The company best known for the 10 daily newspapers it publishes, including the Chicago Tribune, the Orlando Sentinel, the Baltimore Sun, and the Los Angeles Times, can’t wait to get out of the newspaper business.

Last December, the Tribune Company, the second largest newspaper publisher in the country, emerged from bankruptcy without its $13 billion debt and old owners. Now in charge: the same Wall Street banks that lent the company billions to go private. Two months after assuming control, Tribune’s new owners hired Evercore Partners and J.P. Morgan to oversee the dumping of Tribune’s newspaper portfolio.

Founded in 1847 with the launch of the Chicago Tribune, 166 years later the Tribune Company was finished with print news, probably for good.

Investment bank and now owner

Today’s Tribune, controlled by Oaktree Capital Management, best known for investing in “distressed” companies, JPMorgan Chase, a Wall Street investment firm, and Angelo, Gordon & Co., a hedge fund sponsor best known for helping the U.S. government deal with the toxic assets accumulated by banks that helped trigger The Great Recession, want into the television business instead.

Tribune, which already owned 23 local television stations including flagship WGN in Chicago, bought another 19 Monday in a deal estimated to be worth at least $2.7 billion.

The stations were acquired from Local TV Holdings, itself owned and controlled by Wall Street investment firm Oak Hill Capital Partners, founded by Texas oil billionaire Robert Bass. Oak Hill acquired the television outlets from The New York Times and News Corp., in two prior deals. Tribune won’t pay for the stations outright. It is financing the deal with a $4.1 billion credit line granted by banks including JPMorgan Chase and Citigroup.

The stations involved:

Assuming the deal meets the approval of the Federal Communications Commission, Tribune will control 42 stations in 16 markets, including New York, Los Angeles, and Miami.

It expects to pay off the loans and generate returns from the “significant free cash flow” generated by the stations.

Where will that cash flow originate? From pay television subscribers asked to pay a growing amount each year for the formerly “free TV” stations.

“Smaller players feel like they’re losing their way with pay-TV providers and broadcast networks,” Craig Huber, analyst at Huber Research Partners, told USA Today. “They feel like they’re at a disadvantage here unless they size up.”

As cable programming rates continue to increase and subscribers threaten to cut the cord, pay television providers have been more willing to play hardball and kick stations off the cable or satellite dial when they cannot reach a retransmission consent agreement.

With up to 90 percent of a station’s viewership coming from pay television platforms, a lengthy standoff can destroy a station’s primary source of income: advertising revenue.

To protect themselves, television station owners are retaliating by threatening providers with the loss of all of their stations across the country, not just one or two. The resulting subscriber uproar could prove politically difficult and threaten customer relationships with providers. The more stations a company controls, the bigger the threat it can pose to Comcast, DirecTV, AT&T and other national providers.

Tribune is not alone bulking up the number of stations they own and control. Last month Gannett nearly doubled its portfolio from 23 to 43 stations with the acquisition of Belo’s TV stations for $1.5 billion in cash and agreeing to cover $715 million in accumulated debt.

Sinclair Broadcast Group, already the largest local TV station owner in the country, has gotten even larger with the purchase of four TV stations owned by Titan TV Broadcast Group. If the deal is approved, Sinclair will own 140 stations in 72 markets. In some cities, Sinclair will nominally own or control up to five local stations.

Sinclair management is well-known for injecting conservative political viewpoints into local newscasts and programming decisions. In 2004, two weeks before the presidential election, Sinclair ordered all of its television stations to air propaganda critical of Democratic candidate John Kerry. Later that year, Sinclair ordered its ABC affiliated stations not to broadcast a “Nightline” episode about soldiers killed in the Iraq war, fearing it would turn the public against the war.

But for most owners, politics has nothing to do with the desire to supersize. It’s a matter of money.

Even smaller station groups are now consolidating. Media General and New Young Broadcasting Holding, are merging their combined 30 stations.

(Image: The Wall Street Journal)

Critics worry the changing landscape of local television will threaten the concept of “local service” stations are required to provide as a condition of their broadcast license. A station owner that lives and works in the community served is becoming an increasing rarity, and the Federal Communications Commission has allowed stations that used to fiercely compete for local news viewers to now “share resources.” Many stations, especially those owned by out of area investment banks, have discontinued local news altogether in cost-savings maneuvers.

“This deal adds to a blizzard of broadcast industry consolidation that is poised to leave America’s media system less local, less diverse and less accountable to the people in these communities,” said Free Press’ Craig Aaron in a statement on the deal. “By the time all these deals are done, a handful of companies could control almost all of the network affiliates in major markets and swing states. Local broadcasts are becoming simulcasts, with the same cookie-cutter content piped in from distant corporate headquarters, once-competitive stations combined into single newsrooms and fewer journalists forced to fill more hours of airtime.”

“The FCC needs to wake up to what’s happening on local TV,” said Aaron. “Wall Street may be overjoyed at this merger mania, but the rest of us should be very worried about having fewer viewpoints on the air and fewer reporters on the beat.”

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Former FCC commissioner Michael Copps shares his concerns about media consolidation 2013.mp4[/flv]

Former FCC commissioner Michael Copps shares his concerns about increasing media consolidation and its impact on an informed electorate. (Aired on Carolina Journal Radio May 23, 2013) (1 minute)

Again with the domination and control thing.

Dr. John Malone is wasting no time reacquainting the cable industry with the kinds of classic power plays he used while running Tele-Communications, Inc. (TCI), then America’s largest and most powerful cable operator. Malone’s latest salvo: proposing new broadband pricing schemes that run afoul of Net Neutrality by charging consumers higher broadband prices if they watch online video services like Netflix.

Malone, increasing his influence over Charter Communications before launching the next wave of cable company consolidation, implied the industry is hurting from the lack of power and dominance it used to enjoy when it had an unfettered, territorial monopoly back in the 1980s. Malone told an audience at the annual shareholder meeting of Liberty Global he advocates getting the industry’s mojo back by returning to “value creation” pricing models — code language for new ways to charge customers higher prices or add-on fees.

Malone sees raising prices for Internet service key to bringing the industry back to the golden profits it used to enjoy selling television subscriptions, even as customers faced massive rate increases that doubled, tripled, or even quintupled rates for certain services.

Malone’s assessment of the eight current largest cable operators wiring the country: Snow White (Comcast) and the Seven Dwarfs (Everyone Else). The disorganized agendas of various cable operators are troublesome to Malone, who wants the industry to act in lock step with a unified, cooperating voice. Consumer groups call this kind of friendly cooperation “collusion.”

Malone also thinks it is time to discard reliance on cable television to bring home the revenue and profits Wall Street expects. The industry should instead turn its earning attention to broadband, a product few Americans can live without. Malone believes the cable industry is not only positioned to control content distributed on its TV Everywhere online video platform for authenticated cable subscribers, but also have a say in competing content from Netflix, among others, which are totally reliant on the broadband pipes provided by ISPs.

With Netflix consuming a growing percentage of cable broadband resources, and possibly contributing to cable TV cord cutting, Malone does not advocate crushing its competition. Instead, he wants a piece of the action. How? By demanding online video providers pay for using cable broadband infrastructure. Consumers also face surcharges on their broadband accounts if they watch online video services like Netflix, Amazon, YouTube and other over-the-top-video. Malone also advocates the implementation of Internet Overcharging schemes like consumption billing and usage caps.

Malone’s “world of the future,” is, in reality, not much different from AT&T’s 2005 proclamation that use of AT&T’s broadband pipes should come at a cost to content producers.

Then-CEO Ed Whitacre’s public statements fueled support for Net Neutrality, which forbids broadband providers from traffic discrimination techniques like charging extra for certain content or artificially degrading service for producers who refuse to pay.

Malone’s incendiary ideas may be letting too much of the cat out of the bag, say some observers worried Malone’s rhetoric will remind people he was once labeled “the Darth Vader of Cable.” His statements could attract unnecessary attention that could be used to organize opposition.

Last week, the Wall Street Journal reported that broadband providers and content producers were already secretly cutting deals to exchange bandwidth for money without the public scrutiny Malone’s comments will generate.

The newspaper reports some of the biggest Net Neutrality proponents around, particularly Google, are quietly paying millions to large cable companies to guarantee their content reaches customers as quickly and smoothly as possible.

Among the top recipients: Comcast, which collects $25-30 million a year and Time Warner Cable, which nets “tens of millions of dollars” from Google, Microsoft, and Facebook.

The payments are buried in the murky world of “interconnection agreements” governing the backbone pipes carrying huge amounts of web traffic from popular websites and those owned by large telecom providers. Originally, content and broadband providers agreed to peering arrangements that would trade traffic without payment to each other. But as bandwidth-heavy online video began to turn those shared connections into lopsided floods of movies and TV shows headed into subscriber homes against a trickle of content coming back from broadband customers, the cable and phone companies began crying foul.

Netflix has so far navigated around paying Internet Service Providers directly to support their video content. Instead, it is building its own specialized content distribution network intended for ISPs to more effectively and efficiently deliver high bandwidth video. Connections to the Netflix network are free of charge to participating providers, but many ISPs are demanding to be paid.

Some content providers are fearful if they don’t pay, the free “peering” links will become hopelessly overcongested and slow web pages and services to a crawl.

For Verizon customers, that may have already happened as Netflix streams began stuttering and buffering earlier this month.

Cogent, which supplies Verizon with a considerable amount of Netflix traffic, immediately pointed the finger at the phone company for artificially degrading the Netflix viewing experience. Verizon promptly shot back:

Cogent is not compliant with one of the basic and long-standing requirements for most settlement-free peering arrangements: that traffic between the providers be roughly in balance. When the traffic loads are not symmetric, the provider with the heavier load typically pays the other for transit. This isn’t a story about Netflix, or about Verizon “letting” anybody’s traffic deteriorate. This is a fairly boring story about a bandwidth provider that is unhappy that they are out of balance and will have to make alternative arrangements for capacity enhancements, just like any other interconnecting ISP.

Cable giants like Malone see the battle as one the cable industry will have a hard time losing, because it is the only technology present in most communities that can handle the traffic and the growing demand for faster speeds.

Cable operators think content companies have a license to print money, especially since their success is built partly on broadband networks they don’t own or pay for delivering content to customers. At the same time, content companies fear they could be forced out of business if the cable industry decides to give itself preferential treatment.

[flv width=”504″ height=”300″]http://www.phillipdampier.com/video/WSJ Paying ISPs to Move Content 6-20-13.flv[/flv]

Reporters from The Wall Street Journal discuss the secret payment arrangements between content producers and some of America’s largest ISPs. (4 minutes)

Time Warner Cable is extending an online promotion to Extreme (30/5Mbps) customers to upgrade to Ultimate (50/5Mbps) service for an extra $10 a month above your current pricing.

But you may want to call Time Warner to take advantage of the promotion because we found the cable company’s website forced the selection of a $4.99/month fee for a “Home WiFi and Internet Modem” you will not need if you own your own equipment.

You must have a DOCSIS 3 cable modem to take advantage of this offer.

The deal can be accessed by logging into Time Warner Cable’s My Services page and selecting “View or Make Changes to My Internet Service.”

Morin

A former third-party contractor for Charter Communications has been sentenced for illegally obtaining a service restoration work order from the cable company and reconnecting service for the customer, pocketing $160 for himself.

Bay County District Judge Dawn A. Klida this week sentenced Randy A. Morin, 31, of Bay City, Mich. to six months probation, $555 in fines, $160 in restitution, and 50 hours of community service for pretending to be a Charter employee and illegally turning cable service back on for a disconnected customer.

Anthony David called the cable company to reconnect cable service in November, and Morin arrived at his door with work order in hand. What David did not know was Morin had not worked on behalf of the Charter since May 2011.

Morin asked for a total of $160 to reinstate Charter service, which David gave him in two separate installments. At the end of November, David’s Internet service was switched off again after Charter claimed his connection was illegal. David’s next call was to police who began an investigation culminating in Morin’s arrest and felony charges.

William J. Morand, communications director for Charter’s Northeast Region, admitted Morin previously worked for M. Kable, a Charter contractor, and that there was no legitimate way the former contractor could have obtained current customer information.

Except he did.

Court records do not show exactly how that happened.

Time Warner Cable’s decision to spend $11 billion to broadcast Los Angeles Lakers and Dodgers games at an estimated cost of $50-60 a year per subscriber is the subject of a class action lawsuit from fed up customers.

The plaintiffs are upset cable subscribers across Southern California will have to cover the cost of the 20-year deal with no option to opt-out of the sports channels because they are bundled into the most popular cable package.

The suit, filed this week in Superior Court alleges at least 60 percent of subscribers have no interest in the sports programming, but will collectively cover $6.6 billion of the deal and never watch a single game.

Time Warner Cable is also accused of forcing AT&T U-verse, Charter Cable, Cox Cable, DirecTV and Verizon FiOS to sign restrictive contracts that compel the companies to include the sports channels on the basic lineup.

Ironically, Time Warner Cable itself regularly complains about the increasing cost of programming and contract terms that force it to bundle expensive sports channels inside the basic tier instead of offering customers optional, added-cost sports programming packages.

Both sports teams are also named as defendants in the suit because they were aware that all subscribers would face rate increases as a result of the deal.

“TWC’s bundling results in Defendants making huge profits, much of which is extracted from unwilling consumers who have no opportunity to delete unwanted telecasts,” the complaint states.

The suit claims there is no legitimate reason Time Warner Cable and the sports teams could not have offered the new networks only to customers that wished to pay for them. The suit wants the bundling of the sports networks stopped and customers given refunds for the higher television bills that resulted.