Tribune Media walked away from its $3.9 billion dollar merger agreement with Sinclair Broadcast Group this morning, and announced it would sue Sinclair for $1 billion for its conduct trying to get the deal approved, including withholding information and deceiving regulators.

The merger deal was controversial from the moment it was announced, pairing up Sinclair’s 192 stations with Tribune’s 42 TV stations in 33 markets, including well-known stations like WGN in Chicago and WPIX in New York. Sinclair was already the nation’s top TV station owner, and to acquire more stations, Sinclair would have to get TV ownership limits eased, something coincidentally provided by FCC Chairman Ajit Pai, who suddenly announced an interest in bringing back a “discount” on ownership caps for stations broadcasting on the UHF band. That policy was dropped after the country moved to digital over-the-air broadcasting, which negated the perception that UHF channels were less desirable and held lower value than lower VHF channels because of reception quality.

Sinclair’s Long History of Partisan Politics

Sinclair, unlike other TV station owners, also has a long history of being active in partisan politics, airing programming in favor of conservatives and openly advocating for the agendas of the Bush and Trump Administrations. Its long-standing policy to require its stations to air corporate-produced news segments and commentaries during local newscasts has irritated local newsrooms for years, but as the number of Sinclair-owned stations has grown, the practice was eventually exposed with a viral video depicting an uncomfortable collection of anchors from dozens of Sinclair stations decrying “fake news.”

In 2016, Sinclair aired 1,723 stories about the Huntsman Cancer Institute in Utah on 64 of its stations. Most were designed to look like one or two minute news stories, although Sinclair also produced a 30-minute show about the facility. What viewers were never told is that the stories were paid for by the Huntsman Cancer Foundation. In December, the FCC fined Sinclair a record-breaking $13.3 million for failing to disclose the story’s sponsor. The Democratic minority on the Commission called that a slap on the wrist and wanted the maximum fine of $82 million levied on Sinclair for its egregious and flagrant violation of FCC rules.

Sinclair’s past run-ins and controversies guaranteed its merger deal with Tribune would receive special scrutiny. The documents attached to the lawsuit filed this morning reveal Tribune got quickly upset with Sinclair’s hardball lobbying, accusing Sinclair of brazenly flouting the FCC’s rules and setting up the merger for failure.

In the end, even Sinclair’s apparent ally Ajit Pai distanced himself from the TV station owner in July, suddenly advocating the merger deal be forwarded to an administrative law judge for review, a sure sign the merger was in serious trouble with regulators.

How America’s largest local TV owner turned its news anchors into soldiers in Trump’s war on the media: https://t.co/iLVtKRQycL pic.twitter.com/dMdSGellH3

— Deadspin (@Deadspin) March 31, 2018

Tribune Takes Sinclair to Court

This morning, Tribune officially pulled the plug on the merger.

“Our merger cannot be completed within an acceptable time frame, if ever,” Tribune Media chief executive Peter Kern said in a statement. “This uncertainty and delay would be detrimental to our company and our shareholders. Accordingly, we have exercised our right to terminate the merger agreement, and, by way of our lawsuit, intend to hold Sinclair accountable.”

That accountability will come in the form of its lawsuit that includes revealing documents about Sinclair’s behavior during the merger process, which includes allegations Sinclair recklessly withheld information and deceived the FCC and Justice Department about the transaction. If true, that could threaten Sinclair’s fitness to hold FCC licenses for its TV stations.

“From virtually the moment the Merger Agreement was signed, Sinclair repeatedly and willfully breached its contractual obligations in spectacular fashion,” Tribune said in its lawsuit. “In an effort to maintain control over stations it was obligated to sell if advisable to obtain regulatory clearance, Sinclair engaged in belligerent and unnecessarily protracted negotiations with DOJ and the FCC over regulatory requirements, refused to sell stations in the ten specified markets required to obtain approval, and proposed aggressive divestment structures and related-party sales that were either rejected outright or posed a high risk of rejection and delay – all in the service of Sinclair’s self-interest and in derogation of its contractual obligations.”

Tribune claims Sinclair only favored its own financial interests, not the obligations it had to Tribune to get the merger deal approved as quickly as possible. Tribune also accused Sinclair of threatening, insulting, and misleading regulators to keep control over stations it was obligated to sell.

The Sinclair Broadcast Group has come under fire following the spread of a video showing anchors at its stations across the United States reading a script criticizing “fake” news stories. (8:03)

“Sue me.”

Tribune’s executives gradually became more alarmed the more Sinclair negotiated with regulators, claiming Sinclair antagonized officials at the Justice Department. Tribune notes the assistant attorney general of the antitrust division got an earful from Sinclair, lecturing the official that he “completely misunderstand[ood]” the broadcast industry and was “more regulatory” than any recent predecessor.

When Sinclair was cornered by the Department of Justice over demands for station divestitures, the company summarized its position in two words: “sue me.”

Tribune pointed out the Justice Department was prepared to accept the merger with the appropriate stations being sold to new owners, but Sinclair balked. After a series of schemes were suggested to partly divest the stations, Tribune saw the protracted negotiations as unnecessary and imprudent. The agendas of both companies were radically different. Tribune wanted Sinclair to do whatever the FCC and Justice Department insisted be done, to get the deal done quickly. Sinclair wanted the deal and a way to maintain control, even indirectly, over almost every station involved in the deal. Tribune began threatening to sue Sinclair if it did not agree to the Justice Department’s terms.

Tribune’s growing unease with Sinclair’s behavior culminated in this email exchange between Tribune and Sinclair executives in late December, 2017.

Sinclair finally relented in February, 2018, but only partially. Exasperated Tribune executives were stunned as Sinclair now proposed to sell stations to third parties that maintained “significant ties to Sinclair’s executive chairman,” David Smith, or his family.

“Sinclair would effectively control all aspects of station operations, including advertising sales and negotiation of retransmission agreements with cable and satellite operators,” Tribune said in its lawsuit. “Under these proposed arrangements, Sinclair would continue to reap the lion’s share of the economic benefits of the stations it was purportedly ‘divesting’ and would have an option to repurchase the stations in the future.”

“Sinclair fought, threatened, insulted, and misled regulators in a misguided and ultimately unsuccessful attempt to retain control over stations that it was obligated to sell,” the lawsuit concludes.

The country’s largest owner of local TV stations, the Sinclair Broadcast Group, which reaches over a third of homes across the nation, wanted to get even bigger by merging with the Tribune Media Company. Sinclair is raising concerns among media watchers because of its practice of combining news with partisan political opinion. William Brangham reports for PBS Newshour. (8:58)

Moving on out?

New York’s Public Service Commission on Friday set the stage for ‘an orderly transition’ ending Spectrum’s brief life in New York, to be replaced with a ‘to be announced’ new cable operator to serve the needs of New York subscribers.

Or so the New York Public Service Commission hopes.

Although Friday’s 4-0 unanimous decision to revoke Charter’s merger deal in New York is a public relations and legal nightmare for the country’s second largest cable operator, we suspect top executives are getting a good night’s sleep tonight, not too concerned about the immediate consequences of today’s stunning vote.

Losing New York is what Wall Street would call “a materially adverse event” for any cable operator. New York City is the country’s largest media market. Billions of dollars worth of cable infrastructure, subscriber and advertising revenue, and prestige are at stake. Despite the ‘vote to revoke,’ Charter’s attorneys have signaled for weeks they intend to preserve and protect the cable company’s legal rights, and it is almost certain the PSC’s merger revocation order will meet a court-ordered injunction as soon as next week.

The courts are likely to make the final decision about whether Spectrum can stay or has to go. That aforementioned injunction will stop the clock on any ‘rash action’ and start what could be years of litigation, filled with discovery, endless hearings, stall tactics, blizzards of motions, appeals, more appeals, and then more lawsuits over whatever final exit plan is eventually filed, if one is required by the courts. A judge could also order the cable company and the state to work it out in a court-approved settlement, something the PSC seems loathe to do in its two orders published today which make it clear the regulator is done talking only to feel strung along by the cable company.

For the near term, Spectrum customers won’t notice a thing. Even if the PSC was not taken to court, Charter has 60 days to file a six month transition plan, making the earliest date to waive Spectrum goodbye is sometime in early 2019.

To help readers out, we’ve prepared a short FAQ to address any concerns:

Q. Will I lose my cable and internet service?

A. No. Regardless of what happens, the PSC has ordered a transition plan designed to provide a seamless switch between Spectrum and a future provider. For most customers, it will resemble Charter’s own transition from Time Warner Cable to Spectrum.

Q. Who will replace Spectrum?

Not again.

A. The cable industry often resembles a cartel, whose members go to great lengths to protect each other. Historically, no large cable operator will entertain requests for proposals from cities or states requesting a replacement of a cable company already providing service. In short, if a city is fed up with Comcast and wants to shop around for another provider, it is highly unlikely Charter/Spectrum, Cox, Altice/Cablevision, Mediacom, or other providers will submit a bid to replace Comcast. If they did, Comcast could theoretically retaliate in their service areas. Should the Public Service Commission itself solicit bids to replace Spectrum, it is unlikely any operator will send a proposal unless/until Charter indicates it wants to leave the state. This kind of informal protectionism has proven highly effective limiting the power of towns and cities to play companies off each other to get a better deal for their residents.

Q. If Charter loses its court challenge and has to leave, what happens then?

A. If Charter exhausts its appeals and realizes it can no longer do business in New York, it will seek a private sale or system swap with another provider. Comcast would be the most likely contender, having shown prior interest in serving New York and having contiguous cable operations in adjoining states, especially in northern New England, Massachusetts, Pennsylvania and New Jersey. Comcast could agree to trade its cable systems in states like Texas, Florida, or California in return for its New York State’s Spectrum systems, which cover cities across the state. But that is likely years away.

Q. Isn’t Comcast worse than what we have now with Spectrum?

A. Consumer satisfaction surveys suggest the answer is yes. Comcast is routinely rock bottom in customer satisfaction, customer service, pricing, and service options. Its 1 TB data cap on internet service has not yet reached many of its northeastern customers, but most observers expect it eventually will. In contrast, Charter has agreed not to impose data caps for up to seven years after its 2016 merger. But Comcast has delivered more frequent broadband speed upgrades and has more advanced set-top boxes and infrastructure.

Stop the Cap! would vociferously oppose Comcast’s entry in New York, however, just as we did a few years ago when we participated in the successful fight to stop Comcast’s merger attempt with Time Warner Cable.

Q, What other providers might be interested?

A. Altice, which does business as Cablevision or Optimum, is New York’s other big cable operator, providing service exclusively downstate. Altice had aggressive plans to become a big player in the U.S. cable business, but its acquisition dreams were halted by shareholders, concerned about the European company’s already staggering debt, run up acquiring other companies. Altice is currently scrapping Cablevision’s existing Hybrid Fiber Coax infrastructure and replacing it with direct fiber to the home service, which offers improved service. But the company charges a lot for its advanced set-top box, has bloated modem rental fees, and is notorious for vicious cost-cutting, which stalled service improvements at its mobile and cable companies in France and raised a lot of controversy among employees.

Cox could be another contender, but would have to find a few billion to acquire Spectrum’s statewide system. Wild card players include AT&T and Verizon. Verizon would face extreme regulatory challenges, however, because it is the local phone company for most residents in the state. AT&T sold its U-verse system in Connecticut to Frontier Communications and seems increasingly focused on content, not on the systems that deliver content. A hedge fund or private equity firm could also be contenders, but perhaps not considering the high cost to acquire the systems and New York’s reputation for fierce customer protection. Remember, New York insists that a cable company ownership transfer must meet public interest tests, not simply enrich hedge fund participants.

Q. What happens to Charter’s pre-existing deal conditions on rural broadband and speed increases?

A. Officially, the PSC has ordered Charter to continue abiding by the 2016 Merger Order and its deal commitments. The state will likely continue to fine Charter if it keeps missing rural broadband rollout targets until a court stops them or the company leaves. Charter will probably continue rural broadband expansion to show good faith. Charter has met its merger obligations related to speed increases, so it is not currently out of compliance. But a legal challenge offers the opportunity for a third-party judge to suspend or modify existing deal commitments, at least temporarily. It is unlikely Charter will want to invest large sums in its cable systems if it believes it will lose its case in court. The timetable for an upgrade to 200 Mbps Standard speed will likely now occur on a regional basis. The northeast division will still likely activate these speeds across multiple cities in the region sometime this summer, especially in places where it faces competitive pressure. The 300 Mbps upgrade in 2019 is more likely to be impacted by any forthcoming legal action.

Q. Is this political or about the union striking Charter? It is an election year.

A. All things are political to some degree in an election year in New York. That said, the New York Public Service Commission has the nation’s best track record of protecting consumers from bad actor telecom and energy companies. They take their responsibilities very seriously, and have shown consistent independence from the governor’s office, especially in recent years. The Commission was by far the most responsive of any state, including California, in taking our concerns about the Charter/Time Warner Cable merger seriously, and incorporated several of our suggestions into the final Merger Order. We warned the PSC cable companies have routinely reneged or slipped through deal conditions. We even predicted Charter would attempt to count new buildouts in non-rural areas and business office parks towards any commitment to expand their service areas. The PSC smartly conditioned its Merger Order by defining the goal of Charter’s broadband expansion — serving the unserved and underserved. That is why the company is not getting away with counting New York City buildouts towards this commitment.

Cynthia Nixon and Andrew Cuomo, both running for New York governor, neither fans of Charter Spectrum.

Few voters are likely to tie a PSC decision to the governor’s race, although Gov. Andrew Cuomo has repeatedly taken credit and praised the PSC for not tolerating bad behavior from Spectrum. If it was a purely political play, it would originate in the governor’s office. Gov. Cuomo’s Broadband for All program depends on achieving near-100% broadband penetration, something it may not manage if Charter fails its rural buildout commitments. That would be a PR mess. There is ample evidence that Charter’s own conduct was sufficient to trigger this kind of response, with or without an election looming.

New York is also a union-friendly state, and the International Brotherhood of Electrical Workers (IBEW) Local 3 has held out for over a year in the New York City area striking to preserve important job benefits Charter wants to discontinue. New revelations from the PSC outlining Charter’s increasingly bad safety record has strengthened the union’s case that Charter would rather bring in unqualified replacement workers and put safety at risk than settling with a union that essentially built the cable system serving New York City. There is no credible evidence that the union is involved in the PSC’s decision to revoke the merger agreement, although we suspect most affected members will fully support the decision.

Q. Is the PSC being too harsh? Can’t they work it out with Charter?

A. For New York to revoke a merger and effectively boot the company out of business in the state is remarkable. Utility companies that irresponsibly lack a credible disaster plan or do not comply with industry standards to maintain tree trimming and infrastructure repairs that result in plunging parts of upstate into darkness for up to two weeks after wind storms in two consecutive years were fined, but not ordered to leave. The ongoing scandal of competing private ESCO electric companies that have almost all scandalously overcharged New Yorkers with electric bills higher than their incumbent utility have been threatened with de-certification and fines, but are still conducting business, even though much of their marketing material was misleading.

Is it too late to work it out?

That should tell you the PSC’s move today was a final straw. The two parties have negotiated and debated Spectrum’s performance lapses for nearly a year. Tension was clearly rising by the spring after the PSC uncovered evidence Charter was intentionally counting areas it knew were outside of the spirit and language of the merger order’s rural broadband deal commitments. Charter’s brazen behavior achieved a new low when it questioned the PSC’s authority to oversee the merger agreement Charter signed. At one point, it unilaterally announced it would only honor the deal commitments found in one appendix of the Merger Order, conveniently ignoring the section describing and defining the rural broadband commitment Charter agreed to. The company also continued to air what the PSC declared to be false advertising, promoting Charter’s claimed accomplishments in rural broadband expansion. Charter repeatedly ignored warnings to suspend and remove those ads. In fact, the PSC issued strongly worded warnings to Charter at least twice, specifically outlining the possibility of canceling the merger agreement and forcing Spectrum out of the state. In response, Charter began staking out its legal arguments in filings, obviously preparing for litigation.

The PSC would probably argue it is impossible to work things out with a company that repeatedly breaks its own commitments. The PSC also openly worried what message it would send to other regulated utilities if it did not react strongly to Charter’s behavior. If the company had a corporate agenda to cheat New York out of important rural broadband expansion, negotiating, fining, and sanctioning a company is unlikely to change its behavior at the top.

Stop the Cap! had earlier recommended the PSC adopt new sanctions to force Charter to comply with its commitments, and expand them to bring service to many New Yorkers who were left behind by Gov. Cuomo’s Broadband for All program, suddenly saddled with satellite internet service. A large percentage of those affected are frustratingly close to nearby Spectrum service areas and although it would cost Charter a significant sum to reach them, it would deliver a financial sting for their bad behavior while also bringing much-needed internet access to the leftovers left-behind by the governor’s broadband expansion program. Such a settlement would require the company to actually comply with their commitments, something the PSC had been unable to achieve through no fault of their own. Perhaps a judge might have better luck should a negotiated settlement come up in litigation.

Last week, AT&T announced its intention to abandon an appeal of a decision of the 9th Circuit Court of Appeals granting the Federal Trade Commission the right to continue its lawsuit against AT&T for speed throttling its “unlimited data” wireless customers.

The notification came in a surprising four sentence notice filed with the court May 30:

At the May 10, 2018 case management conference in this matter, AT&T informed the Court that it expected at that time to request a 60-day extension from the Supreme Court of the deadline to file a petition for certiorari. See Audio Recording of May 10, 2018 Hr’g at 7:22. Since that hearing, AT&T has decided not to request such an extension and not to file a petition for certiorari to review the decision of the en banc Ninth Circuit, see 883 F.3d 848 (9th Cir. 2018). The deadline to file a petition for certiorari lapsed on May 29, 2018.

AT&T spokesman Mike Balmoris later told reporters: “We have decided not to seek review by the Supreme Court, to focus instead on negotiating a fair resolution of the case with the Federal Trade Commission.”

AT&T’s sudden change of heart surprised many observers, including some closely following the case at the 9th Circuit, which has held regular court supervised meetings to prepare for the widely expected Supreme Court challenge. AT&T notified the court in early May it would file its appeal as soon as May 29, and the court was preparing new discovery guidelines and deadlines between the two parties as the case proceeded.

AT&T had achieved a major victory in 2017 when a three-judge panel at the Ninth Circuit agreed with AT&T’s argument that the FTC had no jurisdiction over the company because part of its business includes traditional telephone service, something defined in law as being regulated exclusively by the FCC. At the same time, the FCC did not seem to have jurisdiction either, because wireless data throttling took place over a network not subject to common carrier service regulations.

Ninth Circuit Court of Appeals — San Francisco.

The Ninth Circuit then agreed to hear the case once again, this time “en banc” — meaning the full court would re-hear the case instead of a limited panel of three judges. In February, the court unanimously found the FTC did have regulatory jurisdiction over AT&T after all:

We conclude that the exemption in Section 5 of the FTC Act – “except . . . common carriers subject to the Acts to regulate commerce” – bars the FTC from regulating “common carriers” only to the extent that they engage in common-carriage activity. By extension, this interpretation means that the FTC may regulate common carriers’ non-common-carriage activities.

[…] This statutory interpretation also accords with common sense. The FTC is the leading federal consumer protection agency and, for many decades, has been the chief federal agency on privacy policy and enforcement. Permitting the FTC to oversee unfair and deceptive non-common-carriage practices of telecommunications companies has practical ramifications. New technologies have spawned new regulatory challenges. A phone company is no longer just a phone company. The transformation of information services and the ubiquity of digital technology mean that telecommunications operators have expanded into website operation, video distribution, news and entertainment production, interactive entertainment services and devices, home security and more. Reaffirming FTC jurisdiction over activities that fall outside of common-carrier services avoids regulatory gaps and provides consistency and predictability in regulatory enforcement.

In short, AT&T’s “get out of regulatory oversight free”-card was revoked, much to its consternation. The company promised a fast appeal to the Supreme Court. The case concerned a number of observers, not the least of which was the Federal Communications Commission, which has been so concerned about AT&T’s novel argument to escape regulation, it filed a brief supporting the FTC with the court:

If the en banc Court were to adopt AT&T’s position that the FTC Act’s common-carrier exception is “status-based” rather than “activity-based,” contrary to the reasoned analysis of the district court below, the fact that AT&T provides traditional common-carrier voice telephone service could potentially immunize the company from any FTC oversight of its noncommon-carrier offerings, even when the FCC lacks authority over those offerings—creating a potentially substantial regulatory gap where neither the FTC nor the FCC has regulatory authority.

That approach is contrary to a common-sense reading of the relevant statutes and could weaken or eliminate important consumer protections. While AT&T may prefer to offer services in a regulatory no man’s land, the law does not dance to AT&T’s whims.

While AT&T publicly expressed confidence about its appeal right up to the day it abandoned it, minutes from the Ninth Circuit trial scheduling and progress conferences reveal AT&T and the FTC were already privately talking with each other to avoid further litigation:

“Parties reported that they are conducting settlement negotiations.”

All observers agree a successful appeal by AT&T to the Supreme Court could have put telecommunications laws and regulations into chaos. Had AT&T successfully restored the three-judge panel’s decision, any telecommunications company could walk away with impunity from FCC and FTC oversight by simply starting a small telephone company serving just a handful of customers. Just one product or service subject to common carrier rules could effectively immunize a phone or cable company from regulations indefinitely, or until Congress changed the law to close that loophole.

Some observers predict AT&T’s decision not to appeal is a prelude to an imminent, favorable permanent settlement of the four-year old case. The evidence strongly suggests AT&T will likely escape any significant monetary punishment, and affected consumers may not get significant (if any) compensation for AT&T’s prior acts:

• The FCC shows no sign of following through on a 2015 press release threatening AT&T with $100 million in fines for its failure to properly disclose its speed throttling policy arbitrarily imposed on unlimited data customers who exceeded a company-defined amount of data usage. At the time the press release was issued, there were three Democrats and two Republicans serving on the Commission. Both of those Republicans opposed the fine and are now part of the Republican majority at the FCC under the Trump Administration. The FCC admitted in court papers that no further action has been taken to fine AT&T. The case was largely left in the hands of the FTC.
• During the Obama Administration, the FTC claimed it was interested in pursuing refunds for affected customers and punishing AT&T for its throttling practices. Last week, Andrew Smith, the FTC’s new director of the Consumer Protection Bureau told an audience today’s priority it to monitor providers over traffic throttling and making sure those practices are transparently disclosed to customers. “We’re planning to examine current practices in the industry,” Smith said. “We’re looking for areas in which ISPs may be engaged in unfair or deceptive practices, and we will bring enforcement action as appropriate.”

Smith

For AT&T, the decision to drop its appeal may have come down to whether it preferred to temporarily escape regulatory oversight until an enraged Congress passed new laws to put AT&T and other telecom companies back under oversight, or living with the kind of “light-to-little touch” regulatory approach favored by the Trump Administration and its regulatory agencies. Whatever deal emerges between AT&T and the Trump Administration’s FTC will likely be “win-win” for the company and the regulator, with consumers offered only token relief.

The goals likely to be achieved in any settlement:

• AT&T would clearly like to avoid a $100 million fine and other enforcement actions, so agreeing to ease throttling (something it has done already) and better disclose the practice would hardly create a problem for the company, especially if fines are dropped as a result.
• The FCC’s new “net neutrality” policy depends almost entirely on effectively abdicating oversight responsibility to the FTC, something embarrassing and hard to justify if AT&T managed to permanently bar the agency from regulating the company.
• The FTC can claim victory by telling consumers they are watching ISPs for undisclosed and unwarranted throttling, without opening up new legal challenges by outright banning of the practice, heavily fining violators, or collecting damages on behalf of customers victimized by prior bad acts.

The wireless industry’s largest lobbying group, CTIA-The Wireless Association, filed suit in a Utah federal court Wednesday to stop the state from imposing a 36 cent surcharge wireless carriers like AT&T, Sprint, and Verizon Wireless cannot easily pass on to their customers.

The new fee, retroactively charged from the beginning of 2018, applies to all telephone lines other than prepaid wireless phones, and represents the chief funding mechanism for Utah’s Universal Public Telecommunications Service Support Fund, which supports providing service in high cost rural areas of Utah and the expenses attributed to Utah’s participation in the federal Telephone Lifeline program, which provides subsidized telephone service to the poor.

The CTIA is upset because its member companies will have to assess the surcharge on almost every customer with a landline or wireless postpaid phone in the state, including customers getting free wireless service through the federal Lifeline program. The CTIA argues that puts an unfair burden on companies, especially those asked to either eat the cost of the surcharge or attempt to collect 36¢ a month from Lifeline customers that currently do not receive bills from their providers.

The lobbying group called its options “a Hobson’s choice” between two bad ideas. Because wireless carriers don’t want to absorb the surcharge and pay for it out of current revenue, the alternatives are to either pass along the cost to customers or raise rates. CTIA’s complaint predominately focuses on what it calls the “absurd real world results” of wireless companies struggling to get paid back the 36¢ monthly surcharge:

Participants in these [Lifeline] programs are frequently members of “unbanked” communities, and even a monthly rate of $0.36 may prove an insurmountable obstacle to participation in the Lifeline program. Those without bank accounts or a credit card have no effective means to remit a surcharge of $0.36. If they choose to mail cash, they would have to spend more on postage than on the surcharge itself. Or they may need to purchase a money order, if such are available in increments of $0.36, and pay both the charges applicable to obtaining a money order and the cost of postage – all well in excess of the $0.36 due under the PSC Rule.

[…] The PSC Rule has a chilling effect on the introduction of service offers in the market today. Carriers that have an interest in introducing innovative service plans that have or are likely to have intrastate revenues near, at, or below $0.36 will have to determine whether to select a collection method illegally imposed on them under the PSC Rule or to not offer such service plans at all.

[…] Further, requiring the underlying wireless carrier to pay the required $0.36 per month UUSF surcharge in such third-party retail prepaid situations would not cure this discrimination, as the wireless carrier generally has no billing relationship with the end-user customer, and therefore no ability to pass the charge through to the end-user customer. Requiring wireless carriers to remit the UUSF surcharge in those situations, notwithstanding their inability to pass the surcharge through to the end-user customer, is equally discriminatory vis-à-vis service providers who can pass through the UUSF surcharge to customers.

The CTIA doesn’t dwell on the real world impact of its member companies, with revenues well into the billions of dollars, simply absorbing the 36¢ a month charged to their Utah customers as a cost of doing business. Instead, the lawsuit argues Utah cannot apply USF surcharges in a way that is “inconsistent with the requirements related to the federal universal service Lifeline program.”

CTIA argues the surcharge, when applied to Lifeline customers, unfairly increases rates for the most-needy. But the lobbying group was equally concerned the charges would not apply to competing prepaid wireless providers, because the Utah Public Service Commission lacks statutory authority to impose surcharges on those providers. The CTIA argues the surcharge is discriminatory and not competitively neutral, because the it allows third-party retailers of prepaid wireless telecommunications services like Tracfone to avoid the surcharge.

The CTIA is seeking a permanent injunction to stop the surcharges and has asked the court to order the defendants — essentially Utah’s taxpayers — to pay its court costs.

Charter Communications is taking the city of El Centro, Calif., to federal court for interfering in a dispute between Spectrum and a local TV station owner that has resulted in two stations being blacked out on the local cable system for nearly three months.

Northwest Broadcasting, Inc., has been in a contract extension dispute with Charter Communications over multiple stations, including its two El Centro-area affiliates KYMA (NBC) and KWST (CBS). Charter accuses Northwest of gouging, claiming “Northwest demanded an 80 percent increase in carriage fees, more than double the rate Charter pays any other broadcaster anywhere else in the entire country.”

On March 7, 2018, the City of El Centro got involved and cited the cable operator, alleging Charter violated five provisions of Article X of the City Code, and began fining the cable company $100 a day for each violation, assessed each day the dispute continues.

El Centro accuses Charter of:

• Discriminating against subscribers based on specific protected classes;
• Failure to notify the city and subscribers 30 days in advance of any changes to cable service or rates;
• Failure to establish a time frame to respond to service interruptions;
• Failure to refund customers for service interruptions exceeding a stated period;
• Failure to notify the city and subscribers 30 days in advance of any changes to the cable television channel lineup.

El Centro Mayor Sheryl Viegas Walker: “I’m taking it to the streets. I’m so fed up with [Spectrum’s] disregard for this community,” KYMA in El Centro reports. (3:02)

Northwest Broadcasting CEO Brian W. Brady strongly disputes Charter’s claims, dismissing them as “lies,” particularly surrounding the removal of two El Centro stations from Charter’s lineup after the cable company claimed Northwest refused permission to continue carrying the stations while renewal talks continued.

“Charter accepted the first two extensions which were offered to them, however, they refused the third extension and took our stations off with 10 minutes notice,” Brady said.

Charter’s lawsuit argues El Centro officials have no right to intervene in the dispute, force Spectrum to put the stations back on the lineup, or require Charter to issue refunds to customers for channels that are no longer available to them.

“Northwest’s pulling its authorization for Charter to carry its broadcast signals is not a ‘service interruption’ within the meaning of the City Code provisions in question,” Charter argued in its lawsuit. “Even if it were, while El Centro demands that Charter ‘cure’ its alleged violations, the only means for Charter to do so is to finalize a retransmission agreement with Northwest. The City’s citations are thus intended to pressure Charter to accept Northwest’s unreasonable terms by imposing fines and intentionally damaging Charter’s reputation and harming its goodwill and relationships with its existing and prospective customers.”

Charter argued giving refunds to customers over the lost channels was “contrary to Charter’s terms of service, and in so doing improperly interfere [sic] with Charter’s contractual relationship with its customers.”

Charter is relying heavily on California’s statewide video franchise law — the 2006 Digital Infrastructure and Video Competition Act (DIVCA), heavily pushed by telecom lobbyists a decade ago, which stripped most local authority over cable systems and transferred it to the state government. Charter is using DIVCA’s light touch regulations to support its assertion El Centro officials cannot interfere in programming disputes and that their actions during the dispute have only made things worse.

“The effect of the City’s actions has been to harden Northwest’s negotiating position and make a deal on reasonable terms even more difficult,” the complaint says.

“I have never seen a corporate entity act with such disregard for our community,” said El Centro Mayor Sheryl Viegas Walker. “We have a contract with them that spells out certain steps that they’re required to take if those kinds of changes are going to be made. They didn’t do that. We wake up one morning and we’re suddenly without two major channels.”

“Rather than negotiating in good faith like all other parties would do and what the law requires, Charter has taken a ‘take it or leave it’ approach,” added Brady. “In an effort this week to get this back on track, Northwest submitted a new proposal to Spectrum. Spectrum’s representative communicated that they really wanted to get this resolved, but would not counter Northwest’s proposal and would not respond at all in writing. Odd behavior for a company that claims to be negotiating in good faith. It appears that Charter would rather bully a small municipality than to engage in a good faith negotiation.”

It appears other small cities are joining Brady’s cause, complaining to the Federal Communications Commission that Charter was unfairly profiting from station blackouts. In Crescent City, Calif., city officials accused Charter of charging a Broadcast TV surcharge of $7.50-8.85/month, but didn’t change or adjust rates after the Northwest Broadcasting blackout began.

“Despite the fact the fee is itemized and justified as a pass-through, Charter did not eliminate or reduce that fee, even though it was no longer incurring costs associated with carriage of … at least two network affiliates,” Crescent City officials told the FCC.

The two California cities have also been joined by officials in Yuma, Ariz. and Jackson, Wyo., where Charter has removed Northwest Broadcasting stations as well.

“We have learned that it is no different for numerous municipalities which have been forced to sue Charter to collect the fees that are contractually owed to them,” Brady said. “Most disputes are settled because Charter uses their army of lawyers to outspend the municipalities forcing the municipality to settle on Charter’s terms, regardless of their contractual obligations. It’s no different for their customers who have told us that Charter recently raised the broadcast surcharge fee in spite of the fact that the programs they want to watch are unavailable because Charter removed the programming. Many have asked for refunds only to be told no. What is the customer to do, sue Charter?”

Northwest Broadcasting Owned and/or Operated Television Stations

KPVI-TV in Pocatello, Ida. was widely seen in parts of Wyoming over Charter Communications until the station was blacked out in a contract dispute. Now viewers want to see Charter fined. (1:11)

Charter officials claim there was insufficient time to notify subscribers about the loss of Northwest Broadcasting stations from the TV lineup, but Jackson, Wyo., officials noted Charter bought a new domain name reflecting the contract dispute at least two weeks before stations like KPVI were blacked out. (1:02)

Jackson city officials question a Charter representative about refunds for customers paying surcharges for broadcast TV stations no longer on Charter’s lineup. (0:57)

How to File a Petition on this Issue with the Federal Communications Commission:

This petition allows for public comment until April 16, but the FCC requires some special steps for individuals wishing to file comment. Below is a list of the requirements to file a public comment with the FCC regarding Charter Communications:

• Members of the public who wish to comment should do so on or before April 16, 2018.
• Filing should be submitted to the FCC via the electronic comment filing system (ECFS).
  • That system is accessible at https://www.fcc.gov/ecfs/filings.
  • A member of the public should type his or her comments and save them.
  • At the top of the ECFS page, select standard filing and in the “proceedings” box, type 18-91 (the proceeding is MB Docket No. 18-91).
  • Fill out the remainder of the boxes with information that is required (some information is optional).
  • At the end of the form, there is a box where saved comments can be uploaded.
• Comments that contain statements of fact (for example, “Here is what happened to me”) should be supported by an affidavit.
• “Comments or oppositions shall be served on the petitioner and on all persons listed in petitioner’s certificate of service…” The petitioners here are the Cities, and the certificate of service is at the end of the communities’ filing, which can be downloaded from https://www.fcc.gov/ecfs/filing/1032236683943.