The headquarters building of U.S. satellite TV operator DirecTV is seen in Los Angeles, California May 18, 2014. REUTERS/Jonathan Alcorn

WASHINGTON (Reuters) – AT&T Inc’s proposed $48.5 billion acquisition of DirecTV is expected to get U.S. regulatory approval as soon as next week, according to people familiar with the matter, a decision that will combine the country’s No. 2 wireless carrier with the largest satellite-TV provider.

The Department of Justice, which assesses whether deals violate antitrust law, has completed its review of the merger and is waiting on the Federal Communications Commission to wrap up its own, according to three people familiar with the matter.

The FCC, which reviews if deals are in public interest, is poised to approve the deal with conditions as early as next week, according to three other people familiar with the matter.

All the sources asked not to be named because they were not authorized to speak with the media. An AT&T spokeswoman and FCC spokesman declined comment. Justice Department representatives were not immediately available for comment.

AT&T’s merger with DirecTV, announced in May 2014, would create the country’s largest pay-TV company, giving DirecTV a broadband product and AT&T new avenues of growth beyond the maturing and increasingly competitive wireless service.

The deal has been expected to pass regulatory muster in contrast with the rival mega-merger between cable and Internet providers Comcast and Time Warner Cable, which was rejected in April largely over the combined companies’ reach into the broadband market.

The FCC and AT&T have been in negotiations over conditions for the merger for several weeks, the people said, adding that none of the conditions are controversial enough to break the deal.

Those conditions are expected to include assurances that both middle-class and low-income Americans have access to affordable high-speed Internet, including an offering of broadband subscriptions as a standalone service without a TV bundle, according to two of the people.

AT&T has earlier committed to expand access to broadband service in rural areas and to offer standalone Internet service at speeds of at least 6 Megabits per second to ensure consumers can access rival video services online, such as Netflix.

FCC officials are also considering ways to ensure that the conditions are properly enforced in the future, possibly through a third-party monitor, according to the two sources.

The FCC is also weighing how to ensure the merged companies abide by the so-called net neutrality rules, which regulate how Internet service providers manage traffic on their networks.

AT&T has promised to abide by net neutrality principles such as no-blocking of traffic, but is challenging in court the FCC’s newest net neutrality regulations that have expanded the agency’s authority over various deals between Internet providers and content companies.

FCC reviewers are weighing what net neutrality-related conditions to apply to the merger and how to address the possibility that the court throws out the latest rules, the two sources said.

Reported by: Alina Selyukh and Diane Bartz

Charter Communications last week filed its 362 page redacted Public Interest Statement laying out its case to win approval of its acquisition of Time Warner Cable and Bright House Networks, to be run under the Charter banner.

“Charter may not be a household name for all Americans, but it has developed into an industry leader by implementing customer and Internet-friendly business practices,” its statement reads.

The sprawling document is effectively a sales pitch to federal regulators to accept Charter’s contention the merger is in the public interest, and the company promises a range of voluntary and committed service upgrades it says will improve the customer experience for those becoming a part of what will be America’s second largest cable operator.

Charter’s proposed upgrades fall under several categories of direct interest to consumers:

Broadband: Charter will commit to upgrade customers to 60Mbps broadband within 30 months (about 2.5 years) after the deal is approved. That could mean some Time Warner Cable customers will still be serviced with standard speeds of 15Mbps as late as 2018. Time Warner Cable’s Maxx upgrade program will be effectively frozen in place and will continue in only those areas “consistent with Time Warner Cable’s existing deployment plans.” That will leave out a large sections of the country not on the upgrade list. Charter has committed to impose no data caps, usage-based pricing or modem fees, but only for three years, after which it will be free to change those policies at will.

Wi-Fi: Charter promises to build on Time Warner’s 100,000 Wi-Fi hotspots, most in just a few cities, and Bright House’s denser network of 45,000 hotspots with a commitment to build at least 300,000 new hotspots across Charter’s expanded service area within four years. Charter will also evaluate deploying cable modems that also act as public Wi-Fi hotspots. Comcast already offers over 500,000 hotspots with plans for many more, making Charter’s wireless commitment less ambitious than what Comcast today offers customers.

Cable-TV: Charter has committed to moving all Time Warner and Bright House systems to all-digital service within 30 months. Customers will need to lease set-top boxes designed to handle Charter’s encryption system for all cable connected televisions. Among those boxes includes Charter’s new, IP-capable Worldbox CPE and cloud-based Spectrum Guide user interface system.

Video on the Go: Charter will adopt Time Warner Cable’s streaming platform and apps to provide 300 streaming television channels to customers watching from inside their homes (a small fraction of those channels are available while outside of the home). Customers will not be able to watch on-demand recorded DVR shows from portable devices, but can program their DVRs from apps or the website.

Discount Internet for the Poor: Charter references the fact its minimum entry-level broadband speed is 60Mbps so that does not bode well for Time Warner Cable’s Everyday Low Priced Internet $14.99 slow-speed Internet plan. Instead Charter will build upon Bright House Networks’ mysterious broadband program for low-income consumers.

Based on Charter’s initial proposal, Stop the Cap! will urge state and federal regulators to require changes of these terms before approving any merger. Among them:

1. All existing Time Warner Cable and Bright House service areas should be upgraded to meet or exceed the levels of service offered by Time Warner Cable’s Maxx program within 30 months. It is not acceptable to upgrade some customers while others are left with a much more modest upgrade program proposed by Charter;
2. Charter must commit to Net Neutrality principles without an expiration date;
3. Regardless of any usage-cap or usage-based pricing plans Charter may introduce after its three-year “no caps” commitment expires, Charter must permanently continue to offer unlimited, flat rate Internet service at a reasonable price as an alternative to usage-priced plans;
4. Customers must be given the option of opting out of any leased/provided-modem Wi-Fi hotspot plan that offers a wireless connection to outside users without the customer’s consent;
5. Charter must commit to a more specific Wi-Fi hotspot program that details towns and cities to be serviced and proposed pricing for non-customers;
6. Charter must allow customers to use their own set-top equipment (eg. Roku, Apple TV, etc.) to receive cable television service without compulsory equipment/rental fees. The company must also commit to offering discount alternatives such as DTAs for secondary televisions and provide an option for income-challenged customers compelled to accept new equipment to continue receiving cable television service;
7. Charter must retain Time Warner Cable’s Everyday Low Priced $14.99 Internet plan regardless of any other low-income discount program it offers. If it chooses to adopt Bright House’s program, it must broaden it to accept applications year-round, simplify the application process and eliminate any waiting periods;
8. Charter must commit to independent verification of customer quality and service standards and adhere to any regulatory guidelines imposed by state or federal regulators as a condition of approval.
9. Charter must commit to expansion of its cable network into a reasonable number of adjacent, unserved areas by committing a significant percentage (to be determined) of measurable financial benefits of the merger to the company or its executives towards this effort.

Stop the Cap! will closely monitor the proceedings and intends to participate on both the state (New York) and federal level to guarantee any merger provides consumers with an equitable share of the benefits. We will also be examining the impact of the merger on existing Time Warner Cable and Bright House employees and will promote merger conditions that protect jobs and limit outsourcing, especially overseas.

One of Kansas’ fastest and most innovative gigabit fiber broadband projects will be built in a community originally bypassed by AT&T.

Earlier this month the Frontenac City Council approved Craw-Kan Telephone Cooperative’s plan to build a fiber optic network in the city that will sell 1,000Mbps service for $70 a month.

“It’s just superior to anything out there,” said Craig Wilbert, general manager of Craw-Kan. “We’ve been doing fiber for several years. We have well over 2,000 customers, and I think we just finally asked ourselves why are we restricting the use of this fiber optic cable when it can do so much more than what most people are receiving?”

Craw-Kan Telephone Cooperative Association, Inc., began in March 1954 serving 14 subscribers in southeastern Kansas, very close to the borders of both Missouri and Oklahoma. After a series of acquisitions, the cooperative grew to more than 24 community exchanges, all bringing direct dialing to customers starting in the mid-1950s with plans to bring gigabit fiber to customers in the mid-2015s.

Construction of the network starts this summer with a completion date of next year.

Brazil’s plans to bring at least 25Mbps fiber broadband to 45 percent of Brazilian households by 2018 are on hold after private providers balked about spending the money.

The Ministry of Communications’ ambitious Broadband for All program is a public-private partnership. Public broadband expansion funding would be matched by generous tax credits to encourage private matching investments to improve Brazil’s telecommunications infrastructure. Telephone customers already pay a tax on their telecom bills to fund Brazil’s version of the Universal Service Fund, which helps subsidize expenses in high cost service areas.

The plan derailed after investment markets saw little opportunity for big profits from a fiber upgrade. Brazil’s president Dilma Vana Rousseff embarrassed her Minister of Communications Ricardo Berzoini, who had already publicly announced plans to get the upgrades started last month.

A source close to the president told Reuters the government has sided with commercial providers and is slowing the project down for now.

“We have to adjust the timing of investments to adapt to the appetite of the market and public finances,” said the source, who spoke on condition of anonymity.

A less ambitious expansion program is tentatively scheduled to start in mid-October, but is only likely to incrementally improve broadband in larger cities.

At least one company balked about poor revenue and profit opportunities serving economically challenged regions in Brazil. It argued the population lacked enough income to pay the prices they intended to charge for fiber service.

Community and broadband activists complain critics have demagogued the effort from the beginning with stories of wiring fiber across vast expanses of the Amazon Rain Forest that would ultimately serve few, if any customers. After years of sub-standard service, many believe broadband should be provided and regulated like an essential utility. Currently, only landline-based broadband is regulated in the public interest.

For the consumer protection agency PROTEST, fast broadband is essential to society and where private providers have dropped the ball, the Brazilian government should pick it up and build broadband networks itself, using the proceeds of the Universal Service Fund.

“This deference to big telecom companies to decide Brazil’s online future is a huge mistake,” complained Carlos Filho, an Internet user in Cuiabá, the capital city of the state of Moto Grosso. “I cannot even get 1Mbps DSL in my downtown apartment. You have to use wireless, which is very expensive, to get anything done. The government should be building broadband like it builds roads.”

This afternoon, officials from the Ministry of Communications will meet with Russian Deputy Communications Minister Rashid Ismailov in St. Petersburg to seek Russian investment in Brazil’s wireless and rural broadband ventures.

Truth or Consequences: Does privatizing a government-owned telephone company encourage innovation and efficiency or serve to enrich a handful of executives and shareholders at the cost of customer service? Two essentially equal telephone companies serving the Canadian prairie provinces offer some useful insights.

The provinces of Manitoba and Saskatchewan are remarkably similar in their landscape and their sparse populations — 1.29 million in Manitoba and 1.13 million in Saskatchewan. Today, most are concentrated in or near a few large cities with many small agricultural towns scattered across great distances.

At the dawn of the 1900s, the “Sunny way” of Prime Minister Sir Henri Charles Wilfrid Laurier and his Liberal party was to push open the western frontiers and lay new railways across Canada. Part of the zeal for expansion came from a sense of growth and optimism, but there were also pervasive fears that without significant settlements in central Canada, the Americans could end up annexing huge swaths of empty Canadian agricultural lands for its own interests.

To prevent this and enhance its own national identity, Canada threw its doors open to immigration, especially to hard-working Americans from the midwest who were inundated with government-sponsored advertisements about a new life and opportunities that waited in the Canadian prairies.

The campaign worked. Between 1901 and 1906, the population of Saskatchewan surged from 91,279 to 257,763, 86.8% settled in rural farming areas. By 1911, the population almost doubled again to 492,432 with over 80% located away from the cities of Regina and Saskatoon. Next door in Manitoba, many new residents preferred areas south of Winnipeg, closer to the American border.

Serving this population boom depended heavily on Canadian railroads, which delivered settlers and laborers, medicine, farming equipment, and the latest news from Ottawa. The trains returned east with part of the harvest and various meats.

It was no surprise Canada’s telecommunications infrastructure (along with more than a few new towns) would grow up along its railway lines.

With Bell Canada preoccupied with its larger client base in Ontario and Quebec, both the governments of Manitoba and Saskatchewan established provincial, publicly owned, phone companies to take control of their telecommunications future. In 1908, the Manitoba Telephone System (MTS) was born, made up mostly of former Bell customers. In 1909, SaskTel was established as a publicly owned operation as well, again comprising former Bell customers in the province. Both MTS and SaskTel quickly bought out all the remaining private telephone companies still operating in their midst.

The Winnipeg Free Press notes both MTS and SaskTel successfully served their respective customers for nearly 90 years. In 1997, Manitoba’s Progressive Conservative premier Gary Filmon broke his pledge to keep hands off MTS and privatized the company, claiming it would be more innovative in private hands.

That move would not be repeated in Saskatchewan, where every political party in office usually treated SaskTel as sacrosanct to the province’s economic development. Even the conservative Saskatchewan Party, which held power in the province from 1982-1991, never got around to privatizing the phone company, and a pledge to privatize crown corporations in the near future was just one of several issues that led to the party’s downfall in the election of 1991.

For the last 18 years, Canadians have been able to see which province made the wisest choice. The newspaper concluded after nearly two decades, there is strong evidence MTS’ main priorities are to satisfy shareholders and commercial business customers, while rewarding their executives with handsome pay packages.

“Meanwhile, SaskTel appears to focus on customer service and satisfaction, being a good employer and on providing returns to their public shareholder: the people of Saskatchewan,” the Winnipeg Free Press concluded.

Evidence of SaskTel’s service ethic could be found last week when SaskTel was acknowledged as western Canada’s most dependable wireless carrier, according to a new study by market researcher J.D. Power.

“SaskTel ranks highest in overall network quality and performs particularly well in call quality, messaging quality and data quality,” J.D. Power said in its report.

SaskTel has never been reserved about its own accomplishments, particularly its success delivering innovative new services to sparsely populated regions across Saskatchewan:

• SaskTel was the first telecommunications company in Canada to complete its rural individual line service program, eliminating all party lines in 1990;
• SaskTel was at the forefront of Internet provision as the first in Canada to remove the long distance charges on dial-up Internet and the first in North America to offer high-speed service on phone lines through DSL technology;
• SaskTel was among the first commercial users of fiber-optics in the world, today offering customers competitive cable television, broadband, and phone service.

Filmon

MTS has not turned out to be the innovator it was promised to be as a private company. While SaskTel was becoming a world leader in converged fiber optic networks, supplying voice, data and video across a strand of fiber, MTS was raising rates on landline customers.

Today, a basic landline in Saskatchewan costs around $8 a month — 27% less than the cheapest MTS home phone service. Everything at MTS usually costs more, which has turned out very well for shareholders and executives. While MTS earns roughly double the profit of SaskTel, almost all goes to major shareholders and top executives. SaskTel has returned $497 million over the last five years to the provincial government as well as customers through an annual dividend payment. Over in Manitoba, MTS has proved to be innovative in avoiding its tax bill — only paying corporate taxes once in 10 years — and that was just $1.2 million in 2010. Creative accounting at MTS has allowed the profitable company to pay “a big fat zero in federal and provincial corporate income taxes,” according to the newspaper, and MTS does not expect to owe a penny in income taxes until 2020 at the earliest.

So where do MTS profits go? Last year, MTS former CEO Pierre Blouin received $7.8 million in compensation, well above his five-year average of $4.8 million. Blouin’s salary was more than 10 times higher than what SaskTel’s CEO receives annually.

The newspaper adds MTS directors are paid more than 10 times what SaskTel’s directors are paid. But even more disturbing, the man who made the Money Party possible for MTS — former premier Gary Filmon — had a cozy, well-compensated home waiting for him on the MTS board after he lost his re-election bid. He has used his time at MTS to feather his own nest with more than $1.4 million in director fees and compensation over 10 years, along with hundreds of thousands of dollars worth of shares.

“None of this is meant to suggest SaskTel is an ideal company, but it appears abundantly clear this publicly owned and operated company provides better service at lower costs to its customers than the privatized MTS, and it also provides much larger benefits to the people of the province from its profits,” writes economist Toby Sanger. “Despite all this, the Saskatchewan government may be laying the groundwork for privatization of SaskTel. If this is what we can expect from the privatizations of other public utilities — higher fees for the public, lower-quality service, much higher compensation for CEOs and executives, higher corporate profits but much lower returns for the provinces — we can see why Bay Street [Canada’s Wall Street] is so excited about the privatization of Hydro One — and why the people of Ontario should be very worried.”