The Federal Communications Commission has quietly approved the acquisition of Alaska’s largest cable operator by John Malone’s Liberty Interactive with no deal conditions or consumer protections, despite fears the merger will lead to monopoly abuse.

The purchase of Alaska’s General Communications Inc. (GCI) in an all-stock deal valued at $1.12 billion was announced in April 2017. GCI currently offers cable TV and broadband service to 108,000 customers across Alaska, and runs a wireless company.

“We conclude that granting the applications serves the public interest,” the FCC wrote. “After thoroughly reviewing the proposed transaction and the record in this proceeding, we conclude that applicants are fully qualified to transfer control of the licenses and authorizations […] and that the transaction is unlikely to result in public interest harms.”

Various groups and Alaska’s largest phone company petitioned the FCC to deny the merger, claiming GCI’s existing predatory and discriminatory business practices would “continue and worsen upon consummation of the deal.”

Malone

Those objecting to the merger claimed GCI already has monopoly control over broadband-capable middle-mile facilities in “many locations in rural Alaska” and that GCI has refused to allow other service providers wholesale access to that network on “reasonable” terms. They also claimed GCI received substantial taxpayer funds to offer service in Alaska, but in turn charges monopoly rates to schools, libraries, and rural health care providers, as well as residential customers.

Essentially quoting from Liberty’s arguments countering the accusations, the FCC completely dismissed opponents’ claims, noting that Liberty does not provide service in Alaska, meaning there are no horizontal competitive effects that would allow GCI Liberty to control access to more facilities than it does now. On the contrary, the FCC ruled, the merger with a larger company meant the acquisition was good for Alaska.

“Rather than eliminating a potential competitor from the marketplace or combining adjacent entities in a manner that increases their ability to resist third-party competition, […] [this] transaction results in GCI becoming part of a diversified parent entity that will provide more resources for its existing Alaska operations.”

The FCC also rejected claims GCI engages in monopolistic, anti-competitive behavior, ruling that past claims of charging above-market prices are “not a basis for denying the proposed transaction because the allegations are non transaction-specific.”

“Although ACS [Alaska’s largest telephone company] claims that the transaction will exacerbate the behavior it finds objectionable, we see no reason to assume that GCI will have greater ability or incentive to discriminate against rivals in Alaska simply because it has access to more financial resources,” the FCC ruled. “To the contrary, the Commission has generally found that a transaction that could result in a licensee having access to greater resources from a larger company promotes competition, potentially resulting in greater innovation and reduced prices for consumers.”

GCI’s current internet plans are considered more expensive and usage capped than other providers.

In almost every instance, the FCC order approving the merger was in full and complete agreement with the arguments raised by Liberty Interactive in favor of the deal. This also allowed the FCC to reject in full any deal conditions that would have resulted in open access to GCI’s network on fair terms and a requirement to charge public institutions the same rates GCI charges its own employees and internal businesses.

The FCC also accepted at face value Liberty’s arguments that as a larger, more diversified company, it can invest in and operate GCI more reliably than its existing owners can.

“We find that this is likely to provide some benefit to consumers,” the FCC ruled. But the agency also noted that because Liberty executives did not specify that the deal will result in specific, additional deal commitments, “the amount of anticipated service improvements that are likely to result from the […] transaction are difficult to quantify.”

The Justice Department and the Federal Trade Commission earlier approved the merger deal. Most analysts expect the new company, GCI Liberty, exists only to allow Malone to structure the merger with little or no owed tax. Most anticipate that after the merger is complete, the company will be eventually turned over to Charter Communications, where it will operate under the Spectrum brand.

Cable magnate John Malone’s Liberty Interactive today announced it would acquire Alaska’s largest cable operator General Communication, Inc. (GCI) for $1.12 billion in an all-stock transaction.

Malone is the biggest individual shareholder of Charter Communications, Inc., and has decades of experience running cable companies in the lower 48 states and abroad. He also has experience structuring deals to avoid the U.S. tax authorities, and this deal is no different. Malone will pay zero taxes on the transaction by creatively spinning off the cable operator, first rechristening it as QVC Corp (named after his home shopping channel), then combining QVC Corp with Liberty Ventures and splitting off the combined company to existing Liberty Ventures shareholders. When the transaction is complete, Malone will again rename the cable company GCI Liberty and keep all the proceeds for himself and his shareholders.

GCI’s 108,000 customers won’t see any changes at the cable company and wireless venture this year. The deal is not scheduled to close until 2018.

GCI’s oldest customers may recall John Malone used to own the Alaskan cable operator, but under a different name. Until 1986, it was part of Malone’s Tele-Communications, Inc. (TCI) empire.

Expensive and usage-capped.

Malone’s operating philosophy these days is best represented by Charter Communications. GCI customers can eventually expect to see a dramatically simplified menu of choices for broadband, television, and telephone service. Broadband from GCI is expensive and usage-capped. Its $60 entry-level plan offers 50/3Mbps service that is “speed reduced” after 50GB of usage a month. For that reason, many customers prefer GCI’s “Faster” plan of 100/5Mbps service for $84.99 a month, with speeds curtailed after 250GB of usage. A gigabit tier is available in certain locations offering 1,000/50Mbps for $174.99 a month, speed-throttled after 1TB of usage.

Quintillion, a new underseas fiber provider, is expected to vastly expand Alaska’s internet backbone, but there are not enough terrestrial middle mile networks to allow all Alaskans to benefit.

A federal taxpayer-funded effort to improve broadband access in rural Alaska will instead improve the bottom lines of Alaska’s telecommunications companies who helped collectively “consult” on a plan that will pay $365 million in taxpayer subsidies to companies building profitable and often redundant 4G wireless networks.

The Alaska Plan, which took effect Nov. 7, is a decade-long effort to subsidize telecom companies up to $55 million annually to encourage them to expand broadband service to 134,000 Alaskan households that get either no or very little internet service today. The Alaska Telephone Association (ATA) — an industry trade association and lobbying group, claims if the plan is successful, only 758 Alaskans will still be waiting for broadband by the year 2026.

But critics of the plan claim taxpayers will give millions to help subsidize private telecom companies that have plans to spend much of the money on redundant, highly profitable 4G wireless data networks that will cost most Alaskans large sums of money to access.

One company — AT&T, which refused to participate in the plan, is still taken care of by the plan, receiving $15.8 million dollars from taxpayers for doing absolutely nothing to improve broadband service in Alaska. The plan directs the money to AT&T to provide phase-down, high-cost support, which drew a sharp rebuke from Republican FCC commissioner Ajit Pai, who questioned why taxpayers had to subsidize AT&T for anything.

“The order claims this a ‘reasonable’ accommodation but cannot explain why the nation’s second largest wireless carrier needs ‘additional transition time to reduce any disruptions,’” Pai wrote.

The biggest weakness of the plan, according to its critics, is its lack of support for middle-mile networks — wired infrastructure that connects providers to a statewide broadband backbone that can manage traffic needs without having to turn to slow-speed satellite connectivity. One of Alaska’s biggest challenges is finding low-cost connectivity with Canada and the lower-48 states. Much of the state relies heavily on GCI’s still-expanding TERRA network, which provides fiber as well as microwave connectivity to 72 towns and villages in rural Alaska. Quintillion, a new player, is working on stretching fiber connectivity through the Northwest Passage. Its forthcoming 30 terabit capacity fiber network offers the possibility of dramatically lower broadband rates and no more data caps, assuming providers have the network capacity to connect their service areas and the nearest fiber access point.

Instead of subsidizing the development of middle mile networks for this purpose, the authors of The Alaska Plan have instead favored wireless connectivity, including the very lucrative 4G wireless networks cellular providers want to expand. By definition, the broadband plan accommodates the limitations of wireless by easing broadband speed requirements for providers. To earn a subsidy, providers need not offer the FCC’s minimum speed to qualify as broadband — 25Mbps.

Instead, the ATA managed to convince regulators that 10/1Mbps service was good enough — speed that can be achieved by the DSL service phone companies favor. This is well below Alaska’s Broadband Task Force goal of 100Mbps for every state resident by 2020. Another free pass built into the plan is allowing providers to collect subsidies even when they do not offer 10Mbps because of network limitations, including lack of suitable middle mile networks. In those cases, the only speed requirement is 1Mbps download speeds and 256kbps uploads, the same as satellite broadband providers.

Commissioner Pai complained those are broadband speeds reminiscent of the internet a decade ago and hardly represents a vision for a faster future.

In a rare moment of bipartisanship at a divided FCC, Commissioner Mignon Clyburn joined Commissioner Pai dissenting from Alaska’s plan.

“It is clear that Alaska’s ‘majestic geography’ makes deployment difficult, but without affordable middle-mile connectivity, high-cost program support spent on the last mile does little to improve communications service to Alaskans,” Clyburn wrote. “Commissioner Pai and I supported an approach that would have taken the $35 million a year in duplicative universal service money and use[d] it to support a middle-mile mechanism that would enable many Alaskans in the Bush to receive broadband for the very first time. The status quo is simply not good enough, and the cost of doing nothing is far too high.”

Pai

Both Clyburn and Pai also complained federal tax dollars will be used to build duplicative 4G wireless networks that will primarily benefit providers. From Commissioner Clyburn’s statement:

We do not subsidize competition. We do not provide duplicative high-cost support to carriers in the same area and we do not subsidize carriers where other unsubsidized carriers are providing service. That underlying principle should be applied here as well. With Alaska’s “sublime scale,” we should instead be directing support to areas that are unserved, not subsidizing competition in areas that already receive mobile service. And just what is the cost to the American consumer of continuing to support overlap in these areas? About $35 million a year!

The companies benefiting from federal tax subsidies include: ASTAC, Copper Valley Wireless, Cordova Wireless, GCI, OTZ Wireless, which covers Northwest Alaska, TelAlaska Cellular, covering Interior and Northwest Alaska, and Windy City Cellular, covering Adak.

Clyburn

Pai called many of the spending priorities a waste of money that will still leave 21,000 Alaskans without 4G LTE broadband and another 46,000 without 25Mbps fixed broadband:

All together these wasted payments total $365 million, or about one quarter of the total Alaska Plan pot. That’s $365 million that could be used to link off-road communities to urban Alaska as requested by the Alaska Federation of Natives, the Bering Straits Native Corporation, the Chugachmiut rural healthcare organization, and many others. That $365 million is more than eight times the $44 million grant from the Broadband Initiatives Program that launched the TERRA Southwest middle-mile network that connected 65 off-road communities in 2011.

With the federal government now pouring federal tax dollars into Alaskan broadband, the state government has been using that as an opportunity to slash state investments in internet access.

A bill from Rep. Neal Foster (D-Nome) to upgrade all rural school districts to 10Mbps broadband for $6.2 million died in committee without any hearings, according to the Alaska Commons. State Rep. Lynn Gattis (R-Wasilla) proposed killing a $5 million broadband grant to schools, and the House Education subcommittee also recommended eliminating the Online with Libraries (OWL) program. Both programs ultimately survived, but not before the state legislature significantly cut the budgets of both programs.

Guttenberg

State Rep. David Guttenberg (D-Fairbanks) hopes the results from last week’s election in Alaska will allow him to position stronger broadband-related legislation in the state legislature.

Guttenberg wants to reinstate a long-cut Broadband Task Force and Working Group while also creating a public Broadband Development Corporation that would build and own middle mile broadband infrastructure and sell it to telecommunications companies that have refused to build those types of networks on their own.

A lot of members of the ATA are lining up in opposition, the newspaper notes, because they won’t directly own the infrastructure. Guttenberg’s view is that the needs of the many outweigh the needs of deep-pocketed telecom companies.

“If you want to build a strong state, if you want to build a strong community, we need to start putting those pieces together,” Guttenberg said of broadband infrastructure last year. “If you give a kid a laptop or a pad in a school district, it’s pointless if he can’t get online.”

Broadband life in Alaska is usually a choice (if you live in Fairbanks, Anchorage, Juneau, or another significantly sized city) between usage-capped cable operator GCI or slow-speed DSL (if you can get it) from Alaska’s two telephone companies – ACS, where unlimited service is still available, or MTA, where a 10Mbps Internet plan starts at $50 and offers up to 50GB of usage a month.

GCI has traditionally been the fastest option, but the company’s usage caps and high prices have brought scores of complaints from customers over the years. A basic 10/1Mbps internet plan costs $59.99 a month and only includes 40GB of usage. Many Alaskans who want faster access with a more reasonable allowance have to spend $84.99 a month for 50/3Mbps access to get a 150GB usage allowance or $134.99 for 100/5Mbps service with 300GB of included usage.

Late last week, GCI announced it was boosting the usage allowance for just one of its plans, the premium-priced, limited availability 1,000/50Mbps plan ($174.99), which until recently included a 750GB usage allowance. The new usage allowance is 1TB (1,000GB).

“In today’s connected society, people are demanding more and more access to data at incredibly fast speeds,” said Paul Landes, GCI’s senior vice president/general manager of consumer services. “GCI is proud to have a product that keeps our customers connected in ways people in Boston and LA can’t even receive. Even better, we are able to provide these upgrades at no additional cost to our loyal customers.”

Alaskans face high prices for internet access from GCI, the state’s largest cable company.

Gigabit customers like Stop the Cap! reader Dave Langhorn certainly hoped so.

“This is long overdue,” said Langhorn. “For $175 a month, there shouldn’t be any data caps, considering unlimited gigabit plans in the lower-48 often sell for $70-80 a month, which is less than half what we pay and still get capped.”

Our reader Michael Horton is incensed that GCI managed a usage allowance boost for its most premium internet plan, while leaving everyone else with the same old service.

“We shouldn’t be allowing any ISPs to restrict usage on their networks,” said Horton. “You should be paying for the speed that you use and nothing more.”

Horton considers data caps anachronistic at a time when the digital economy is moving towards online distribution of products and services like movies, games similar to 벳엔드 사이트, software, and other digital products. Even Windows 10 has been more often installed from a download than from physical media.

GCI has promised to address at least one of Horton’s concerns, stating they are planning speed boosts and allowance upgrades for all of their internet plans at an unspecified time later this year.

GCI says the allowance boost comes in response to customer requests from surveys and “listening sessions.”

Horton and Langhorn both believe that those voices would be heard much louder if GCI had more significant competition.

“ACS is the only alternative if you want unreliable speed,” Horton writes.”They don’t have bandwidth caps, but you will be unable to use their service efficiently if you are a gamer or watch Netflix a lot.”