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FCC Moves to Make Cable TV Franchise Fee Rules More Cable Industry Friendly

Phillip Dampier August 7, 2019 Consumer News, Public Policy & Gov't, Reuters No Comments

WASHINGTON, Aug 1 (Reuters) – The U.S. Federal Communications Commission (FCC) last week voted 3-2 to tighten rules governing the franchise fees paid by cable companies to local authorities, a move that cities warn could result in public access channels going off the air or in municipalities losing free service.

Congress previously capped the franchise fees that cable operators pay for using public property, among other factors, at 5% of gross revenue on cable bills. The FCC vote requires non-financial “in kind” contributions made by cable operators must be assigned a value and counted against the cap.

Those costs that now must be counted against the cap include contributions for public, educational, and government access channels, institutional networks and other services like free cable for municipal buildings.

FCC Chairman Ajit Pai said “every dollar paid in excessive fees is a dollar that by definition cannot and will not be invested in upgrading and expanding networks.”

Cable operators pay roughly $3 billion annually in franchise fees to state and local governments.

New York told the FCC all city fire stations get free cable and internet service from cable providers.

“There are no viable alternative services available to the city. The only potential long-term solution would be to build a parallel network which will take years and cost a massive amount of money,” the city said in a July 25 letter.

Milton, Massachusetts, which noted it uses an institutional network for police and school security cameras and municipal internet access, said it could lose government access channel programming.

Pai

The FCC also voted Thursday to bar municipalities from regulating or imposing fees on most non-cable services, including broadband Internet service.

NCTA – the Internet & Television Association representing major cable companies like Comcast Corp, Charter Communications Inc and Cox Communications Inc – said the vote “will help promote broadband investment, deployment, and innovation, to the benefit of all Americans.”

FCC Commissioner Geoffrey Starks said “free or discounted service to cash-strapped schools, provision of critical (institutional network service), discounts to vulnerable communities … are a small imposition given the value received by providers.”

He added it “risks causing grave harm to local communities.”

Republicans commissioners point out that cable companies have been forced to fund other events like ice cream socials or offer free service for government-owned golf courses.

Local communities including Atlanta, Boston, Dallas and Los Angeles told the FCC in a joint statement local governments will “be forced to make difficult decisions about reductions in service (i.e., coverage of governmental meetings, community media, and broadband to schools) or increases in local revenue sources.”

Reporting by David Shepardson; Editing by Bernadette Baum

Reuters: DoJ Ignored Bid from Charter Communications to Acquire T-Mobile/Sprint Assets

NEW YORK (Reuters) – Charter Communications submitted a proposal to the Justice Department to buy telecom assets being sold under the T-Mobile US and Sprint Corp combination, but never heard back from the agency, three sources familiar with the matter said.

U.S. officials decided to accept a deal to sell assets including Sprint’s Boost Mobile brand to satellite TV provider Dish Network to resolve antitrust concerns, ending extensive talks on a merger the Justice Department is expected to approve this week.

The Justice Department’s lack of response to Charter could raise concerns among critics of the $26.5 billion merger of wireless carriers T-Mobile and Sprint that officials did not weigh all divestiture offers before deciding on a deal with Dish.

Details of the proposal were not immediately known, but sources said this week Charter had requested that there be an auction process for the divested assets.

The Justice Department declined to comment. Charter was not immediately available for comment.

Ten state attorneys general, led by New York and California and including the District of Columbia, filed a lawsuit on June 11 to stop the merger, saying it would cost their subscribers more than $4.5 billion annually. Four more states have since joined the lawsuit.

Dish emerged as the leader to acquire the prepaid phone brand Boost Mobile, which T-Mobile and Sprint are selling in order to gain regulatory approval for their merger.

Charter began offering its own mobile service called Spectrum Mobile last year, which runs on Verizon Communications’ network. It served 310,000 mobile lines as of the first quarter.

Dish, which has been stockpiling billions of dollars worth of wireless spectrum, faces a March 2020 deadline to build a product using the spectrum in order to fulfill the requirements of its licenses. It has focused on building an Internet of Things network, with the goal of eventually having a 5G wireless network.

The Federal Communications Commission has indicated it is prepared to approve the Sprint and T-Mobile merger.

Reporting by Angela Moon and Sheila Dang in New York; additional reporting by David Shepardson and Diane Bartz in Washington; editing by Chris Sanders and Leslie Adler

CNBC: Justice Dept. Gives T-Mobile/Sprint Merger One Week to Settle Issues

WASHINGTON (Reuters) – The U.S. Justice Department would sue to block the merger of T-Mobile US Inc and Sprint Corp if the parties do not settle next week, CNBC reported on Thursday, citing sources.

T-Mobile and Sprint did not immediately respond to Reuters requests for comment. The Justice Department declined to comment.

In June, a group of U.S. state attorneys general filed suit to block the merger, arguing that the deal would cost consumers more than $4.5 billion annually.

To win over the Justice Department, which is not involved in the lawsuit, T-Mobile and Sprint have agreed to a series of deal concessions, including selling the prepaid brand Boost.

The companies have been in talks for weeks to sell Boost to Dish Network Corp but are haggling over issues such as restrictions over who can buy the divested assets if they are sold in the future, with T-Mobile and Deutsche Telekom seeking to prevent them from going to a cable or technology company.

T-Mobile is about 63% owned by Deutsche Telekom and Sprint is controlled by Softbank Group Corp.

The companies told the court in late June that they were willing to refrain from closing the deal until after the state attorneys general case is completed.

The two companies have a July 29 deadline to complete the deal but are expected to extend it.

Federal Communications Commission chairman Ajit Pai has given his blessing to the merger in principle and is expected to circulate a formal order within weeks.

Reporting by David Shepardson and Diane Bartz in Washington and Akanksha Rana in Bengaluru; Editing by Sonya

CNBC’s David Faber reports the biggest stumbling block in the merger is a fear Dish might sell its wireless service to a cable company. T-Mobile wants contract language restricting that possibility. (5:13)

 

FCC Opens Probe Into Sinclair Disclosures on Failed Tribune Deal; Questions Sinclair’s Candor

WASHINGTON (Reuters) – The Federal Communications Commission has opened a new investigation into whether Sinclair Broadcast Group Inc engaged in misrepresentations or a lack of candor in its failed effort to win approval for a $3.9 billion bid to purchase Tribune Media Co.

In a June 25 letter to Sinclair posted Wednesday on the FCC’s website, the government agency directed Sinclair to answer a series of questions and provide documents by July 9, warning that “failing to respond accurately and completely to this (letter) constitutes a violation of the act and our rules.”

Sinclair did not immediately respond to a Reuters request for comment.

An administrative judge in March dropped a hearing into allegations that Sinclair, the largest U.S. broadcast station owner, may have misled regulators. Judge Jane Halprin added however that the allegations “are extremely serious charges that reasonably warrant a thorough examination.”

Tribune terminated the sale of 42 TV stations in 33 markets to Sinclair, which has 192 stations, in August. A month earlier the FCC referred the deal for a hearing, questioning Sinclair’s candor over the planned sale of some stations and suggesting Sinclair would effectively retain control over them.

The collapse of the deal, which was backed by U.S. President Donald Trump, potentially ended Sinclair’s hopes of building a national conservative-leaning TV powerhouse that might have rivaled Twenty-First Century Fox Inc’s Fox News.

Sinclair in March said it continues “to maintain that we were completely candid, transparent and honest with the FCC during its review of our proposed acquisition of Tribune Media.”

Andrew Schwartzman, a law professor at Georgetown University, said the FCC could have waited to address the issues when Sinclair’s licenses were up for renewal, but said the inquiry was “inevitable” given the FCC’s prior findings.

After the deal collapsed, the FCC’s Enforcement Bureau said it did not oppose dismissal of the hearing proceeding.

Part of a letter sent by the FCC to Sinclair Broadcasting.

Nexstar Media Group Inc said in December it will buy Tribune in a $4.1 billion deal that would make it the largest regional U.S. TV station operator. The deal is still under review by the Justice Department and the FCC.

Democrats accused Sinclair of slanting news coverage in favor of Republicans. Trump last year criticized the Republican-led FCC for not approving the Tribune deal, saying on Twitter it “would have been a great and much needed Conservative voice for and of the People.”

In 2017, the FCC said it was fining Sinclair $13.38 million after it failed to properly disclose that paid programming that aired on local TV stations was sponsored by a cancer institute.

In the latest inquiry, Sinclair could face new fines.

In May, Walt Disney Co said it would sell its interests in 21 regional sports networks and Fox College Sports to Sinclair for $9.6 billion.

Reporting by David Shepardson; Editing by Stephen Coates

T-Mobile Prepares for Boost Auction if Dish Network Talks Stall

(Reuters) – T-Mobile US Inc is preparing an alternative plan if a deal to sell wireless assets to Dish Network Corp falls through, according to two sources familiar with the matter.

Investment bank Goldman Sachs Group Inc., which is advising T-Mobile, the third largest U.S. wireless carrier, on selling prepaid brand Boost Mobile as part of the company’s concession to gain regulatory approval to buy Sprint Corp, is expected to send out books to prospective buyers in two weeks, one source familiar with the matter said.

While satellite television provider Dish Network remains the front-runner to acquire the Boost assets, Goldman has told prospective buyers as late as Tuesday that it is preparing for an upcoming auction of Boost.

Another source characterized the process being run by Goldman as moving slowly. Among the details holding up an auction is that Goldman is not yet clear what exactly is up for sale from the merger, one source said.

T-Mobile and Sprint did not immediately respond to requests for comment. Goldman Sachs declined to comment.

T-Mobile and Sprint have agreed to a series of deal concessions, including to sell Boost, to gain regulatory approval for the $26.5 billion merger with Sprint, but still needs the green light from the U.S. Department of Justice antitrust chief, though his staff have recommended the agency block the deal.

A source close to the discussions said T-Mobile was hopeful it would reach an agreement with the Justice Department by early next week.

The Boost assets have stirred up interest from a variety of parties, including Amazon.com and cable companies Comcast, Charter Communications, and Altice USA, according to sources.

T-Mobile and Sprint are still negotiating possible additional concessions with the Department of Justice, and Goldman Sachs is waiting for the details of the agreement before working on the terms that will be sent out to bidders, one source said.

Two potential bidders told Reuters on the condition of anonymity that they are still in the dark about critical information related to the Boost sale, such as how the Boost wireless deal with T-Mobile will be structured, or financial details about the Boost customers, which the bidders will use to determine the prepaid brand’s valuation.

Dish is also speaking with other parties on potential partnerships with Boost, sources said.

T-Mobile has agreed to negotiate a contract with Boost’s buyer that will allow the spun-off company to run on the combined T-Mobile and Sprint network, according to a regulatory filing that outlined the merger concessions. But the carriers are currently debating whether to provide the buyer an infrastructure-based mobile virtual network operator deal, which would allow the buyer more control over the wireless plans, including control of the user’s SIM card, one source said.

That could help convince the Department of Justice to approve the merger, which has held discussions on how to preserve competition in the wireless industry.

Cable provider Altice is one of the few so-called MVNO partners to have this type of wireless agreement, which it currently has with Sprint. An infrastructure-based MVNO is generally seen as more favorable than a standard deal that allows wireless providers that do not own and operate their own network to piggyback off of one of the four major wireless carriers for wholesale prices.

Other concessions being discussed include whether T-Mobile and Sprint will divest wireless spectrum, or the airwaves that carry data, and the possibility of giving up more retail customers or retail shops from either T-Mobile or Sprint’s prepaid brands, according to one source familiar with the matter.

Reporting by Sheila Dang and Angela Moon in New York and Diane Bartz in Washington; Editing by Kenneth Li and Lisa Shumaker

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