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Spectrum Auction: T-Mobile Runaway Winner, But Dish Buy Puzzles Investors

Phillip Dampier April 17, 2017 Broadband "Shortage", Comcast/Xfinity, Competition, Consumer News, Dish Network, Public Policy & Gov't, T-Mobile, Wireless Broadband Comments Off on Spectrum Auction: T-Mobile Runaway Winner, But Dish Buy Puzzles Investors

T-Mobile’s 600MHz coverage map — assuming it builds out its full spectrum purchase.

One of the most consequential and visible spectrum auctions ever is over, and it will have a significant impact on broadcasters, wireless carriers, and the future competitive landscape of the wireless industry.

The world’s first “incentive auction” paid television stations to voluntarily vacate or move their assigned channels to make room for the wireless industry’s desire for more spectrum to power wireless data services. Up for bid was 70MHz of spectrum currently used by UHF television stations. A total of 50 winning wireless bidders collectively agreed to pay $19.8 billion to acquire that space. The biggest winner was T-Mobile USA, which is paying almost half the amount of total proceeds to acquire 45% of the spectrum available in the current auction. T-Mobile managed to acquire enough spectrum to cover 100% of the United States and Puerto Rico with an average of 31MHz of available spectrum nationwide, quadrupling its current inventory of important “low-band” spectrum, which is excellent for covering rural areas and inside buildings.

Consumers are likely to benefit as early as later this year when T-Mobile begins lighting up cellular service utilizing the newly available spectrum. Unfortunately, customers will have to buy new devices compatible with the new bands of frequencies.

Having the spectrum alone is not enough to beef up T-Mobile’s network. The company will have to invest in a large number of new cell sites, particularly in outlying areas, to eventually rival the coverage of AT&T and Verizon Wireless. But with an ample supply of 600MHz spectrum, T-Mobile could soon challenge AT&T and Verizon Wireless’ perceived network and coverage superiority. After this auction, AT&T continues to hold the largest portfolio of <1GHz spectrum — 70.5MHz. Verizon is second with 46.2MHz and T-Mobile has moved up in its third place position with 41.1MHz.

Although the FCC claims the current auction was among the highest grossing ever conducted by the FCC, industry observers claim companies got the new frequencies at a bargain price. A 2015 spectrum auction attracted $44.9 billion in bids, more than double the amount bid this year. The average price wireless companies paid per megahertz per person this year was just shy of 90¢, compared with $2.72 in 2015.

Where bargains are to be had, Charles Ergen and his Dish Network satellite company are sure to follow.

Few companies have as much unused wireless spectrum in their portfolio as Dish. Ergen loves to bid in auctions and has also picked up excess spectrum available on the cheap from other satellite companies that have since gone dark or bankrupt. Dish spent $6.2 billion on spectrum during the latest auction, puzzling investors who drove Dish’s share price down wondering what the company intends to do with the frequencies.

Investors were hoping Dish would eventually sell its spectrum portfolio at a profit, something that could still happen if other wireless carriers see a deal to be made. But some Wall Street analysts fear Dish might actually build a large wireless network of its own to offer wireless broadband service. Wall Street dislikes big spending projects and the competition it could bring to the marketplace, potentially driving down prices.

The other possibility is that Dish is making itself look more attractive to a possible buyer like Verizon, which could acquire the satellite company to win cheaper cable programming prices for its FiOS TV and an attractive amount of wireless spectrum for Verizon Wireless. The nation’s biggest wireless carrier notably did not participate in this spectrum auction.

Another unusual bidder was Comcast. Craig Moffett from Wall Street firm MoffettNathanson called Comcast’s $1.7 billion bid “half-hearted” and said it was unlikely to be enough spectrum for the company to begin offering its own wireless service. Comcast plans to rely on Verizon Wireless to power its wireless service, at least initially.

Comcast targeted its bids only in cities where it already provides cable service, which also nixes the theory Comcast and Charter might have been working together to form a cellular joint venture. Moffett expected Comcast would seek at least 20MHz of spectrum across most of the country. It ended up with 10MHz and only in select cities. Moffett thinks that may signal Comcast’s interest in buying an existing wireless carrier is still on the table.

Spectrum Auction Over: 175 TV Stations Take Money to Vacate Their Channels

Phillip Dampier April 13, 2017 Consumer News, Public Policy & Gov't 35 Comments

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An unprecedented 175 free over-the-air television signals will sign off on their current channels for good in return for an average of tens of millions in compensation paid by Comcast, Dish Networks, and various wireless companies that want their frequencies to bolster their mobile networks.

The UHF dial compression comes courtesy of the latest FCC spectrum auction, which allowed bidders to entice over-the-air television stations to give up their frequencies to make room for wireless companies trying to bolster their 4G LTE networks. At least 957 stations across the country will have to move to new channels as the FCC compresses the TV dial to make room for wireless providers.

Virtually all the affected stations won’t disappear from free over-the-air TV for good, however. Of the 175 stations, 133 plan to make a deal with another local station to relaunch as a secondary digital channel, 29 will move from a UHF channel to a new VHF channel (2-13), and one channel will move from a high VHF channel to a low numbered one.

The move was very profitable to some major market stations, where the TV dial is already crowded with signals. WWTO-TV, a TBN affiliate airing Christian TV programming in LaSalle/Chicago, Ill. won the highest amount of any station in the country to put its transmitter off the air – $304 million. The biggest non-commercial auction winner was New Jersey’s Public Broadcasting Authority, which won $194 million to switch off WNJN in Montclair, N.Y.

The winners are 50 wireless bidders who want the frequencies to improve their wireless networks by increasing the amount of spectrum they can use in the coveted 600MHz band. Signals at these frequencies do a better job penetrating buildings and around natural obstacles and terrain. The result will be improved coverage and signal quality, with fewer dropped calls.

“The conclusion of the world’s first incentive auction is a major milestone in the FCC’s long history as steward of the nation’s airwaves,” said FCC chairman Ajit Pai. “Consumers are the real beneficiaries, as broadcasters invest new resources in programming and service, and additional wireless spectrum opens the way to greater competition and innovation in the mobile broadband marketplace.”

Stations can begin vacating their frequencies this year. Among the 957 stations that have to change channel numbers, the first of a series of channel changes will begin on Nov. 30, 2018. The last changes should take place just over three years from now.

Are you affected? Here is the list of channels going off the air or relocating to a different band:

Albany-Schenectady-Troy, N.Y.

  • WCDC-TV UHF Going off the air

Augusta, Ga.

  • WAGT-TV UHF Going off the air

Baltimore, Md.

  • WUTB-TV UHF Going off the air

Boston, Mass.

  • WBIN-TV UHF Going off the air
  • WDPX-TV UHF Going off the air
  • WFXZ-CD UHF Going off the air
  • WGBH-TV UHF Moving to Low VHF Channel
  • WLVI-TV UHF Going off the air
  • WMFP-TV UHF Going off the air
  • WYCN-CD UHF Going off the air
  • WYDN-TV UHF Going off the air

Buffalo, N.Y.

  • WIVB-TV UHF Going off the air
  • WNYB-TV UHF Moving to Low VHF Channel
  • WVTT-CD UHF Moving to High VHF Channel

Burlington, Vt.-Plattsburgh, N.Y.

  • WNNE-TV UHF Going off the air
  • WVTA-TV UHF Going off the air

Charleston-Huntington, W.V.

  • WPBO-TV UHF Going off the air
  • WTSF-TV UHF Moving to High VHF Channel

Charlotte, N.C.

  • WLNN-CD UHF Going off the air
  • WMYT-TV UHF Going off the air
  • WTBL-CD UHF Going off the air

Charlottesville, Va.

  • WVIR-TV UHF Moving to Low VHF Channel

Chattanooga, Tenn.

  • WNGH-TV UHF Moving to Low VHF Channel
  • WTNB-CD UHF Moving to Low VHF Channel

Chicago, Ill.

  • WOCH-CD UHF Going off the air
  • WPWR-TV UHF Going off the air
  • WSNS-TV UHF Going off the air
  • WWTO-TV High VHF Channel Going off the air
  • WXFT-TV UHF Going off the air
  • WYCC-TV UHF Going off the air

Cincinnati, Oh.

  • WOTH-CD UHF Going off the air

Cleveland-Akron, Oh.

  • WAOH-CD UHF Going off the air
  • WDLI-TV UHF Going off the air
  • WGGN-TV UHF Moving to Low VHF Channel
  • WRLM-TV UHF Going off the air
  • WUAB-TV UHF Going off the air

Columbus, Ga.

  • WJSP-TV UHF Moving to Low VHF Channel

Columbus, Oh.

  • WOUC-TV UHF Moving to Low VHF Channel
  • WSFJ-TV UHF Going off the air

Dallas-Ft. Worth, Tex.

  • KATA-CD UHF Going off the air

Dayton, Oh.

  • WBDT-TV UHF Going off the air
  • WKOI-TV UHF Going off the air

Flint-Saginaw-Bay City, Mich.

  • WCMZ-TV UHF Going off the air

Greensboro-High Point-Winston, N.C.

  • WCWG-TV UHF Going off the air
  • WLXI-TV UHF Going off the air

Greenville-New Bern-Washington, N.C.

  • WFXI-TV High VHF Channel Going off the air

Greenville-Spartanburg, S.C.

  • WGGS-TV UHF Moving to Low VHF Channel
  • WRET-TV UHF Going off the air
  • WYCW-TV UHF Going off the air

Harrisburg-Lancaster-Lebanon-York, Pa.

  • WGCB-TV UHF Going off the air
  • WLYH-TV UHF Going off the air
  • WPMT-TV UHF Going off the air

Harrisonburg, Va.

  • WAZH-CD UHF Going off the air
  • WVPY-TV UHF Going off the air

Hartford-New Haven, Conn.

  • WCTX-TV UHF Going off the air
  • WEDY-TV UHF Going off the air
  • WRDM-CD UHF Going off the air
  • WUVN-TV UHF Going off the air

Huntsville-Decatur-Florence, Ala.

  • WHDF-TV UHF Moving to Low VHF Channel

Indianapolis, Ind.

  • WCLJ-TV UHF Going off the air
  • WHMB-TV UHF Moving to High VHF Channel
  • WNDY-TV UHF Going off the air

Johnstown-Altoona, Pa.

  • WKBS-TV UHF Moving to Low VHF Channel

Knoxville, Tenn.

  • WAGV-TV UHF Going off the air

Lansing, Mich.

  • WHTV-TV UHF Going off the air
  • WLNS-TV UHF Going off the air

Lima, Oh.

  • WTLW-TV UHF Moving to Low VHF Channel

Los Angeles, Calif.

  • KAZA-TV UHF Going off the air
  • KBEH-TV UHF Going off the air
  • KDOC-TV UHF Moving to High VHF Channel
  • KILM-TV UHF Going off the air
  • KJLA-TV UHF Going off the air
  • KLCS-TV UHF Going off the air
  • KNET-CD UHF Going off the air
  • KOCE-TV UHF Going off the air
  • KRCA-TV UHF Going off the air
  • KSFV-CD UHF Going off the air
  • KVCR-TV UHF Moving to Low VHF Channel
  • KWHY-TV UHF Moving to Low VHF Channel

Louisville, Ky.

  • WBKI-TV UHF Going off the air
  • WWJS-CD UHF Going off the air

Madison, Wisc.

  • WISC-TV UHF Moving to High VHF Channel

Memphis, Tenn.

  • WWTW-TV UHF Going off the air

Miami-Ft. Lauderdale, Fla.

  • WDLP-CD UHF Going off the air
  • WIMP-CD UHF Going off the air
  • WLPH-CD UHF Going off the air

Milwaukee, Wisc.

  • WCGV-TV UHF Going off the air
  • WMLW-TV UHF Going off the air
  • WMVT-TV UHF Going off the air
  • WVCY-TV UHF Going off the air

Minneapolis-St. Paul, Minn.

  • KCCO-TV High VHF Channel Going off the air

Monterey-Salinas, Calif.

  • KSMS-TV UHF Going off the air

Myrtle Beach-Florence, S.C.

  • WGSI-CD High VHF Channel Going off the air

New York, N.Y.

  • WEBR-CD UHF Going off the air
  • WMBQ-CD UHF Going off the air
  • WMUN-CD UHF Going off the air
  • WNBC-TV UHF Going off the air
  • WNJN-TV UHF Going off the air
  • WNYJ-TV UHF Going off the air
  • WRNN-TV UHF Going off the air
  • WTBY-TV UHF Going off the air
  • WXTV-TV UHF Going off the air
  • WZME-TV UHF Going off the air

Orlando-Daytona Beach-Melbourne, Fla.

  • WACX-TV UHF Moving to High VHF Channel
  • WTGL-TV UHF Going off the air

Philadelphia, Pa.

  • WFMZ-TV UHF Going off the air
  • WGTW-TV UHF Going off the air
  • WLVT-TV UHF Going off the air
  • WMCN-TV UHF Going off the air
  • WNJT-TV UHF Going off the air
  • WTSD-CD UHF Going off the air
  • WTVE-TV UHF Going off the air
  • WUVP-TV UHF Going off the air
  • WWSI-TV UHF Going off the air
  • WYBE-TV UHF Going off the air

Pittsburgh, Pa.

  • WBOA-CD UHF Going off the air
  • WEMW-CD UHF Going off the air
  • WEPA-CD UHF Going off the air
  • WNNB-CD UHF Going off the air
  • WPCP-CD UHF Going off the air
  • WQED-TV High VHF Moving to Low VHF Channel
  • WQVC-CD UHF Going off the air
  • WVTX-CD UHF Going off the air

Providence, R.I.-New Bedford, Mass.

  • WLWC-TV UHF Going off the air
  • WRIW-CD UHF Going off the air
  • WSBE-TV UHF Moving to Low VHF Channel

Puerto Rico

  • WDWL-TV UHF Going off the air
  • WELU-TV UHF Going off the air
  • WIRS-TV UHF Going off the air
  • WKPV-TV UHF Going off the air
  • WMEI-TV UHF Going off the air
  • WSJU-TV UHF Going off the air
  • WTCV-TV UHF Going off the air

Raleigh-Durham, N.C.

  • WFPX-TV UHF Going off the air
  • WHFL-CD UHF Moving to High VHF Channel
  • WNCN-TV UHF Moving to High VHF Channel
  • WRAY-TV UHF Going off the air
  • WZGS-CD UHF Going off the air

Richmond-Petersburg, Va.

  • WUPV-TV UHF Moving to High VHF Channel

Roanoke-Lynchburg, Va.

  • WFFP-TV UHF Going off the air

Rockford, Ill.

  • WIFR-TV UHF Going off the air

San Diego, Calif.

  • K35DG-TV UHF Going off the air
  • KSEX-CD UHF Going off the air

San Francisco-Oakland-San Jose, Calif.

  • KEMO-TV UHF Going off the air
  • KEXT-CD UHF Going off the air
  • KMPT-TV UHF Going off the air
  • KOFY-TV UHF Going off the air
  • KQEH-TV UHF Going off the air
  • KRCB-TV UHF Moving to Low VHF Channel
  • KRON-TV UHF Moving to High VHF Channel
  • KTLN-TV UHF Going off the air
  • KTNC-TV UHF Going off the air
  • KTSF-TV UHF Going off the air

Santa Barbara-Santa Maria-San Caballero, Calif.

  • KMMA-CD UHF Going off the air

Springfield, Mo.

  • KSPR-TV UHF Going off the air

Springfield-Holyoke, Mass.

  • WGBY-TV UHF Moving to High VHF Channel

Syracuse, N.Y.

  • WNYI-TV UHF Moving to High VHF Channel

Tampa-St. Petersburg-Sarasota, Fla.

  • WUSF-TV UHF Going off the air
  • WTTA-TV UHF Going off the air

Tri-Cities, Tenn.

  • WAPG-CD UHF Going off the air
  • WMSY-TV UHF Going off the air
  • WSBN-TV UHF Going off the air

Tyler-Longview, Tex.

  • KCEB-TV UHF Going off the air

Washington, D.C.

  • WAZF-CD UHF Going off the air
  • WDCA-TV UHF Going off the air
  • WDCW-TV UHF Going off the air
  • WJAL-TV UHF Going off the air
  • WMDO-CD UHF Going off the air
  • WNVC-TV UHF Going off the air
  • WNVT-TV UHF Going off the air
  • WZDC-CD UHF Going off the air

West Palm Beach-Ft. Pierce, Fla.

  • WFGC-TV UHF Moving to High VHF Channel
  • WXEL-TV UHF Going off the air

Wilkes Barre-Scranton, Pa.

  • WKBN-TV UHF Going off the air
  • WVIA-TV UHF Going off the air

FCC Chairman Ajit Pai Appoints Charter’s Former Senior Counsel as Chief of Consumer Affairs Bureau

D.C.’s perpetually revolving door for regulators and lobbyists keeps on spinning.

FCC chairman Ajit Pai today announced he will appoint Charter Communications’ former general counsel as the next head of the FCC’s Consumer and Government Affairs Bureau.

Patrick Webre has taken several trips through D.C.’s revolving door over the last seven years, serving 11 months as an associate chief of that same bureau under former FCC chairman Julius Genachowski. Starting in November 2010, Webre took a position as senior director and senior counsel at Charter Communications. Starting in 2012, Webre was hired by Huron Consulting Group and later as a staff attorney at corporate D.C. law firm Jenner & Block.

Jenner & Block’s profile notes while working for Charter, Webre “was their primary advocate to commissioners and staff at the FCC, the National Telecommunications and Information Administration, the Federal Trade Commission, the Department of Justice, and Members of Congress and their staff.” In short, he was effectively Charter’s lobbyist.

Jenner & Block claims it achieves “excellent results for our clients,” which have included Comcast, AT&T, and Verizon, among others.

“Our lawyers combine broad experience with inside perspective into the inner workings of the FCC, the Department of Justice and other regulatory agencies across the country,” the firm’s website notes. “Our practice includes a former FCC general counsel and senior FCC policy advisor, a former senior counsel to the chairman for Transactions, numerous Supreme Court and Court of Appeals clerks and nationally recognized lawyers who have extensive experience handling cutting-edge telecommunications and media law issues. […] Together, we have tackled numerous important issues before the FCC and the courts, including net neutrality, media ownership, online video and content restrictions on video programming and video games.”

Webre

Jenner & Block does not represent you — the average American consumer. It represents big-pocketed telecom companies interested in getting their corporate agendas through the regulatory and legislative workings of Washington. In its message to clients, the law firm touts its achievements:

AGENCY PROCEEDINGS AND ENFORCEMENT ACTIONS

Jenner & Block represents telecommunications and media clients at the FCC, the Department of Justice and other regulatory agencies across the country.  We have developed particular expertise in matters concerning video regulation, the Internet and other advanced services, spectrum and wireless issues, and telephone competition.  Recent matters include program access and program carriage disputes, media ownership proceedings, proceedings on the status of on-line video providers, net neutrality, spectrum and interference proceedings, universal service and intercarrier compensation.

MERGERS AND ACQUISITIONS

Jenner & Block regularly represents media and telecommunications clients in mergers and acquisitions and other transactions involving license transfers.  Our work includes both securing regulatory approval from the FCC and other regulatory agencies and, with our Corporate practice, negotiating and executing agreements.  Representative transactions include Comcast-NBCU, AT&T-T-Mobile, Verizon-Frontier, Verizon Wireless-ALLTEL and CenturyTel-Embarq.  We have also successfully represented clients in numerous radio and television station transactions.

Mr. Webre’s new job at the FCC is to ostensibly represent the interests of consumers. The Consumer and Governmental Affairs Bureau develops and implements the commission’s consumer policies, including disability access. Its consumer center is directly responsible for addressing consumer inquiries and complaints about some of the same cable and phone companies Mr. Webre used to represent.

Pai issued a statement suggesting Webre would be his perfect choice to replace current chief Alison Kutler, who was originally appointed by former FCC chairman Tom Wheeler.

“Consumers sit at the core of the FCC’s work, and the FCC’s Consumer and Governmental Affairs Bureau serves as our primary liaison to them,” said Pai in a statement. “Whether reviewing consumer complaints or developing policies to stop robocalls, CGB works hard to serve the public interest. Patrick’s skill and experience will enable us to continue this important mission.”

Drahi’s Acquisition Quest ’17 – Altice Could Seek Up to 30% Of U.S. Telecom Market

Phillip Dampier April 12, 2017 Altice USA, Competition, Consumer News, Public Policy & Gov't Comments Off on Drahi’s Acquisition Quest ’17 – Altice Could Seek Up to 30% Of U.S. Telecom Market

Patrick Drahi

“If he can succeed with a corporate-friendly Trump Administration and his lackey Republican legislators and regulators, Patrick Drahi’s Altice could seek to own or control up to 30% of the American telecoms market,” said A.W. Dewalle, a researcher studying Altice’s unprecedented acquisition-frenzy across the world’s telecommunications marketplace. “His IPO in the land of Uncle Sam is just the first shot and it will make a lot of executives very rich and consolidate America’s cable industry.”

Wall Street banks are clamoring for a piece of Altice’s initial public offering, announced this week. The big winners, who will split substantial fees paid to advise Altice USA, are Goldman Sachs, JP Morgan, Morgan Stanley and Citi. The IPO will allow the Drahi-controlled Altice USA to raise money for further acquisitions in the United States and to potentially restructure its existing debt, run up acquiring Cablevision and Suddenlink.

Reuters reported that Drahi’s biggest U.S. shareholders — BC Partners and the Canadian Pension Plan Investment Board will use the IPO as an opportunity to sell some of their combined 30% stake in Altice USA, giving Drahi further assurance he will stay firmly in control of the American operation as he takes on new investors.

Les Echos reports Drahi’s pattern is a familiar one for a man in a hurry to take a much bigger stake in the American telecom market, where profits are high and competition is relatively low. By raising additional funds, Altice USA can show financial strength as it appeals to bankers to loan it the billions in will need to acquire existing cable (and potentially phone) companies. If Altice uses some of the money to repay its existing $20 billion U.S. debt, that could also win the company favorable interest rates on its future loan portfolio.

Drahi is an acquisition specialist, having bought more than 30 companies to add to his Altice portfolio since its start in 2002. Low interest rates, favorable banking terms and corporate deregulation have fueled the shopping spree. With the election of Donald Trump in the U.S., Altice is convinced the sky is the limit when it comes to mergers and acquisitions.

“Everything about his government and the people he has put in place at regulatory agencies says deregulation, ‘laissez-faire,’ and consumers beware,” said Dewalle, a point echoed in part by the Financial Times.

The election of Donald Trump has lifted expectations among chief executives that it will be easier to consolidate companies in the telecoms, media and technology (TMT) sector, as the Republican president has a more laissez-faire approach towards competition. Many media and telecom players are under pressure to boost margins and find new growth avenues, while facing declining sales, according to a senior banker in the industry. “M&A might be the only option for many companies in this sector and Altice will certainly try to play a big role in this,” said [one] banker.

Altice is already laying the public relations groundwork to convince skeptical legislators and regulators that an Altice buyout is not bad news for customers. Altice is spending millions to scrap Cablevision’s existing hybrid coax-fiber network for a 100% fiber to the home replacement. Other upgrades are also ongoing across Suddenlink’s footprint.

Because the American telecom marketplace is not nearly as competitive as the one Altice faces in Europe, Americans are accustomed to paying for broadband and television services at prices that would be scandalous in France. The excess profits earned in America can help Altice finance fiber upgrades in its more competitive European markets. Altice confirmed this week it planned to invest more in 4G wireless upgrades for its SFR division in France and will cover 22 million French homes with fiber to the home service by 2022 and 5.3 million homes in Portugal by 2020.

How big will Mr. Drahi seek to get in the United States? He testified before the Economic Affairs Committee of the French Senate last June, telling legislators he owns or controls about one-third of the French telecom market. In the United States, he controls just 2%, leaving plenty of room to grow.

French business experts predict Drahi will initially seek to sweep up the remaining independent cable operators in the States into the Altice empire before turning attention to a big player like Comcast or Charter Communications, the largest and second-largest American cable operator respectively. Publicly traded companies like Cable ONE would be the first prime targets for an Altice buyout. But Drahi could also repeat his Cablevision acquisition by offering a premium price for privately held operators like Cox Communications, which has a presence in larger cities, and Mediacom — which provides service in 23 states and has a big presence in the midwest.

Most of the rest of America’s independent cable operators are small, regional operations serving smaller communities. Drahi has his choice of these kinds of operators that include Adams Cable, Armstrong, Atlantic Broadband (owned by Canada’s Cogeco), Blue Ridge Communications, Buckeye Broadband, Hargray, Midco, Northland, Service Electric, TruVista, Wave Broadband (exploring a sale), and WOW, among others.

Thus far, Drahi has not shown much interest in acquiring telephone companies, so analysts expect him to confine his acquisitions to the cable business. Even if Drahi acquires a substantial cable portfolio in the United States, he will argue he still faces competition from telephone companies in those same service areas. What Drahi won’t do is compete from the ground up by building a competitive cable system to face off against a firmly entrenched American duopoly.

“That would be bad for business,” said Dewalle.

FCC Considering Making It Easier for Telcos to Kill Landline/DSL Service

The FCC has circulated a draft rulemaking that proposes to make it easier for phone companies to end landline and DSL service in areas they are no longer interested in maintaining existing infrastructure.

“We propose eliminating some or all of the changes to the copper retirement process adopted by the Commission in the 2015 Technology Transitions Order,” according to the draft, which would allow phone companies to end service “where alternative voice services are available to consumers in the affected service area.”

The proposed new policy would depart significantly from the one put in place during the Obama Administration because it would end assurances that competing providers would have reasonable and affordable access to wholesale broadband and voice services after phone companies mothball their copper wire networks in favor of wireless or fiber alternatives. If the FCC proposal passes, incumbent phone companies like Verizon and AT&T could end rural landline and DSL service and not make provisions for competitors to have access to the technology alternatives the phone companies would offer affected customers.

Verizon immediately praised the FCC proposal, saying it was “encouraged the FCC has set as a priority creating a regulatory environment that encourages investment in next-generation networks and clears away outdated and unnecessary regulations,” wrote Will Johnson, senior vice-president of federal regulatory and legal affairs at Verizon. “This action is forward-looking, productive and will lead to tangible consumer benefits.”

Previous attempts by Verizon to discontinue landline and DSL service did not lead to “tangible consumer benefits” as Verizon might have hoped. Instead, it led to a consumer backlash, particularly in areas affected by Superstorm Sandy in 2012. Verizon elected not to rebuild its copper wire infrastructure in affected coastal communities in New York and New Jersey. Instead, it introduced a wireless landline replacement called Voice Link that proved unpopular and caused a revolt among residents on Fire Island. The wireless replacement did not support data, health monitoring, credit card transaction processing, faxing, and was criticized for being unreliable. Verizon eventually relented and opted to expand its FiOS fiber to the home network on the island instead.

Verizon also attempted to market Voice Link to New York residents in certain urban and rural service areas affected by extended service outages in lieu of repairing its existing infrastructure. Under the proposed changes, the FCC would ease the rules governing the transition away from copper-based services, which include traditional landline service and DSL, in favor of wireless technology replacements and fiber optics.

Because telephone companies like AT&T and Verizon have made mothballing rural wireline infrastructure a priority, the FCC strengthened its rules in 2015 by doubling the notification window from 90 to 180 days, giving more time for affected customers to make other service arrangements or complain to regulators that there were no suitable alternatives. The FCC wants to roll back that provision to its earlier 90-day notification window in response to telephone company complaints that maintaining copper wire infrastructure is expensive and diverted investment away from next-generation networks.

AT&T has been lobbying for several years to win permission from state legislatures to abandon copper wireline infrastructure, mostly in rural areas, where the company has chosen not to upgrade to fiber optic networks. AT&T claims only about 10% of their original landline customer base still have that service.

Both Verizon and AT&T have shown an interest in moving rural consumers to more proprietary wireless networks, preferably their own, where consumers would get voice and data services. But consumer advocates complain customers could lose access to competitive alternatives, may not have a guarantee of reliable service because of variable wireless coverage, could pay substantially more for wireless alternatives, and may be forced to use technology that either does not support or works less reliably with home security systems, medical monitoring, faxing, and data-related transactions like credit card processing.

Other consumer groups like AARP and Public Knowledge have complained that shortening the window for a transition away from basic landline and DSL service to alternative technology could disproportionately affect the customers most likely to still depend on traditional wireline service — the elderly, poor, and those in rural areas.

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Stop the Cap!