Copps

Americans need to stand up and say “no” to more telecom mergers and lobbying efforts that push for additional deregulation and corporate protectionism in the telecommunications sector. Unfortunately, we are in for a fight, thanks to Washington’s problem disappointing a multi-billion industry that lavishly finances political campaigns, conventions, and vacation outings.

Michael Copps, former commissioner on the Federal Communications Commission from 2001-2011 and acting chairman for the first six months of the Obama Administration ought to know.

“The consolidated world of telecom broadband did not evolve from the hand of God, the mysterious workings of natural law, or the inevitability of market-based dynamics,” Copps wrote in his essay, “Why Give Up on Competition?” “It was enabled by conscious decision-making at the federal level, largely through the abdication of its oversight responsibilities by the Federal Communications Commission over the better part of 30 years.”

In short, it did not have to turn out this way, no matter what the telecom industry and their astroturf friends have to say.

“Go to just about any telecom conference these days, and some industry maven will make the case that restoring competition to the telecom world is so 1990s,” Copps writes. “Why don’t we all just recognize the inevitable, they ask: telecom is a natural monopoly, competition is a chimera, and the sooner we flash a steady green light for more industry consolidation and less government oversight, the better off we’ll all be.”

Provider-backed ALEC advocates for the corporate interests that fund its operations.

Too many in Washington are already true believers, according to Copps, and the result is two companies controlling over 2/3rds of the wireless marketplace and a broadband duopoly for most Americans. This did not happen overnight. Enormous and expensive lobbying campaigns run for over a decade have convinced lawmakers that less is more when it comes to telecom regulation and oversight. Regulators ringing alarm bells about deregulation without sufficient competition have been picked off, says Copps, by the telecom industry-backed American Legislative Exchange Council (ALEC), which has convinced at least 19 state legislatures to wipe away authority from state public service commissions that for years have been trying to protect consumers and preserve competition.

The Telecommunications Act of 1996 was originally designed to open the telecommunications marketplace to increased competition, but also ensure a level playing field for competitors by charging the FCC to implement and enforce strong rules to keep incumbent telecommunications companies from steamrolling new competitors.

No surprises here: Michael Powell was FCC chairman during the deregulation frenzy of the first term of George W. Bush. Today, he’s the president of the National Cable & Telecommunications Association, the largest cable industry lobbying group in the country.

With the arrival of President George W. Bush, the new Republican majority at the FCC promptly began obliterating checks and balances at the behest of some of the nation’s largest phone and cable companies. The results:

• Reselling rights and wholesale leasing of facilities to competitors were wiped away, guaranteeing monopoly control of already-established networks;
• Opening up the long distance and local market to Baby Bell competition with their promise they would compete nationwide failed. Like Big Cable, the Baby Bells sold local and long distance only to their own customers, not to those located in another Baby Bell’s service area;
• Instead of competing, phone companies simply bought each other. “As soon as one transaction was approved, another one came through the door,” Copps reported. “Sometimes it seemed like the merger approval business was our only business.”;
• ” The FCC voted, over the strenuous objections of Commissioner Jonathan Adelstein and me, to remove advanced telecommunications (broadband) from the purview of Title II of the Telecommunications Act—where consumer protections, competition, privacy, and public safety are clearly mandated—and placed them instead in the nebulous and uncharted land of Title I, where regulatory authority is uncertain, consumer protections are virtually non-existent, and where the huge companies are better positioned to wreak havoc on the promise of competition,” Copps said.

To right the wrongs, Copps wants some major changes to reignite competition and return to telecom innovation, eliminating the stagnation we have from today’s cozy, barely competitive marketplace:

1. Learn to say “no” to more industry mergers. Consolidation has not brought communications nirvana for consumers, just higher prices and fewer choices, often from a monopoly provider;
2. Encourage innovative approaches like municipal broadband. Copps: “‘My way or nothing’ may be the mantra of the big guys, but that means no broadband in places they don’t wish to serve.” Copps wants to see the federal government pre-empt state bans on public broadband laws provider-backed ALEC has gotten through legislatures across the country;
3. Smarter stewardship of wireless spectrum, including unlicensed spectrum use, shared spectrum, smarter technology, and a “use it or lose it” policy that pulls back unused/warehoused spectrum held by some of the nation’s largest wireless carriers.

An industry orphan?

Sprint CEO Dan Hesse probably rues the day his Board of Directors pulled the plug on a merger deal that would have combined MetroPCS and Sprint back in February. The merger was abandoned after board members openly worried the transaction would distract Sprint from its network improvement project — dubbed Network Vision — then just getting underway.

The deal with T-Mobile and MetroPCS may have limited Sprint’s takeover options, although analysts say a hostile counteroffer for MetroPCS could still take the small carrier away from T-Mobile.

Hesse himself is a proponent of additional wireless industry consolidation. He believes the current market has too many wireless carriers and the two dominant providers — AT&T and Verizon — enjoy economy of scale Sprint cannot hope to achieve in its current position.

Hesse

Wall Street was more pessimistic about Sprint after the T-Mobile/MetroPCS merger was announced, suggesting they may be an industry orphan, pushed into a corner and running out of options.

Shares of Leap Wireless, the owner of Cricket, rose as much as 17 percent after the T-Mobile deal was announced, signaling Cricket is likely an endangered species. Leap’s cellular network is similar in scope to MetroPCS, although the two companies largely serve different markets. Wall Street’s favorite dance card has Sprint and Leap Wireless as future partners, and Sprint may be forced to acquire the smaller carrier to save face. Leap operates its own modest network of cell towers and has plans to roll out LTE 4G service to its customers. That spectrum could become important to Sprint, especially in the larger urban areas Cricket targets.

An endangered species.

Some Wall Street analysts say deals with MetroPCS, Leap, and other small regional carriers are small potatoes. Many advocate for a much larger merger between Sprint and T-Mobile to more realistically confront the de-facto duopoly of AT&T and Verizon Wireless.

Regulators under the Obama Administration may take a dim view of a merger that combines the third and fourth largest nationwide carriers, but nobody expects much regulatory resistance approving mergers that wipe out MetroPCS and Cricket.

“The problems that Sprint and T-Mobile have are they are not as big as AT&T and Verizon,” Piper Jaffray’s Chris Larsen told Bloomberg News in a phone interview. “They don’t have the scale so therefore it is harder to compete. Increasing your size 25 percent, it helps. But when you are less than half as big as your rival, getting 25 percent bigger narrows the gap, but it does not close the gap.”

[flv]http://www.phillipdampier.com/video/CNBC MetroPCS Down on Merger Reports 10-3-12.flv[/flv]

CNBC reports the T-Mobile/MetroPCS deal reignites wireless consolidation and leaves Sprint in a potentially difficult position.  (5 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg Sprint Left Behind as MetroPCS Joins T-Mobile 10-3-12.flv[/flv]

Bloomberg News reports T-Mobile needs more subscribers, but some Wall Street analysts think the company is making a mistake focusing on the prepaid market.  (1 minute)

The parent company of T-Mobile USA has agreed to buy MetroPCS in a reverse stock split that leaves parent Deutsche Telekom able to eventually spin off the combined entity as an independent company and exit the U.S. market.

The merger will bolster T-Mobile’s mobile spectrum in several large cities, with up to 20MHz available for a robust LTE 4G network, better positioning the company to compete with third-place Sprint.

T-Mobile plans to decommission the smaller carrier’s CDMA network by 2015, gradually shifting  MetroPCS users to T-Mobile’s HSPA+ and LTE networks as customers purchase new equipment. MetroPCS customers will find T-Mobile phones for sale immediately after the deal closes.

“We have no plans to smash together T-Mobile’s GSM and MetroPCS’ CDMA customers together,” said T-Mobile CEO John Legere, defending against any comparison with the Sprint-Nextel merger. “We will be encouraging customers to switch to T-Mobile’s network as customers upgrade their phones.”

Legere says any customers still using MetroPCS’ network during the last 8-12 months before the network is decommissioned will be offered a strong incentive, such as a deeply discounted phone, to move.

Legere

Legere adds the deal will cement T-Mobile’s position as America’s only nationwide carrier offering truly unlimited 4G HSPA+/LTE wireless data service. Sprint’s network still largely depends on 3G and an older, slower standard called WiMAX. Legere says T-Mobile will now become the nation’s largest no-contract phone carrier, and will emphasize it welcomes customers who bring their own phones to the carrier.

Legere adds T-Mobile’s new 4G network will be able to rival the quality of its larger competitors when it is fully deployed.

“The T-Mobile and MetroPCS brands are a great strategic fit – both operationally and culturally,” René Obermann, the chief executive of Deutsche Telekom, said in a statement. “The new company will be the value leader in wireless with the scale, spectrum and financial and other resources to expand its geographic coverage, broaden choice among all types of customers and continue to innovate.”

But the merger also may trigger an even larger wave of wireless consolidation in the industry, as remaining players jockey for position in response to today’s announcement. Both Sprint and Leap Wireless, which owns Cricket, are under increasing pressure from investors to respond. Leap Wireless could soon face a takeover bid itself, either from T-Mobile USA or Sprint. Some investors are even calling for Sprint and T-Mobile to merge, becoming a more effective competitor for Verizon and AT&T.

The proposed  merger still needs approval from the Federal Communications Commission. Regulators are not likely to oppose deals with either MetroPCS or Leap Wireless, as both smaller carriers operate networks that largely do not overlap and both hold only a minuscule market share.

German investors wary about T-Mobile’s new emphasis on prepaid service, considered a negative in Europe, were reassured by Legere that Americans pay higher prices for prepaid, no contract service than what is prevalent in Europe.

The combined T-Mobile/MetroPCS remains the fourth place carrier with 42.5 million customers. Sprint has 56.4 million customers.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/T-Mobile CEO Speaks About Combined Company with MetroPCS 10-3-12.flv[/flv]

T-Mobile CEO John Legere talks about the benefits of combining T-Mobile USA and MetroPCS. “This isn’t a deal to survive – it’s to thrive.” (5 minutes)

AT&T and Verizon: The Doublemint Twins of Wireless

Wireless carriers other than AT&T and Verizon Wireless have joined forces asking federal regulators to help level the playing field in wireless competition.

At this week’s convention of the newly-relaunched Competitive Carrier Association (CCA), Sprint, T-Mobile USA, Clearwire, C Spire, and more than 100 other small regional rural carriers joined forces in Las Vegas to sound the alarm about a wireless duopoly restraining competition and raising prices for consumers.

“Humpty Dumpty has been put back together again,” said C Spire CEO Hu Meena. “And while the identical twins sometimes agree to meet and discuss industry issues with other industry players, they seldom, if ever, support action that might better the industry as a whole.”

C Spire should know. The company filed a lawsuit against AT&T earlier this year claiming the phone giant manipulated its 700MHz band allocation to lock C Spire customers out of getting access to the latest smartphones.

“At some point, and that time is coming, regulators and politicians are going to have to acknowledge they have a choice to make: they are going to have to decide whether the communications industry, the fundamental driver of the information economy, is going to be regulated by true, healthy competition or by the government,” Meena said.

In the last 20 years, rampant consolidation has reduced the number of national wireless carriers down to four — Verizon Wireless, AT&T, Sprint, and T-Mobile. Filling in the gaps are various regional providers, all who depend on one of the major four to provide reasonable roaming service for customers traveling beyond the service areas of smaller companies. Without reasonable roaming, competitors are left at a serious disadvantage.

Another major problem is access to the latest smartphones. Major manufacturers largely design and market cell phones for the largest four companies, often relegating smaller providers to sell older or less prominent phones to customers. When phones do not work on the spectrum acquired by smaller competitors, roaming becomes a problem.

But beyond those issues is the question of wireless spectrum. Traditionally sold in competitive auctions, the deepest pocketed companies traditionally win the bulk of frequencies, leaving competitors with less desirable spectrum that has difficulty penetrating buildings or requires a more robust cell tower network.

Meena

Members of the CCA recognize that mergers and consolidation can bring costs down through economy of scale, but in their eyes, AT&T and Verizon’s actions have promulgated a new paradigm for wireless on Wall Street: consolidation around a handful of wireless carriers is healthy; having too many competitors is inefficient.

“Consolidation can introduce business efficiencies,” said Michael Prior, CEO of Atlantic Tele-Network. “But government has a role in making sure that infrastructure is used in a way that works for the entire country. All we’re asking the FCC to do is to make sure there is a level playing field.”

Observers expect the CCA to ask the FCC to set aside spectrum in future wireless auctions exclusively for smaller carriers to help protect what competition still exists.

“There used to be dozens of railroad companies,” Prior noted. “But the government didn’t allow certain companies to develop rails that wouldn’t allow trains to interconnect to rails run by other companies.”

Meena warned the same thing could happen in the wireless industry.

“We know what happened in the first 20 years of the industry where we have had many healthy competitors,” Meena said. “There remains a false hope among too many carriers that the duopoly will one day become reasonable. But, we all know, whether we choose to admit it or not, that until all competitive carriers become fully committed to work together for open competition, the wireless industry playing field will remain harmfully tilted toward the duopoly. They will never give an inch unless and until they have to do so.”

Earlier this year, Bell Canada announced a blockbuster $3.38 billion offer to buy Astral Media, Inc. It is just the latest rush towards media concentration in Canada as the country’s largest cable and phone companies acquire a growing number of television networks, cable services, radio and broadcast television outlets, magazines, and other media.

Bell Canada already owns CTV – a major broadcast network, and TSN sports. Now it is back for more — Astral Media, the company that owns HBO Canada, The Movie Network, Family, Viewers Choice and lots more.

If this deal wins approval, one company will control 37.6% of TV viewing in Canada, more than twice the amount of its largest competitor. It means Bell will be able to set rates for some of Canada’s most popular cable networks and shows — putting competitors at a major disadvantage and forcing you to pay more to watch.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Say No to Bell Canada.flv[/flv]

Say No to Bell’s ad campaign fighting Bell Canada’s attempt to buy Astral Media.  (1 minute)

The federal government has to approve this deal, and a growing number of competing media companies, consumer groups, and politicians are coming together to oppose it.

Stop the Cap! believes Bell Canada owns too much already, and has repeatedly demonstrated that when it flexes its marketplace muscle, consumers pay more for less service. Add your voice against this deal by submitting a letter to Canada’s Ministers of Heritage and Industry, the Competition Bureau, the CRTC and your Member of Parliament and visiting the other opposition websites noted below.

No company needs to own and control 79 TV channels, 107 radio stations and more than 100 major Canadian news, entertainment, and cultural websites.

Even smaller Canadian cable companies fear this deal. Cogeco Cable, Eastlink, and Quebecor (parent company of Vidéotron), have joined forces to launch saynotobell.ca, a website to help consumers fight back. Quebec-based consumer group Option consommateurs has its own online petition in French, and Openmedia’s Stop the Takeover Coalition includes a range of pro-consumer forces opposed to the deal:

• OpenMedia.ca
• the Public Interest Advocacy Centre (PIAC)
• the Canadian Internet Policy and Public Interest Clinic (CIPPIC)
• Canada Without Poverty and the CWP Advocacy Network,
• the Canadian Media Guild (which represents over 6,000 media workers, including those from CBC, Reuters, the Canadian Press, and Shaw Media),
• the Consumers’ Association of Canada,
• the Council of Canadians (Canada’s largest citizens’ group),
• the Council of Senior Citizens’ Organizations of British Columbia (COSCO),
• Union des consommateurs.

Some of the arguments against the deal to consider:

• Bell Canada’s TV audience share would be 50% greater than the share of any TV network in the US, Japan, UK, Australia, France, and Russia. It would allow one corporation to control the programming (including news) on a scale not seen outside of countries like Italy, Brazil, and Mexico. When politicians have that much control of the media, they use it to influence viewers. Would Bell do any different?
• Bell can set the rates, terms, and bundling requirements for popular cable programming and services. They have already shown a willingness to tell independent ISPs they must set usage limits on their customers just as Bell does already. What would stop them from insisting you subscribe to more services in order to watch the programming you want?
• Mergers=job losses and cost cutting to pay for inflated bonuses and “cost savings” to help finance these blockbuster deals. Without competition, original Canadian productions can be slashed to the bone or canceled altogether. Why deliver quality when you can limit viewers’ alternative choices instead?
• America allowed media consolidation in radio and television and turned vibrant local stations into corporate money-machines at the expense of local news, original shows, and local content. How many radio stations in the United States now operate like automated electronic jukeboxes? How many local TV newscasts signed off for good to “save money.” Can Canadian local news, weather, and informational programming survive Bell’s ax? If it happened in the United States, it can happen in Canada too.

Ensure diversity by disconnecting this Bell deal permanently, and tell your elected leaders to stop allowing endless media consolidation.

[flv width=”576″ height=”344″]http://www.phillipdampier.com/video/Globe and Mail How much of a competition threat is Bells Astral deal 8-24-12.flv[/flv]

The Globe and Mail considers the issue of Bell’s takeover bid for Astral Media. How will it affect Canadian consumers? (2 minutes)