Sinclair’s deal with Tribune will make them by far the largest TV station ownership group in the country, owning 16% of the TV stations in the U.S. (Image: Mother Jones)

After a hard-hitting piece analyzing the close ties between President Donald J. Trump, FCC Chairman Ajit Pai, and Sinclair Broadcasting appeared in this morning’s New York Times, a group of leading House Democrats serving on the House Energy & Commerce Committee have written Mr. Pai asking for answers about his possible “favorable treatment” of Sinclair Broadcasting since becoming Chairman of the FCC.

These reports, according to the letter, raise two overarching questions:

• Whether actions taken by the FCC under your leadership show a pattern of preferential treatment for Sinclair, and
• Whether a series of interactions between your office, the Trump Campaign and Trump Administration, and Sinclair demonstrate inappropriate coordination.

The letter’s signers — all Democrats — are Rep. Frank Pallone, Jr. (ranking member of the full committee), Rep. Mike Doyle (ranking member of the Communications and Technology Subcommittee), and Rep. Diana DeGette (ranking member, Subcommittee on Oversight and Investigations).

The 12-page letter presents Pai with multiple examples of potential collusion and favorable treatment of a television station group that airs mandatory pro-Trump Administration commentaries on all of its local newscasts, employs a former Trump campaign aide, has sought private meetings with administration officials , and has made substantial campaign contributions.

The Times article appears to be the source for most of the concern expressed in the letter, which lays out multiple issues and seeks Mr. Pai’s comments and explanations.

At the beginning of the Trump Administration, the Democrats claim, Mr. Pai has undertaken a number of actions in his role as Chairman of the FCC that fall squarely in line with the corporate expansion agenda at Sinclair Broadcast Group. Among the most important was Mr. Pai’s sudden decision to bring a party-line vote to reinstate an archaic UHF Discount rule, which allows a company to downgrade the reach of its UHF stations for the purposes of determining if it is within the FCC’s limit of one station owner reaching no more than 39% of the country. This “discount” was established at a time when analog television signals on the UHF band (Channels 14+) were at a distinct coverage disadvantage over stations occupying the VHF (Channels 2-13) band. The discount was retired after the U.S. switched to digital television broadcasting, which largely eliminated this coverage disparity.

TV station owners saw a revival of the UHF Discount not as a way to deal with reception differences, but rather as a loophole to launch new acquisitions by discounting the coverage of their current stations. Only one company – Sinclair Broadcasting – stood to gain the most from the reinstatement of the UHF Discount. Almost on cue, two weeks after Pai brought this obscure rule up and reinstated it on a 2-1 vote, Sinclair announced a blockbuster merger with Tribune to acquire stations that will allow Sinclair to cover 70% of the United States, a number impossible to achieve without Pai’s support for the UHF Discount.

Democrats argue this was not what Congress intended, and it allows one station owner to own and control approximately double the number of stations the ownership cap would normally prohibit. They argue such a deal will reduce the diversity of media voices in communities across the country, especially in markets where Sinclair will own and operate more than one television station.

The New York Times provides this chart illustrating the vast expansion of stations if it wins control of Tribune Media.

The Democrats are also upset the FCC, under Pai’s leadership, appears to be in a hurry to get this deal reviewed and likely approved. It set a review window of just 30 days for public comment, considerably shorter than earlier, less controversial acquisition deals. Critics of the deal contend that the FCC is giving inadequate consideration of the deal’s lack of public interest benefits, and Sinclair’s application is vague and its claims are difficult to validate. Pai seems unconcerned, leading some to believe he intends to rubber stamp his approval with minimal conditions.

Ajit Pai, Chairman of U.S Federal Communications Commission. REUTERS/Eric Gaillard

Under Pai’s watch, the Democrats charge, Sinclair has already benefited from a ‘rush to approval’ mentality at the FCC. Sinclair’s earlier deal to acquire stations owned by the Bonten Media Group was also convenient, coming shortly after the FCC under Mr. Pai revoked guidance that would have required the FCC to closely scrutinize the transaction. The FCC granted the deal, despite the fact several of Bonten’s stations are in areas where Sinclair now holds operating agreements to manage other local stations. Large station groups have used these agreements as loopholes to effectively gain day-to-day control of stations without actually transferring their ownership.

The Democrats also argue that Sinclair is well positioned to be in the lead of Next Gen TV, ATSC 3.0 technology that will replace the current digital TV standard in the United States in the next few years. Sinclair is the biggest cheerleader of the new technology, and Mr. Pai coincidentally has put a rush on getting ATSC 3.0 approved and into the marketplace. ONE Media 3.0, a wholly owned subsidiary of Sinclair, just happens to own six critical patents essential for using the Next Gen TV standard. That means every station in the country moving to the next broadcast platform will have to pay royalties to Sinclair estimated in the billions.

As the Times reports, whenever Sinclair sought something from Washington as part of its corporate agenda, the FCC’s Mr. Pai quickly aligned himself and the FCC’s Republican majority to fulfill Sinclair’s wishes.

Rep. Frank Pallone, Jr. (D-N.J.) is ranking member of the House Energy & Commerce Committee.

The Democrats also question whether there is direct coordination between the Administration, Sinclair, and the FCC:

• After the election, President Trump reportedly met with the Executive Chairman and former CEO of Sinclair and discussed changing FCC rules to help Sinclair. A news account stated that after the election, President Trump met with David Smith, Sinclair’s Executive Chairman and former CEO. According to this report, “potential FCC rule changes were discussed” after President Trump asked Mr. Smith, “What do you need to happen in your business?”

• Before you became Chairman of the FCC, you reportedly met with then President-elect Trump in New York. Reports indicate that on January 16 of this year, you met with then-President-elect Trump in New York in a meeting that did not appear on your official calendar.

• In March, shortly after you became Chairman of the FCC, you met with President Trump in the Oval Office. An FCC spokesperson confirmed that the meeting occurred, but did not indicate what was discussed during the meeting. When asked directly about your meetings with President Trump, you declined to disclose what you discussed, saying “I am not at liberty to say.”

• The week after the election, you reportedly attended a company conference for Sinclair’s general managers, during which you met with Sinclair’s CEO. According to a Politico report, in January of this year, you met with Sinclair’s former CEO, David Smith, as well as the newly named Sinclair CEO, Chris Ripley.

• The President’s campaign reportedly “struck a deal” with Sinclair to “secure better media coverage.” This arrangement came to light after the election, when Jared Kushner reportedly revealed that in exchange for access to then-candidate Trump and his campaign, “Sinclair would broadcast Trump interviews across the country without commentary.” Sinclair representatives have defended this arrangement by claiming that the Clinton campaign was offered the option for extended interviews with local anchors as well, but did not accept.

• In April, Boris Epshteyn, who was “most recently Special Assistant to The President and Assistant Communications Director for Surrogate Operations for the Executive Office of President Trump,” and formerly a “senior advisor to the Trump campaign,” joined Sinclair to provide on-air political commentary. Epshteyn’s segments are “must-run” programming for Sinclair stations, with nine segments airing per week. One report has criticized the segments as “propaganda” and reporting on Sinclair’s selection of “must-run” programming has raised “suggestions that Sinclair pushed right-leaning views.”

The Democrats are requesting Mr. Pai answer their letter and provide additional information no later than Aug. 28.

If you have not filed a reply comment with the Federal Communications Commission on the subject of Net Neutrality, you now have two extra weeks to send one.

At the request of consumer groups and some members of Congress, the FCC extended the deadline for reply comments — those in response to existing filings — until Aug. 30, 2017. The two-week extension is far less than the eight weeks requested by many, and was granted despite objections for any extension from the cable, wireless, and telephone company lobbying organizations.

“While it is the policy of the Commission that ‘extensions shall not be routinely granted,’ we find that an extension of the reply comment deadline is appropriate in this case in order to allow interested parties to respond to the record,” the FCC wrote. “While we recognize that Movants have requested an eight-week extension of the reply comment deadline, we find, consistent with past Commission precedent granting partial extensions, that an additional two weeks is an appropriate period of time to extend the reply comment deadline in order to provide parties additional time to analyze the technical, legal, and policy arguments raised by initial commenters.”

Few in Washington expect the more than 11 million comments on the issue of keeping an open internet will make much difference to FCC Chairman Ajit Pai or his Republican colleague Michael O’Rielly, both fierce opponents of Net Neutrality. The third Republican Commissioner, Brendan Carr, was sworn in with returning Democrat Jessica Rosenworcel last Friday. Carr has a paper trail opposing Net Neutrality, while Rosenworcel is on record supporting it, along with her colleague Mignon Clyburn. In the end, the vote is likely to be 3-2 in favor of repealing Net Neutrality.

Unusually, the FCC has taken the step of characterizing the quality of comments received on the Net Neutrality issue, calling the vast majority of them exceptionally brief and containing little more than a declaration of the author’s “ultimate policy preferences.” It also suggested a large number of comments were “apparently fabricated,” noting that many were signed without the consent of the person named and others lack any names at all.

The telecom industry characterized the delay as giving more time for what Lawrence Spiwak, president of the telecom industry-friendly Phoenix Center calls “sophistic clicktivism” to “pad the record” in favor of Net Neutrality. Other groups funded by the telecom industry have spent months attempting to discredit the enormous number of comments — the most ever received by the FCC — by suggesting the majority were fake or fraudulent and not worthy of being taken seriously.

Verizon has told the Federal Communications Commission it should reject a bid from a consumer group to release confidential corporate merger information to the public so it can learn what economic incentives, if any, exist to begin charging content providers extra fees for internet fast lanes and zero rating.

Incompas, which advocates for increased competition in the wireless industry, asked the Commission in July to publicly disclose details of recent telecom mergers obtained in confidence from the companies involved to “interested commenters” in the Net Neutrality proceeding allowing consumers can obtain valuable insight into the “economic incentives and abilities of incumbent broadband providers to curb competition, including through their control of residential broadband connections.”

The group specifically called out AT&T’s merger with DirecTV, Comcast’s failed merger with Time Warner Cable, and Charter’s merger with Time Warner Cable and Bright House Networks. All of the entities involved either operate wireless networks themselves or partner with a provider that does. Incompas believes a document release will show increased concentration and market power and the marked impact that can have on what consumers pay for service and how those companies plan to treat competing traffic.

The information disclosure sought by the group was vehemently opposed by Verizon, which doesn’t want its business secrets revealed to the public.

“There is no legal justification or sound policy basis to justify making this highly sensitive business information available in the Restoring Internet Freedom proceeding,” Verizon countered in its filing. The phone company does not want to publicly release details about its connection agreements with other companies or exactly how many customers it serves. “[N]othing has changed since the adoption of these protective orders that warrants the Commission weakening these protections by allowing this sensitive business information to be disclosed to potentially millions of ‘interested commenters’ in the Restoring Internet Freedom proceeding.”

While some Net Neutrality critics have sought to dismiss the more than 13 million comments received so far by the FCC on Net Neutrality as confused ranting, Verizon takes an opposite position saying the Commission is already bogged down with quality comments on Net Neutrality and does not need more, claiming it would only add to a flood of analysis on Net Neutrality. Verizon claimed among the submissions received by the FCC are “millions of comments, thousands of pages of expert testimony and declarations and hundreds of substantive analyses and submissions with detailed economic, legal and policy arguments.”

Charter Communications did not appreciate the proposal either, claiming it was unfair.

“Such an outcome would eviscerate the core protection of the commission’s protective orders, thereby unfairly punishing Charter’s past compliance and threatening the commission’s ability to obtain sensitive information from private parties in the future,” Charter officials wrote.

Lee

Steve Lee, the director of the New Jersey Division of Consumer Affairs is resigning to take a job with the nation’s largest cable company.

Lee, whose resignation becomes effective Sept. 5, will become Comcast’s deputy general counsel, according to a statement released Tuesday by the state Attorney General’s Office.

Lee has been in charge of the consumer protection agency since 2014, but has spent the last several months speaking with Comcast about accepting a position likely to pay substantially more than he earns in his current role.

Lee’s three years as director has not seen any significant actions against Comcast initiated by his office. During Lee’s tenure, the Division has primarily focused on an aggressive prescription monitoring program to combat opioid abuse, sexual misconduct by doctors in exam rooms, and streamlining state licensing procedures.

The deputy director of the division, Sharon Joyce, will become acting director effective Sept. 6. She has been with the Division of Law since 1979 and has served as the acting director on three prior occasions.

Patrick Drahi, Altice, and his friends at Goldman Sachs are depicted as working together to make Altice’s acquisition dreams come true.

Patrick Drahi rarely gives up on his dreams. His latest is to be America’s biggest cable magnate, and there are signs he is laying the groundwork to make that dream come true.

CNBC and some French media outlets report Drahi’s Altice NV and Altice USA are assembling their European and North American financiers, attorneys, and dealmakers to potentially make an offer to acquire Charter Communications. If successful, Altice would leapfrog to the largest cable operator in the United States after combining its Cablevision and Suddenlink systems with Charter’s own legacy systems and those it acquired from Time Warner Cable and Bright House Networks.

Any succcessful deal would likely require an offer of $500 a share for Charter stock, which would make the company worth about $200 billion. Because Altice is dwarfed by Charter, it is unlikely Drahi will be able to raise enough cash on his own to make a deal, and Altice is already mired in debt from its ongoing aggressive acquisitions. Drahi’s biggest competitor for Charter is expected to be Japan’s SoftBank, which has shown an interest in acquiring the cable operator to combine with its wireless carrier Sprint.

Altice isn’t likely to encounter the regulatory hurdles that have caused other colossal cable deals like Comcast’s attempt to buy Time Warner Cable to collapse over regulator opposition.  Drahi’s involvement in U.S. cable has been limited to acquisitions of two smaller players – Cablevision and Suddenlink.

Drahi’s strongest arguments to sell investors on the deal are likely to surround his well-known obsession with draconian cost-cutting at his acquired companies. Drahi would certainly offer investors billions in deal synergies and savings, accomplished through dramatic layoffs, scrutinizing costs right down to replacement coffee makers for the break room and copy paper for the office, and sweeping cutbacks on employee and vendor perks. Drahi has also taken a strong stand against Hollywood studios and cable programmers that seek double-digit rate increases for cable programming. In Europe, Drahi is known for terminating costly contracts with programmers and launching alternative channels Altice owns and operates to replace them.

Drahi is also likely to sell regulators on his current plans to transform cable in the United States away from coaxial cable and towards fiber optics straight through to the home. Drahi has already offered to wire all of France with fiber optics and is presently embarking on a fiber upgrade for his Cablevision systems in New Jersey, New York, and Connecticut. But Drahi’s ambitious fiber plans have been met with suspicion in France where some believe Drahi is all talk and no spending.

He has promised the Macron government he will spend $17.6 billion on building an Altice-owned fiber broadband network in France by 2025 without any taxpayer subsidies. While that sounds laudable, it would mean Altice’s SFR would pull out of the government’s national fiber strategy that depends on different telecom companies building out fiber in different regions of the country.

Drahi is threatening to become a spoiler because before he acquired SFR, the former management cut a deal with Orange – France’s largest telecom company, to jointly build a fiber network for 14 million French households in smaller towns and suburbs. Orange would build and own 80% of the territory, SFR 20%. But because SFR needs access to that fiber network for its own wired and wireless broadband and television services, it will have to pay rental fees to Orange to use the network in most of the territory. Drahi instead wants a 50-50 ownership split to cut costs and Orange has said no. Altice’s plans for its own alternative fiber network would allow it to bypass the Orange-owned network and deliver traffic over its own fiber system. That could mean parts of less-populated France will have two fiber networks to choose from instead of just one.

Drahi

It is an expensive gamble, but investors seem largely unfazed so far, perhaps suspecting Drahi has no intention of actually following through on spending billions on a potentially redundant fiber network in the suburbs and farm country, preferring to believe the threat of doing so will drive Orange back to the negotiating table.

Some American analysts are uncertain whether Drahi can pull off an acquisition deal that would combine Charter, a company many times larger than Altice, with Altice’s much smaller earlier cable acquisitions. Some also suspect he won’t find enough money to attract interest from Charter’s biggest shareholder — John Malone’s Liberty Media and Charter’s current CEO Thomas Rutledge.

But French media has little doubt Drahi can pull it off, especially when he is motivated.

“Patrick Drahi, founder of Altice, has set his limits: he has none,” notes Le Figaro, adding Drahi is a classic industry spoiler, completely happy to blow up cable’s comfortable status quo, even when at risk of attracting the wrath of his competitors.

CNBC reports Altice is preparing a serious offer to acquire Charter Communications. (5:54)