Sinclair’s deal with Tribune will make them by far the largest TV station ownership group in the country, owning 16% of the TV stations in the U.S. (Image: Mother Jones)

After a hard-hitting piece analyzing the close ties between President Donald J. Trump, FCC Chairman Ajit Pai, and Sinclair Broadcasting appeared in this morning’s New York Times, a group of leading House Democrats serving on the House Energy & Commerce Committee have written Mr. Pai asking for answers about his possible “favorable treatment” of Sinclair Broadcasting since becoming Chairman of the FCC.

These reports, according to the letter, raise two overarching questions:

• Whether actions taken by the FCC under your leadership show a pattern of preferential treatment for Sinclair, and
• Whether a series of interactions between your office, the Trump Campaign and Trump Administration, and Sinclair demonstrate inappropriate coordination.

The letter’s signers — all Democrats — are Rep. Frank Pallone, Jr. (ranking member of the full committee), Rep. Mike Doyle (ranking member of the Communications and Technology Subcommittee), and Rep. Diana DeGette (ranking member, Subcommittee on Oversight and Investigations).

The 12-page letter presents Pai with multiple examples of potential collusion and favorable treatment of a television station group that airs mandatory pro-Trump Administration commentaries on all of its local newscasts, employs a former Trump campaign aide, has sought private meetings with administration officials , and has made substantial campaign contributions.

The Times article appears to be the source for most of the concern expressed in the letter, which lays out multiple issues and seeks Mr. Pai’s comments and explanations.

At the beginning of the Trump Administration, the Democrats claim, Mr. Pai has undertaken a number of actions in his role as Chairman of the FCC that fall squarely in line with the corporate expansion agenda at Sinclair Broadcast Group. Among the most important was Mr. Pai’s sudden decision to bring a party-line vote to reinstate an archaic UHF Discount rule, which allows a company to downgrade the reach of its UHF stations for the purposes of determining if it is within the FCC’s limit of one station owner reaching no more than 39% of the country. This “discount” was established at a time when analog television signals on the UHF band (Channels 14+) were at a distinct coverage disadvantage over stations occupying the VHF (Channels 2-13) band. The discount was retired after the U.S. switched to digital television broadcasting, which largely eliminated this coverage disparity.

TV station owners saw a revival of the UHF Discount not as a way to deal with reception differences, but rather as a loophole to launch new acquisitions by discounting the coverage of their current stations. Only one company – Sinclair Broadcasting – stood to gain the most from the reinstatement of the UHF Discount. Almost on cue, two weeks after Pai brought this obscure rule up and reinstated it on a 2-1 vote, Sinclair announced a blockbuster merger with Tribune to acquire stations that will allow Sinclair to cover 70% of the United States, a number impossible to achieve without Pai’s support for the UHF Discount.

Democrats argue this was not what Congress intended, and it allows one station owner to own and control approximately double the number of stations the ownership cap would normally prohibit. They argue such a deal will reduce the diversity of media voices in communities across the country, especially in markets where Sinclair will own and operate more than one television station.

The New York Times provides this chart illustrating the vast expansion of stations if it wins control of Tribune Media.

The Democrats are also upset the FCC, under Pai’s leadership, appears to be in a hurry to get this deal reviewed and likely approved. It set a review window of just 30 days for public comment, considerably shorter than earlier, less controversial acquisition deals. Critics of the deal contend that the FCC is giving inadequate consideration of the deal’s lack of public interest benefits, and Sinclair’s application is vague and its claims are difficult to validate. Pai seems unconcerned, leading some to believe he intends to rubber stamp his approval with minimal conditions.

Ajit Pai, Chairman of U.S Federal Communications Commission. REUTERS/Eric Gaillard

Under Pai’s watch, the Democrats charge, Sinclair has already benefited from a ‘rush to approval’ mentality at the FCC. Sinclair’s earlier deal to acquire stations owned by the Bonten Media Group was also convenient, coming shortly after the FCC under Mr. Pai revoked guidance that would have required the FCC to closely scrutinize the transaction. The FCC granted the deal, despite the fact several of Bonten’s stations are in areas where Sinclair now holds operating agreements to manage other local stations. Large station groups have used these agreements as loopholes to effectively gain day-to-day control of stations without actually transferring their ownership.

The Democrats also argue that Sinclair is well positioned to be in the lead of Next Gen TV, ATSC 3.0 technology that will replace the current digital TV standard in the United States in the next few years. Sinclair is the biggest cheerleader of the new technology, and Mr. Pai coincidentally has put a rush on getting ATSC 3.0 approved and into the marketplace. ONE Media 3.0, a wholly owned subsidiary of Sinclair, just happens to own six critical patents essential for using the Next Gen TV standard. That means every station in the country moving to the next broadcast platform will have to pay royalties to Sinclair estimated in the billions.

As the Times reports, whenever Sinclair sought something from Washington as part of its corporate agenda, the FCC’s Mr. Pai quickly aligned himself and the FCC’s Republican majority to fulfill Sinclair’s wishes.

Rep. Frank Pallone, Jr. (D-N.J.) is ranking member of the House Energy & Commerce Committee.

The Democrats also question whether there is direct coordination between the Administration, Sinclair, and the FCC:

• After the election, President Trump reportedly met with the Executive Chairman and former CEO of Sinclair and discussed changing FCC rules to help Sinclair. A news account stated that after the election, President Trump met with David Smith, Sinclair’s Executive Chairman and former CEO. According to this report, “potential FCC rule changes were discussed” after President Trump asked Mr. Smith, “What do you need to happen in your business?”

• Before you became Chairman of the FCC, you reportedly met with then President-elect Trump in New York. Reports indicate that on January 16 of this year, you met with then-President-elect Trump in New York in a meeting that did not appear on your official calendar.

• In March, shortly after you became Chairman of the FCC, you met with President Trump in the Oval Office. An FCC spokesperson confirmed that the meeting occurred, but did not indicate what was discussed during the meeting. When asked directly about your meetings with President Trump, you declined to disclose what you discussed, saying “I am not at liberty to say.”

• The week after the election, you reportedly attended a company conference for Sinclair’s general managers, during which you met with Sinclair’s CEO. According to a Politico report, in January of this year, you met with Sinclair’s former CEO, David Smith, as well as the newly named Sinclair CEO, Chris Ripley.

• The President’s campaign reportedly “struck a deal” with Sinclair to “secure better media coverage.” This arrangement came to light after the election, when Jared Kushner reportedly revealed that in exchange for access to then-candidate Trump and his campaign, “Sinclair would broadcast Trump interviews across the country without commentary.” Sinclair representatives have defended this arrangement by claiming that the Clinton campaign was offered the option for extended interviews with local anchors as well, but did not accept.

• In April, Boris Epshteyn, who was “most recently Special Assistant to The President and Assistant Communications Director for Surrogate Operations for the Executive Office of President Trump,” and formerly a “senior advisor to the Trump campaign,” joined Sinclair to provide on-air political commentary. Epshteyn’s segments are “must-run” programming for Sinclair stations, with nine segments airing per week. One report has criticized the segments as “propaganda” and reporting on Sinclair’s selection of “must-run” programming has raised “suggestions that Sinclair pushed right-leaning views.”

The Democrats are requesting Mr. Pai answer their letter and provide additional information no later than Aug. 28.

If you have not filed a reply comment with the Federal Communications Commission on the subject of Net Neutrality, you now have two extra weeks to send one.

At the request of consumer groups and some members of Congress, the FCC extended the deadline for reply comments — those in response to existing filings — until Aug. 30, 2017. The two-week extension is far less than the eight weeks requested by many, and was granted despite objections for any extension from the cable, wireless, and telephone company lobbying organizations.

“While it is the policy of the Commission that ‘extensions shall not be routinely granted,’ we find that an extension of the reply comment deadline is appropriate in this case in order to allow interested parties to respond to the record,” the FCC wrote. “While we recognize that Movants have requested an eight-week extension of the reply comment deadline, we find, consistent with past Commission precedent granting partial extensions, that an additional two weeks is an appropriate period of time to extend the reply comment deadline in order to provide parties additional time to analyze the technical, legal, and policy arguments raised by initial commenters.”

Few in Washington expect the more than 11 million comments on the issue of keeping an open internet will make much difference to FCC Chairman Ajit Pai or his Republican colleague Michael O’Rielly, both fierce opponents of Net Neutrality. The third Republican Commissioner, Brendan Carr, was sworn in with returning Democrat Jessica Rosenworcel last Friday. Carr has a paper trail opposing Net Neutrality, while Rosenworcel is on record supporting it, along with her colleague Mignon Clyburn. In the end, the vote is likely to be 3-2 in favor of repealing Net Neutrality.

Unusually, the FCC has taken the step of characterizing the quality of comments received on the Net Neutrality issue, calling the vast majority of them exceptionally brief and containing little more than a declaration of the author’s “ultimate policy preferences.” It also suggested a large number of comments were “apparently fabricated,” noting that many were signed without the consent of the person named and others lack any names at all.

The telecom industry characterized the delay as giving more time for what Lawrence Spiwak, president of the telecom industry-friendly Phoenix Center calls “sophistic clicktivism” to “pad the record” in favor of Net Neutrality. Other groups funded by the telecom industry have spent months attempting to discredit the enormous number of comments — the most ever received by the FCC — by suggesting the majority were fake or fraudulent and not worthy of being taken seriously.

Verizon has told the Federal Communications Commission it should reject a bid from a consumer group to release confidential corporate merger information to the public so it can learn what economic incentives, if any, exist to begin charging content providers extra fees for internet fast lanes and zero rating.

Incompas, which advocates for increased competition in the wireless industry, asked the Commission in July to publicly disclose details of recent telecom mergers obtained in confidence from the companies involved to “interested commenters” in the Net Neutrality proceeding allowing consumers can obtain valuable insight into the “economic incentives and abilities of incumbent broadband providers to curb competition, including through their control of residential broadband connections.”

The group specifically called out AT&T’s merger with DirecTV, Comcast’s failed merger with Time Warner Cable, and Charter’s merger with Time Warner Cable and Bright House Networks. All of the entities involved either operate wireless networks themselves or partner with a provider that does. Incompas believes a document release will show increased concentration and market power and the marked impact that can have on what consumers pay for service and how those companies plan to treat competing traffic.

The information disclosure sought by the group was vehemently opposed by Verizon, which doesn’t want its business secrets revealed to the public.

“There is no legal justification or sound policy basis to justify making this highly sensitive business information available in the Restoring Internet Freedom proceeding,” Verizon countered in its filing. The phone company does not want to publicly release details about its connection agreements with other companies or exactly how many customers it serves. “[N]othing has changed since the adoption of these protective orders that warrants the Commission weakening these protections by allowing this sensitive business information to be disclosed to potentially millions of ‘interested commenters’ in the Restoring Internet Freedom proceeding.”

While some Net Neutrality critics have sought to dismiss the more than 13 million comments received so far by the FCC on Net Neutrality as confused ranting, Verizon takes an opposite position saying the Commission is already bogged down with quality comments on Net Neutrality and does not need more, claiming it would only add to a flood of analysis on Net Neutrality. Verizon claimed among the submissions received by the FCC are “millions of comments, thousands of pages of expert testimony and declarations and hundreds of substantive analyses and submissions with detailed economic, legal and policy arguments.”

Charter Communications did not appreciate the proposal either, claiming it was unfair.

“Such an outcome would eviscerate the core protection of the commission’s protective orders, thereby unfairly punishing Charter’s past compliance and threatening the commission’s ability to obtain sensitive information from private parties in the future,” Charter officials wrote.

AT&T: Using taxpayer and ratepayer dollars to subsidize 4G LTE upgrades for its customers.

With taxpayer subsidies on the horizon, phone companies cut back investing their own money on rural broadband expansion hoping taxpayers would cover funding themselves.

That is the conclusion of Dave Burstein, a long-standing and well-respected industry observer and publisher of Net Policy News. Burstein is concerned the unintentional consequence of Obama and Trump Administration rural broadband funding programs has been fewer homes connected than what some carriers would have managed on their own without government subsidies.

“Since 2009, carrier investment in broadband in rural areas has gone down drastically,” Burstein wrote.

As a result, FCC Chairman Ajit Pai announced plans to spend $4.53 billion from a public-financed Mobility Fund over the next decade to advance 4G LTE service, primarily in rural areas that would not be served in the absence of government support. Burstein suspects much of that money could end up being unnecessarily wasted.

“Under current plans, most of the money is likely to go where telcos would build [4G] without a subsidy, [or will be used to] buy obsolete technology, or give the telcos two or three times what the job should cost,” Burstein wrote. “Any spending on wireless except where towers or backhaul is unavailable should be assumed wasteful until proven otherwise.  Realistic costs need to be developed and subsidies allocated on that basis.”

AT&T’s rural fixed wireless expansion program, funded substantially by U.S. taxpayers and ratepayers, is a case in point. AT&T is receiving almost $428 million a year in public funds to extend wireless access to 1.1 million customers in 18 states, the FCC says. Much of that investment is claimed to be spent retrofitting and upgrading existing cell towers to support 4G LTE service. But AT&T claims 98% of its customers already have access to 4G LTE service — more than any other carrier in the country, so AT&T is actually spending the money to bolster its existing 4G LTE network, something more likely to benefit its cell customers, not a few thousand fixed wireless customers.

(Source: AT&T)

“An AT&T exec in California said communities didn’t need to worry about the impact of the CAF-funded project, since it was almost all going to be on existing towers,” Burstein wrote, allaying fears among members of the public that money would be spent on lots of new cell towers. “I don’t know what loophole AT&T is using to get the money, but it’s a pretty safe guess they would have upgraded most of them without the government paying. 4G service now reaches all but 3-5 million of the 110-126 million U.S. households. Probably half [of the less than five million] targeted would soon be served without a subsidy – if the telcos knew no subsidy was likely. Before spending a penny on subsidies, the FCC needs to do a thorough assessment of what would be built without government money.”

Burstein

Wireless executives were delighted when the U.S. government in 2009 committed to spending $7 billion in taxpayer funds on broadband stimulus funding as part of a full-scale economic stimulus program to combat the Great Recession.

“Both George Bush in 2004 and Barack Obama in 2008 had promised to bring affordable broadband to all Americans,” Burstein noted. “The clamor to reach these last few million was so loud, telcos became confident the government would pay for it if they just stopped their own investment. They aren’t stupid and refused to spend their own money. Before 2009 and the expected huge stimulus program, most telcos expanded their networks each year, based on available capital funds.”

Burstein believes some phone companies became better experts at milking government money to pay for needed network upgrades than frugally spending public funds on rural broadband expansion. As a result, after eight years and massive spending, Burstein notes fewer than two million of the “unserved” six million homes were reached by wireline or wireless broadband service when the funding ran out.

Under Chairman Pai’s latest round of rural broadband funding, Burstein believes much of this new money is also at risk of being wasted.

“[Pai] needs to dig into the details of what he’s proposing,” Burstein wrote. “Nearly all cells with decent backhaul will be upgraded to 4G; Verizon and AT&T have already reached 98% of homes. Government money should go to building towers and backhaul where that’s missing, not filling in network holes the carriers would likely cover.”

Rural advocacy groups have been frustrated for years watching rural telephone companies deliver piecemeal upgrades and service expansion, often to only a few hundred customers at any one time. When they learn how much was spent to extend broadband service to a relatively few number of customers, they are confused because companies often spend much less when they budget and pay for projects on their own without government subsidies.

Gov. Andrew Cuomo announcing rural broadband initiatives in New York.

Burstein is currently suspicious about the $200 million approved in subsidy funding to extend rural broadband in parts of upstate New York. Burstein notes Pai is factually wrong about his claim that the hundreds of millions set aside for New York would be spent on “unserved areas of rural New York.”

“Most of that money will not go to unserved areas,” Burstein reports. “Some grants are going to politically connected groups. I’ve read the rules and the approved proposals. The amounts look excessive based on the limited public details.”

Telephone companies have become skilled negotiators when it comes to wiring their rural service areas. Most want more money than the government has previously been willing to offer to help them meet their Return On Investment expectations. Burstein noted that under normal circumstances, a government program offering a 25% subsidy to extend rural broadband into areas considered unprofitable to serve would be enough in most cases to get approval from rural phone companies like CenturyLink and Frontier Communications. But many phone companies, including AT&T, Verizon, and Qwest (now a part of CenturyLink) did not even file applications to participate in early funding rounds. Qwest’s lack of interest was especially problematic, because the former Baby Bell served the Pacific Northwest and Rocky Mountain regions where some of the worst broadband accessibility problems persisted.

Burstein claims Jonathan Adelstein, then Rural Utilities Administrator, had to double his subsidy offer to get Qwest’s attention with a 50% subsidy.

Rural backhaul connectivity is often provided by fiber optic cabling.

“Qwest refused, demanding 75%,” Burstein noted. “That was probably twice the amount necessary and Adelstein rightly refused. They knew the government had few ways to reach those unserved without paying whatever the telcos demanded. A few years later, Qwest is part of Centurylink. Many of those lines are now upgrading under [public] Connect America Funds with what amounts to a greater than 100% subsidy.”

Net Neutrality appeared to have no impact on telephone company investment decisions, even in rural areas. The investment cuts followed a trend that began even before President Barack Obama took office. Wireless carriers slash investments in rural areas when management is confident the government is motivated to step in and offer taxpayer dollars to expand rural broadband service. When those funds do become available, a significant percentage of the money isn’t spent on constructing new infrastructure to extend the reach of wired and wireless networks into unserved rural areas. Instead, it pays for expanding existing infrastructure that may coincidentally reach some rural customers, but is still primarily used by existing cellular customers.

“In many extreme rural areas, only the local telco has the ability to deliver broadband at a reasonable cost,” noted Burstein. “You need to have affordable backhaul and a local staff for repairs. Because the ‘unserved’ are in very small clusters, often less than 100 homes, it’s usually impractical for a new entrant to bring in a backhaul connection.”

Instead, AT&T is attempting to fill some of the gaps with fixed wireless service from existing cell towers. While good news for customers without access to cable or DSL broadband but do have adequate cellular coverage to subscribe to AT&T’s Fixed Wireless service, that is not much help for those in deeply rural areas where AT&T isn’t investing in additional cell towers to extend coverage. In effect, AT&T enjoys a win-win for itself — adding taxpayer-funded capacity to their existing 4G LTE networks at the same time it markets data-cap free access to its bandwidth-heavy online video services like DirecTV Now. That frees up capital and reduces costs for AT&T’s investors. But it also alienates AT&T’s competitors that recognize the additional network capacity available to AT&T also allows it to offer steep discounts on its DirecTV Now service exclusively for its own wireless customers.