal that the Justice Department’s case against vertical integration mergers — when companies buy other companies they do business with — has standing. The total defeat of the Justice Department in today’s decision may make government lawyers hesitant to challenge future vertical integration deals.

Comcast’s all-cash offer for a large part of 21st Century Fox is likely to proceed now that the AT&T-Time Warner merger was approved. More telecom industry deals are expected to emerge later this year.

The Trump Administration’s choice to oversee antitrust cases — Makan Delrahim, sent signals to Wall Street that he is still inclined to be pro-business on merger transactions, telling reporters most proposed transactions were either good for consumers or neutral — a view consumer advocates generally oppose.

“I understand that some journalists and observers have recently expressed concern that the antitrust division no longer believes that vertical mergers can be efficient and beneficial to competition and consumers,” Delrahim said. “Rest assured these concerns are misplaced.”

If the merger is completed, AT&T will now be the country’s largest pay-TV distributor, controlling more than a dozen “must-have” TV networks that competitors cannot afford to be without. The deal will even affect the wireless industry’s competitive landscape. AT&T’s unlimited wireless customers are expected to be given exclusive free access to a bundle of channels filled with Time Warner-owned content.

Comcast Dumps Congestion Management System It Says Was Unused for a Year

Image courtesy: cobalt123Comcast has quietly dropped its internet congestion management system, designed to slow down its heaviest users, claiming it has gone unused for more than a year and was no longer needed.

Originally spotted by readers of DSL Reports, the announcement referenced the system that replaced Comcast’s speed throttle that intentionally degraded peer-to-peer network traffic after Comcast claimed it was unfairly impacting its other customers:

As reflected in a June 11, 2018 update to our XFINITY Internet Broadband Disclosures, the congestion management system that was initially deployed in 2008 has been deactivated. As our network technologies and usage of the network continue to evolve, we reserve the right to implement a new congestion management system if necessary in the performance of reasonable network management and in order to maintain a good broadband Internet access service experience for our customers, and will provide updates here as well as other locations if a new system is implemented.

Comcast’s “protocol-agnostic” network management technology, designed by Sandvine and introduced in 2008, measured customer traffic and singled out heavy users for speed reductions when Comcast’s network was saturated with traffic. Customers were unaware if they were deemed heavy users or if their traffic was targeted for temporary speed reductions. Comcast relied on the technology, along with the introduction of a 250 GB nationwide data cap, to control network traffic and stall the need for expensive node-split upgrades.

Comcast claims the introduction of DOCSIS 3.0 (starting in late 2008) and DOCSIS 3.1 (2017) gradually eliminated the need to maintain the congestion management system, because channel bonding vastly expanded available internet bandwidth. What remains in place in most Comcast service areas is Comcast’s controversial 1 TB usage cap. The company initially claimed its data caps were part of a network traffic management strategy, but more recently the company claims it collects more from heavy users to compensate for its broadband investments.

FCC’s Rosenworcel Slams Spread of Fictional Stories of Cities Impeding 5G

Phillip Dampier June 12, 2018 Public Policy & Gov't, Wireless Broadband No Comments

Rosenworcel

Using “stitched-together” stories and caricature, lobbyists are finding an audience among Republican members of the Federal Communications Commission eager to sweep away local control of broadband infrastructure to allow wireless companies to locate equipment almost anywhere they want.

FCC Commissioner Jessica Rosenworcel warned attendees at the 86th annual meeting of the U.S. Conference of Mayors that the ability of local communities to control what equipment ends up on municipally owned light and utility poles is at risk:

In our first city—which happens to be a fictional one—public infrastructure is dated. The city needs better broadband and wireless services. But city officials view improvements skeptically. They lack the policies and processes needed to clear the way for the deployment of fiber facilities, wireless towers, and small cells—all of which are essential digital age infrastructure. They delay applications for facilities siting. They charge big fees for access to municipal poles. And get this, these bad actors have the audacity to have public safety and aesthetic concerns.

Like I said, this city is fictional. It’s a caricature based on some outliers and stitched-together stories. But this city is the one dominating discussion in Washington. It’s unfortunately shaping the debate where I work—at the Federal Communications Commission. It’s animating our discussions about broadband deployment and how we ensure the next generation of wireless broadband known as 5G reaches everyone, everywhere. This narrative is priming the pump for Washington preempting cities and towns and preventing them from having a role in what is happening in their own backyards.

The wireless industry is backing a number of state measures that severely restrict local control and decision-making powers over wireless infrastructure and its placement. The coordinated campaign has relied heavily on dubious stories of local communities arbitrarily rejecting wireless infrastructure upgrades or seeking huge amounts of money in return for permission to place equipment on community-owned utility poles or street lights:

The telecommunications industry has stacked the deck on many levels of the debate over how much control local municipalities should have over locations for cell towers, small cells, backup battery cabinets, and other infrastructure, claiming cities want to extort confiscatory pole attachment fees, drag their feet on permitting, and impose arbitrary rules that delay the deployment of wireless upgrades.

FCC Chairman Ajit Pai’s Broadband Deployment Advisory Committee (BDAC) is heavily packed with telecom industry insiders and lobbyists. Only a small handful of members are local public officials. As a result, the industry-stacked committee quickly identified local communities as one of the biggest impediments of next generation broadband services like 5G, and prioritized recommendations for new policies designed to deregulate the process in favor of providers.

The Republican FCC chairman and commissioners frequently characterize this issue as ‘old rules’ getting in the way of new technology, like 5G, necessitating regulatory reform.

State lawmakers, often relying on information packages assembled by telecommunications companies, have introduced industry-drafted model bills dramatically curtailing local control over equipment placement and pole attachment pricing. In states like Tennessee, the debate was framed as an either/or choice of Tennessee receiving advanced 5G investment and deployment or watching companies choose more industry-friendly states for 5G services.

Rosenworcel acknowledged San Jose Mayor Sam Liccardo, who resigned from BDAC after complaining it was heavily biased in favor of telecommunications companies. She praised Liccardo for independently streamlining provider access to poles for future 5G service with fair pricing and for developing new digital inclusion projects that will funnel some provider compensation into programs designed to achieve broader adoption of broadband services by the public.

For Rosenworcel, the fastest and most resilient way to broadband deployment is with a community on board.

“That’s because picking fights with cities and states promises to yield little more than a fast trip to the courts. It’s already happening with the FCC’s effort to redefine “federal actions” under the National Historic Preservation Act and National Environmental Policy Act,” Rosenworcel said.

Rosenworcel recommends the FCC develop a new framework that spends less time on the lobbyists’ talking points and scare stories and instead relies on common sense cooperative coordination between companies, the FCC, and local communities.

“We can begin by developing model codes for small cell and 5G deployment—but we need to make sure they are supported by a wide range of industry and state and local officials,” Rosenworcel said. “Then we need to review every infrastructure grant program at the Department of Commerce, Department of Agriculture, and Department of Transportation and build in incentives to use this model. In the process, we can build a more common set of practices nationwide. But to do so, we would use carrots instead of sticks.”

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