Central Oregon’s independent cable television and broadband company — BendBroadband — has been sold to Telephone and Data Systems (TDS), a Chicago-based telephone company in a deal worth $261 million.

TDS, which also owns southwestern U.S. Baja Broadband and 84 percent of US Cellular, promises nothing will change for the company’s 36,000 cable TV, 41,000 Internet, and 22,000 phone customers “for the foreseeable future.” The company also said it plans to keep BendBroadband’s name and 280 employees.

BendBroadband has provided cable television service in Bend, Redmond, Sunriver, Prineville, Madras, and Sisters as far back as 1955, when it imported long distance KOIN (the CBS affiliate out of Portland), KLOR (Portland’s ABC affiliate), and KVAL-TV (Eugene’s NBC affiliate) for the benefit of viewers that could not receive broadcast television station signals from western Oregon blocked by the Cascade Range — high mountains that separated cities like Portland from Bend.

“While BendBroadband has made many smart investments, it is clear that we will need to join forces with a like-minded company to gain the scale necessary to provide the cutting-edge technology and personalized customer experiences that consumers expect,” BendBroadband’s website says.

The company also felt the cable industry was entering a new era of consolidation, necessitating a sale to improve negotiating power with television networks over programming costs.

AT&T has approached DirecTV about a possible acquisition of the satellite provider in a deal expected to fetch at least $40 billion, spare change for AT&T’s $185 billion operation.

The Wall Street Journal reports the deal would combine DirecTV’s 20 million customers with AT&T’s 5.7 million U-verse customers, rivaling the size of a combined Comcast and Time Warner Cable.

The idea for the merger came after Comcast and Time Warner Cable struck their deal in February, and a person familiar with the merger talks reports DirecTV is receptive to a deal with AT&T. AT&T CEO Randall Stephenson reportedly saw the next wave of consolidation in the American cable market as a potential game-changer, forcing AT&T to refocus its growth priorities back towards the United States instead of Europe.

Satellite companies like Dish and DirecTV are at an increasing disadvantage because growth in television subscriptions has stalled. Neither satellite company has a competitive broadband offering, and as more Americans gain access to wired broadband, many choose to bundle service with the company that provides Internet access.

DirecTV’s growth has fallen every year since 2010 and starting in 2013, the company began losing more subscribers than it signed up.

A combined AT&T-DirecTV would market satellite television nationwide, U-verse TV and Internet where available, wireless phone and broadband service, and rural satellite Internet access.

AT&T has explored an acquisition of a satellite provider for more than a decade and already partners with DirecTV to sell AT&T landline customers a bundle including the satellite provider’s television service.

As with most significant acquisitions proposed by AT&T, the Justice Department and the Federal Communications Commission will likely scrutinize any merger deal carefully. Both companies must prove the deal is in the public interest. But the Journal reports the FCC might be amenable to the deal because it considers satellite television without broadband a threatened business. Lobbyists are likely to argue the joint company would be the best positioned to compete effectively with a combined Comcast-Time Warner Cable.

If a deal appears likely, Dish Network is expected to face immediate pressure to also merge with an existing cable or telephone company.

Another alternative attempted in the past was a direct merger between DirecTV and Dish, an idea regulators nixed more than a decade ago. Today, such a deal would not solve either company’s difficulty providing broadband service.

Consumer groups are likely to oppose the merger because it further consolidates an industry they believe already sorely lacks competition. AT&T’s lawyers are reportedly already laying the foundation for a major lobbying campaign to promote the deal.

[flv]http://www.phillipdampier.com/video/WSJ ATT Approaches DirecTV for Merger 5-1-14.flv[/flv]

The Wall Street Journal provides more insight into the proposed merger of AT&T and DirecTV and how government regulators are likely to see the deal. (2:51)

Bigger is not better. Despite endless claims that mergers, acquisitions and consolidation brings operating efficiencies and cost savings, for most customers it means only one thing: a higher cable bill. The Wall Street Journal traced the ancestors of some of today’s largest cable operators, cobbled together in takeovers, buyouts, and in the case of Adelphia, criminal activity leading to bankruptcy and absorption by Comcast and Time Warner Cable .

Wall Street analysts are pondering what deals are coming next, with Cablevision, Suddenlink, Mediacom, and Cable ONE all top targets. Among the current players, Charter is by far the most aggressive buyer and will likely be in the market for some or all of those smaller cable systems soon enough. Just remember, someone has to pay for those blockbuster merger deals, debt financing and executive bonuses.

Anyone in their 40s probably can recall companies like Jones, TCI, Falcon, Prime and Media General. They are all long gone, much the same way Bell Atlantic, SBC, Pacific Bell, BellSouth, and Ameritech have been absorbed into the AT&T and Verizon Continuum.

Cincinnati Bell threw in the towel on its wireless mobile business Monday when it decided to sell its wireless spectrum licenses, network, and 340,000 customers for $210 million to its larger rival Verizon Wireless.

While most analysts say the transaction is the inevitable outcome of a wireless industry now dedicated to consolidation, at least one analyst said the threat of Google Fiber eventually entering the Cincinnati market may have also contributed to the decision to sell.

The future of Cincinnati Bell’s wireless division had been questioned for more than a year, ever since the arrival of the company’s newest CEO Ted Torbeck in January 2013. Cincinnati Bell, one of the last independent holdouts of the Bell System breakup that have not been reabsorbed by AT&T or Verizon, had struggled since Torbeck’s predecessor made some bad bets on acquisitions, including an investment in microwave communications provider Broadwing that left the company with more than $2 billion in debt in 2004. Another $526 million acquisition of data center Cyrus One left the company further in debt.

Torbeck

Torbeck promised a frank evaluation of Cincinnati Bell’s operations last year and keeping its declining wireless division no longer made sense with Torbeck’s focus on replacing the company’s aging copper wire network with fiber optics.

For years, Cincinnati Bell’s biggest competitor has been Time Warner Cable, which has taken away many of its landline customers. Cincinnati Bell’s mobile phone division was created to protect its core business, picking up wireless subscribers as customers dropped their landlines. But the cable company’s bundled service packages made landline service much less expensive than sticking with the phone company, and many wireless customers prefer a national wireless phone company offering better coverage and a wider selection of devices.

Rampant wireless industry consolidation has concentrated most of the cell phone market in the hands of AT&T and Verizon Wireless, giving those two companies access to the most advanced and hottest devices while regional carriers made do offering customers less capable smartphones. Its competitors’ march towards 4G LTE network upgrades also challenged Cincinnati Bell with costly capital investments in a 4G HSPA+ network that Torbeck recently decided no longer made economic sense.

Cincinnati Bell’s wireless revenue for 2013 was $202 million, a decrease of 17 percent from 2012. The company also lost 58,000 subscribers last year, an unsustainable drop that showed few signs of stopping.

“Our business has been in decline for five or six years,” Torbeck told the Cincinnati Business Courier. “This is absolutely the right time to make this deal. It was probably the highest value we could get at this point in time.”

Torbeck believes Cincinnati Bell’s best chance for a future lies with with fiber optics, capable of delivering phone service along with a robust broadband and television offering that can effectively compete with Time Warner Cable.

“We’ve got to grow market share in Cincinnati and fiber optics is the way to do it,” Torbeck said in 2013. “We have about 25 percent of the city covered and we think from a financial perspective we can get to 65 or 70 percent so we’ve got significant growth opportunity there.”

Last year, Cincinnati Bell had passed 184,000 homes with fiber optics – a 28 percent market share. But only 52,000 homes subscribed to Fioptics — Cincinnati Bell’s fiber brand. Time Warner Cable had managed to keep many of its wavering 446,000 customers loyal to the cable company with aggressive discounting and customer retention offers. But now that many of those discounts have since expired, Torbeck wants to reach 650,000-700,000 homes in its service area covering southwestern Ohio and northern Kentucky and convince 50% of those customers to switch to fiber optics.

Torbeck isn’t interested in limiting his business to just greater Cincinnati either.

“At some point in time, we’d like to expand regionally into Indianapolis, Columbus,” Torbeck said. “Louisville is another opportunity. But that’s probably a little down the road. From a fiber standpoint, we could look at acquisitions and get into metro fiber. These are things we’re looking at, but these are things that are down the road. We got a lot of room for growth just here in Cincinnati.”

But financial analysts warned Cincinnati Bell’s enormous debt load limits the company’s potential to invest in expansion. Torbeck’s decision to sell off the company’s wireless unit is another step in reducing that debt and further investing in fiber optics expansion.

The company’s unique position as the last remaining independent phone company that still bears the name of the telephone’s inventor may make the company a target for a takeover before Torbeck’s vision is realized. One analyst thinks Cincinnati Bell would be a natural target for Google, which has a recent record of repurposing fiber networks built by other companies as a cost-saving measure to further deploy Google Fiber.

“They are a small and cheap company with the infrastructure that Google could use,” said Brian Nichols. “My theory is that Google will buy undervalued companies like Cincy Bell to save on the mounting costs of buildouts, which could top $30 billion,“ Nichols wrote in an email to WCPO-TV.

Google did exactly that in Provo, Utah, acquiring struggling iProvo from the city government for $1 in return for agreeing to expand the fiber network to more homes.

Cincinnati’s local phone company would sell for considerably more than that, but it would still prove affordable for Google, which has a market value of $361 billion, about 470 times that of Cincinnati Bell.

Cincinnati Bell has already spent about $300 million on Fioptics and plans to spend an extra $80 million this year on expansion. Before the network is complete, the phone company is likely to spend as much as $600 million on fiber upgrades. But the payoff has been higher revenue — $100 million last year alone, and a stabilizing business model that has reduced losses from landline cord-cutting. Telecom analyst Nicholas Puncer offers support for the investment, something rare for most Wall Street advisers.

“It’s a reasonable strategy,” Puncer said. “There’s only going to be more data going through networks in the future, not less. The way we consume content is going to be a lot different 10 years from now than it is today. This is their effort to be on the right side of that, giving people more options to receive that content.”

But if Google Fiber comes to town, it may not be enough.

“Google has an unprecedented luxury,” Nichols said in his email to WCPO. “They are [attaching] fiber to existing poles owned by AT&T (and other telecom companies), and then targeting areas where consumers agree for service before the network is even built. Given this demand, and its mere ability to operate in such a manner, I do think Cincinnati Bell will have major problems once that day comes (likely sooner rather than later). In fact, I don’t think they stand a chance of competing against Google.”

Cincinnati Bell said it will continue to offer wireless service for customers for the next 8 to 12 months. The company will notify customers with further details regarding transition assistance around the time of the closing, which is expected to be in the second half of 2014.

It was not immediately clear on Monday if the sale will impact jobs. Cincinnati Bell Wireless employs about 175 people, including retail store employees.

[flv]http://www.phillipdampier.com/video/WKRC Cincinnati Cincinnati Bell selling wireless spectrum to Verizon 4-8-14.flv[/flv]

WKRC in Cincinnati reports on what the sale of Cincinnati Bell Wireless to Verizon Wireless means for customers. (1:24)

WHAM and WUHF are now both located at WHAM’s facilities in suburban Rochester, N.Y. WHAM now produces WUHF’s newscasts.

Ever wonder why some local television stations air newscasts produced by another competing station?

When your local ABC station’s evening news ends up on a local FOX station, it is usually because the two have signed a joint agreement to let one station represent the other in making programming decisions and selling advertising.

FCC chairman Thomas Wheeler believes this growing trend represents an end run around the agency’s rules limiting how much control a single major media company may have in any particular community. On Monday Wheeler joined two Democratic commissioners and voted to ban the practice.

Wheeler said the vote against joint agreements represented “a win for common sense,” and preserved the FCC’s intent to make sure viewers have a diverse mix of news, information and programming. In several small and medium cities, viewers were instead getting the same newscast on competing stations and just one or two media companies made all the programming decisions for local viewers.

FCC media ownership rules prevent TV station owners from owning stations reaching more than 39 percent of the national TV audience, owning more than a single top-four network station in a market and owning more than two TV stations in a market. They also prevent a local newspaper from buying a local TV station.

But station owners found they could evade those rules and save money by turning over the production of costly locally produced programming like news and community affairs to another station, and in some cases even moving operations into another station’s building, while still holding the station’s license. In some markets, one company like Sinclair or Nexstar can end up owning a local network affiliate, a CW or MyNetworkTV station, and have a joint agreement to sell advertising and program another network affiliate.

Sinclair Exploits Loophole to Build a Media Empire

Owned by Sinclair

One good example of this practice can be found in the 78th largest television market in the United States — Rochester, N.Y.

Ten years ago, WROC (CBS), WHEC (NBC), WOKR (now WHAM) (ABC), and WUHF (FOX) each maintained their own news teams and ad sales departments. The first station to drop its own news was WUHF. Station owner Sinclair fired the news staff and signed an agreement with Nexstar’s WROC to produce a newscast for the station instead. WROC’s reporters could now be seen on two different stations.

In early 2013, WHAM was acquired by Deerfield Media, which has a whisker-thin separation between itself and Sinclair. The Wall Street Journal reported that Deerfield’s owner, Stephen Mumblow, was Sinclair CEO David Smith’s former personal banker. All of its stations are operated by Sinclair, despite being licensed to Deerfield.

Operated by Sinclair

Media consolidation critics say that is a blatant end run around the FCC’s ownership rules and violates local station limits.

Rochester viewers noticed a change on Jan. 1 of this year, when WUHF dropped WROC’s newscasts and began airing WHAM news instead. WUHF is now co-located in WHAM’s offices and despite the fact WHAM is owned by Deerfield, all of WHAM’s news and sales team are Sinclair employees. Sinclair now owns or controls Rochester’s CW, ABC, and FOX affiliates. Nexstar still owns WROC and Hubbard Broadcasting owns WHEC.

Nationwide, Sinclair owns, programs, or provides sales services to 167 television stations in 77 markets. In 2011, it owned 58 stations.

Smith

Sinclair is not a “hands-off” media player either. Sinclair’s CEO David Smith has regularly forced his conservative political views into his station’s newscasts.

Smith calls himself a family values man, but his 1996 arrest and conviction in a prostitution sting suggests otherwise. Smith was arrested for picking up a prostitute who performed what police called an “unnatural and perverted sex act” on him as he drove down the highway in a company-owned Mercedes.

As part of his plea agreement, Smith had to perform court-ordered community service. Smith subcontracted that out to his Baltimore station’s newsroom employees, ordered to produce a series of reports on a local drug counseling program, which Smith used to satisfy his sentence. That did not go over well with local reporters and at least one judge.

“I really hated the way he handled our newsroom and what he expected his reporters to do after his arrest,” LuAnne Canipe, a reporter who worked on air at Sinclair’s flagship station, WBFF in Baltimore, from 1994 to 1998, told Salon. “A Baltimore judge called me up,” she recalls. “He wasn’t handling the case, but he called to tell me about the arrangement and asked me if I knew about it. The judge was outraged. He said, ‘How can employees do community service for their boss?’”

Canipe left as the work atmosphere at Sinclair rapidly deteriorated.

Hyman

“Let’s just say the arrest of the CEO was part of a sexual atmosphere that trickled down to different levels in the company,” Canipe told Salon. “There was an improper work environment. I think that because of what he did there was a feeling that everything was fair game,” says Canipe, who says she chose to leave Sinclair in 1998. She says that she once complained to management about another Sinclair employee, who had engaged in audible phone sex inside a station conference room, but that no action was taken against the employee.

How Sinclair Uses Its Stations to Push a Political Agenda

But Sinclair’s most controversial interference in local news operations came days before the 2004 presidential election, when Sinclair ordered its stations to air a highly charged documentary critics called a propaganda hit piece against Democratic candidate John Kerry.

“Stolen Honor: Wounds that Never Heal,” was the brainchild of Carlton Sherwood, a disgraced former reporter for a Washington, D.C. station that was later forced to donate $50,000 and air a lengthy retraction after Sherwood falsely claimed that the veterans responsible for creating the Vietnam Veterans Memorial Wall were misappropriating contributions. The charges proved baseless and at least one veteran signed a sworn statement claiming Sherwood had a political ax to grind, calling the project that “liberal memorial” and a “black gash.” Sherwood reportedly wanted the memorial to speak to the righteousness of the Vietnam War and focused most of his reporting on critics who felt the memorial looked like “a wailing wall.”

Sinclair owned/operated stations now carry news from conservative Newsmax and the Washington Times on their websites.

Sherwood’s one-sided anti-Kerry documentary created a firestorm of criticism that reached all the way to Wall Street. Sinclair faced advertiser boycotts, petitions to yank its stations’ licenses, and angry investors who wanted Sinclair to steer clear of controversy that was bad for business.

Since then, Sinclair’s conservative credentials are still apparent, although more subtle. Top-rated WHAM’s local news now features headlines from the Rev. Sun Myung Moon’s Washington Times and the fiercely conservative Newsmax. Many Sinclair stations are also still required to air conservative political commentaries featuring Sinclair’s Mark Hyman during their newscasts.

Sinclair’s “government is bad” philosophy is found in its franchised “Waste Watch” series, which also airs during station newscasts. Sinclair claims the feature investigates and exposes how viewers’ local tax dollars are spent. But news staff at several Sinclair stations find the series distasteful because it frames its reporting around the idea that local government is generally incompetent and wasteful. Media critics suggest that kind of framed reporting does not belong in a straightforward newscast.

Underlining Sinclair’s Waste Watch conservative bona fides is the prominent presence of conservative political groups including the CATO Institute, Citizens Against Government Waste (CAGW), and the National Taxpayers Union (NTU) on Sinclair station websites. CAGW has historically maintained ties with the American Legislative Exchange Council and was a former member of ALEC. NTU President Duane Parde is the former executive director of ALEC, and NTU remains an ALEC member.

Wheeler

Despite the meddling from Sinclair’s headquarters, many Sinclair stations’ news teams try to maintain balance around Sinclair’s political agenda. WHAM, for example, buries Hyman’s commentaries on its extended morning news aired on WUHF instead of airing them in its primary newscast on WHAM. In Rochester, “Waste Watch” has also had some unintended consequences. WHAM has used the franchise to extensively report on various scandals surrounding county contracts involving the highest levels of Monroe County government, long dominated by the Republican party.

With more than 100 “joint agreements” in place at stations around the country — primarily in news-scarce medium and smaller television markets, the declining number of people making decisions about what is newsworthy and how it is reported has become increasingly worrisome for media consolidation critics. Television news dominates audiences as newspaper readership continues to decline. Critics suggest the impact of media consolidation can already be seen at companies like Sinclair.

FCC Gives Stations Two Years to Unwind Agreements; Republican Commissioners Upset

Under the new rules, a broadcaster that accounts for more than 15% of another station’s advertising sales would be seen by the FCC as the de-facto licensee of that station. In dozens of markets, this new rule will put companies like Sinclair and Nexstar in violation of the FCC’s ownership limits. The FCC is giving stations two years to disconnect their joint agreements or apply for a waiver if they can prove the partnership serves the public interest.

Deerfield Media is likely to be one of the hardest hit media groups, although critics contend the partnership with Sinclair was created primarily to evade the rules.

Although the rules change received support from all three Democrats, the commission’s two Republicans voiced strong opposition and claimed that the FCC was regulating a solution for a non-problem.

Commissioner Ajit Pai didn’t seem interested in the views of media consolidation critics. Instead, he looked for complaints from advertisers forced to buy ad time through the joint sales agreements. Finding none, he declared the case to end the joint agreements “embarrassingly weak.”

“This is the dog that didn’t bark,” Pai said.

Pai recommended station owners sue in federal court to overturn the FCC’s new rules. Pai is on the record opposing most ownership limits of any kind.