AT&T will sell its operations in Puerto Rico and the U.S. Virgin Islands to John Malone’s Liberty Latin America, Ltd., setting up a virtual market monopoly for Liberty, which already owns cable operator Liberty Cablevision of Puerto Rico.

Liberty Latin America has agreed to pay $1.95 billion in cash to acquire 1.1 million AT&T cellular, landline, and internet customers in both U.S. territories.

AT&T intends to use the proceeds of the sale to reduce debt and allow the company to lay the foundation to buy back more of its own shares, pleasing investors. AT&T had originally sought up to $3 billion for the Caribbean networks, partly acquired from a 2009 acquisition of Centennial Communications, which cost AT&T less than $1 billion.

Analysts say the low selling price shows AT&T is feeling pressure from activist investor Elliott Management, which has been pushing AT&T to divest non-core assets. The selling price was also impacted by the distressed state of AT&T’s infrastructure and customer base, impacted by Hurricane Maria in 2017, which damaged both the Virgin Islands and Puerto Rico and displaced hundreds of thousands of residents.

Liberty already has a major presence in Puerto Rico through its cable system — Puerto Rico’s largest pay television and broadband provider. Cable tycoon John Malone will effectively control Puerto Rico’s largest wireless phone and cable company. Claro, Puerto Rico’s landline provider, will be its chief competitor.

The two companies said they expect the deal to close within six to nine months.

The next standard for cable broadband is now due by 2020.

CableLabs is working on the next generation of broadband over existing Hybrid Fiber-Coax (HFC) networks, finally achieving identical upload and download speed and supporting more spectrum on existing cable lines, which could mean another leap in broadband speed.

DOCSIS 4.0 is still evolving, but according to Light Reading, the next upgrade will fully support Full Duplex DOCSIS, allowing customers to get the same upload speed as their download speed, and will fully implement Low Latency DOCSIS which could reduce traffic delays to under 1 ms. The new standard will also introduce Extended Spectrum DOCSIS, which will open up broadband traffic on frequencies up to 1.8 GHz — 600 Mhz more bandwidth than available today. That additional spectrum will allow for speed increases in excess of 1 Gbps, support IP video traffic, and backhaul for wireless applications like small cells. 

According to Light Reading, people familiar with the development of the cable broadband specification believe much of the work will be complete by the end of 2019, with the spectrum expansion specification expected before mid-2020. This would allow the introduction of DOCSIS 4.0 modems for purchase beginning in 2021.

Cable operators are largely taking a break on large investments this year, with few planning major infrastructure changes beyond some projects underway at Comcast and Altice-Cablevision’s ongoing replacement of its HFC network with fiber to the home service. In 2020, operators will make crucial decisions about their next upgrade commitments. Comcast and Altice will have the easiest time delivering symmetrical broadband because Comcast will support the “Node+0” design that eliminates amplifiers between the nearest node and the customer’s home. This will facilitate the introduction of symmetrical speeds. Altice is dropping the DOCSIS standard as it moves to fiber service, which already supports symmetrical speeds.

Other cable operators are not currently committed to removing amplifiers from their networks, supporting alternate designs like “Node+1,” “Node+2,” etc., which are similar to today’s cable system designs. Instead, they are hoping to leverage Extended Spectrum DOCSIS to boost their speeds. Most will likely offer significant speed bumps for uploading, but those speeds won’t match download speed. For example, Charter Spectrum or Cox might upgrade customers to 500/100 Mbps service, on the theory that 100 Mbps upload speed will still be a welcome change for customers, and not noticeably slower for most current applications, such as uploading videos or file storage in the cloud.

Industry trade association NCTA reports that Comcast, Charter, Cox, Mediacom, Midco, Rogers (Canada), Shaw Communications (Canada), Vodafone (Europe), Taiwan Broadband Communications, Telecom Argentina, Liberty Global (Europe/Latin America) are all implementing the industry’s 10G initiative, with lab trials already underway, and field trials beginning in 2020. DOCSIS 4.0 will ultimately be a part of that project.

CableLabs is already making plans for DOCSIS 4.1 (our name, not theirs), that will further extend DOCSIS spectrum up to 3 GHz — a massive upgrade in usable spectrum. Whether that will be technically plausible on aging cable systems last rebuilt in the 1990s isn’t known, and probably won’t be for two or more years. But if it proves technically feasible, DOCSIS 4.1 could be one of the last DOCSIS standards before cable systems consider abandoning HFC in favor of all-fiber networks.

CableLabs has proved itself to be adept at squeezing every bit of performance out of a network that was originally built with simple coaxial copper cable and designed to distribute analog TV signals. DOCSIS 4.1 would support speeds potentially as high as 25 Gbps downstream and 10 Gbps upstream. Customers would require new cable modems and cable systems would have to tighten standards to take aging infrastructure out of service more frequently. Upload traffic would likely be assigned spectrum below 1 GHz, with 1-3 GHz reserved for downloads. By then, television, phone, and internet services would likely all be a part of a single broadband pipe.

Cable systems have enjoyed enormous cost savings over the last 20 years deploying DOCSIS upgrades instead of scrapping their existing HFC networks in favor of all-fiber. Charter Spectrum admitted the cost to upgrade from DOCSIS 3.0 to DOCSIS 3.1 was just $9 per subscriber.

Liberty Cablevision of Puerto Rico has estimated it will take as long as June of this year to fully restore cable and broadband service to Puerto Rico.

It has been over 100 days since Hurricane Maria devastated Puerto Rico and the U.S. Virgin Islands. At least 45% of Puerto Rico remains without any electricity, and the U.S. Army Corps of Engineers estimates it will take until May to fully restore power — eight months after the hurricane hit.

The island’s well-publicized power scandal with a politically-connected contractor also involves a decrepit utility, likely corruption in contract awards, incompetent management, and political interference from conservative groups who want to privatize the island’s utility and sell off its assets to corporate interests and entrepreneurs competing to turn the island into an experimental laboratory for renewable energy sources. All contribute to a slowdown in power recovery because no plan has adequate backing and sufficient resources to quickly bring power back online. Instead, mutual aid assistance from U.S. utilities is gradually rebuilding and strengthening the island’s existing power grid.

Liberty Cable’s original service area.

Liberty Cablevision claims many of its outages are power-related. When power is restored, their service will return as well. But many of their former customers will not. More than 140,000 Puerto Ricans have left since the storm hit Sept. 20 and some experts estimate more than 300,000 more could leave in the next two years. That’s on top of a similar number that have already left over the last decade as a result of the perpetual economic crisis on the U.S. island territory of 3.4 million.

Liberty is rebuilding significant parts of their network, spending millions to replace damaged coaxial cable with fiber optics, especially in areas closest to the eye of the hurricane where damage was greatest.

Liberty Global, controlled in part by cable magnate John Malone, this week completed spinning off Liberty Cablevision of Puerto Rico to Liberty Latin America, a new independent, publicly traded company. Included in the spinoff are Cable & Wireless Communications, a familiar telecom company serving Caribbean islands, parts of Latin America and the African island nation of the Seychelles, and VTR – Chile’s largest cable company.

A portable cell site

Cellular/Cable/Telephone

As of Dec. 29, 11.0% of Puerto Rico’s cell sites remain out of service. One county, Vieques, has greater than 50% of its cell sites out of service.

Satellite Cells on Light Trucks (COLTs) have been deployed in Aguadilla, Arecibo, Cayey, Coamo Sur, Fajardo, Guayama, Manati, Mayaguez Mesa, San German, Vega Baja, and Yauco and Terrestrial Cells on Wheels (COWs)/COLTs in Humacao, Quebradillas, Rio Grande, and Utuado.

U.S. Virgin Islands: Overall, 20.5% of cell sites are out of service. 50% of cell sites in St. John are out of service.

The FCC has received reports that large percentages of consumers are without either cable services or wireline service. While the companies have been actively restoring service, the majority of their customers do not have service because commercial power is not yet available in their respective areas. In Puerto Rico, there are no major telecom switches still affected.

Broadcast Stations

When broadcast stations are listed as “suspected to be out of service,” the statement is based on field scanning of relevant bands. Stations listed may be operating on reduced power or on a reduced schedule.

Television

Puerto Rico

• 5 TV stations are confirmed operational (WKAQ, WIPR, WNJX, WTIN, WORO)
• 2 TV stations are suspected to be out of service (WIPM, WELU)
• 70 TV stations have been issued Special Temporary Authority to be offline
• 30 TV stations have unconfirmed status

U.S. Virgin Islands

• 14 TV stations have been issued Special Temporary Authority to be offline
• 2 TV stations have unconfirmed status

AM Radio

Puerto Rico

• 42 AM radio stations are confirmed operational (WA2X, WABA, WALO, WAPA, WBMJ, WCMN, WCGB, WCPR, WDEP, WENA, WEXS, WGDL, WI2X, WI2X, WI3X, WIAC, WIPR, WISO, WKAQ, WKFE, WKJB, WKUM, WLEO, WLEY, WMDD, WMNT, WMSW, WOIZ, WOQI, WORA, WPAB, WPPC, WPRA, WPRP, WSKN, WSOL, WTIL, WUNO, WUPR, WVJP, WXEW, WYEL)
• 8 AM radio stations are suspected to be out of service (W227, WJDZ, WNVE, WVQR, WYAS, WZCA, WZMT, WZOL)
• 21 AM radio stations are confirmed out of service by the Puerto Rican Broadcast Association (WBQN, WCMA, WDNO, WEGA, WFAB, WGIT, WHOY, WIBS, WIDA, WISA, WIVV, WJIT, WKVM, WLRP, WNEL, WNIK, WOLA, WOSO, WQBS, WRSJ, WUKQ)
• 1 AM radio station has unconfirmed status
• 2 AM radio stations have been issued Special Temporary Authority to be offline

U.S. Virgin Islands

• 2 AM radio stations are confirmed operational (WSTA, WUVI)
• 2 AM radio stations are suspected to be out of service (WDHP, WSTX)
• 1 AM radio station has unconfirmed status

FM Radio

Puerto Rico

• 55 FM radio stations are confirmed operational (WAEL-FM, WCAD, WCMN-FM, WCMNFM3, WCMN-FM6, WEGM, WERR, WERR-FM1, WERR-FM2, WERR-FM3, WFDT, WFID, WIDI, WIRI, WIVA-FM, WKAQ-FM, WKAQ-FM1, WKAQ-FM2, WLUZ, WMAA-LP, WMEG, WMIO, WNNV, WNRT, WNRT-FM1, WNRT-FM2, WNVM, WODA, WORO, WOYE, WPRM-FM, WPUC-FM, WPUC-FM1, WQML, WRIO, WRRH, WRTU, WRXD, WTOK-FM, WTOKFM2, WTPM, WTPM-FM1, WVDJ-LP, WVIE, WVIS, WVJP-FM, WVJP-FM2, WXYX, WXYXFM1, WXYX-FM2, WZAR, WZIN, WZNT, WZNT-FM1, WZOL)
• 8 FM radio stations are suspected to be out of service (W227CV, WJDZ, WNVE, WVQR, WYAS, WZCA, WZMT, WZOL-FM3)
• 17 FM radio stations are confirmed out of service by the Puerto Rican Broadcast Association (WCAD-FM1, WCAD-FM2, WCRP, WELX, WIDA-FM, WIOA, WIOA-FM1, WIOC, WNIK-FM, WQBS-FM, WQBS-FM1, WUKQ-FM, WUKQ-FM1, WXHD, WXLX, WYQE, WZET)
• 3 FM stations have been issued Special Temporary Authority to be offline
• 28 FM radio stations have unconfirmed status

U.S. Virgin Islands

• 2 FM radio stations are confirmed operational (WVIE, WZIN)
• 1 FM radio station is suspected to be out of service (WVIZ)
• 1 FM radio station has been issued Special Temporary Authority to be offline
• 19 FM radio stations have unconfirmed status

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.

A last-ditch effort last weekend by executives of SoftBank and Deutsche Telekom to overcome their differences in merging Sprint with T-Mobile USA ended in failure, killing Wall Street’s hopes combining the two scrappiest wireless carriers would end a bruising price war that had heated up competition and hurt profits at all four of America’s leading wireless companies.

Now Wall Street, hungry for a consolidation deal, is strategizing what will come next.

Sprint/T-Mobile Merger

In the end, SoftBank’s chairman, Masayoshi Son, simply did not want to give up control of Sprint to Deutsche Telekom, especially considering Sprint’s vast wireless spectrum holdings suitable for future 5G wireless services.

The failure caused Sprint Corp. shares and bonds to plummet, and spooked investors are worried Sprint’s decade-long inability to earn a profit won’t end anytime soon. Sprint’s 2010 Network Vision Plan, which promised better coverage and network performance, also helped to load the company with debt, nearly half of which Sprint has to pay back over the next four years before it becomes due. Sprint’s perpetual upgrades have not tremendously improved its network coverage or performance, and its poor performance ratings have caused many customers to look elsewhere for wireless service.

Investors are also concerned Sprint will struggle to pay its current debts at the same time it faces new ones from investments in next generation 5G wireless technology. Scared shareholders have been comforted this morning by both Son and Sprint CEO Marcelo Claure in an all-out damage control campaign.

Son has promised the now-orphaned Sprint will benefit from an increased stake in the company by SoftBank — a signal to investors SoftBank is tying itself closer to Sprint. Son has also promised additional investments to launch yet another wave of network upgrades for Sprint’s fourth place network. But nothing is expected to change very quickly for customers, who may be in for a rough ride for the immediate future. Son has already said his commitment to raise Sprint’s capital expenditures from the current $3.5-4 billion to $5-6 billion annually will not begin this year. Analysts claim Sprint needs at least $5-6 billion annually to invest in network improvements if it ever hopes to catch up to T-Mobile, AT&T, and Verizon Wireless.

Masayoshi Son, chairman of SoftBank Group

“Even if the next three-four years will be a tough battle, five to 10 years later it will be clear that this is a strategically invaluable business,’’ Son said, lamenting losing control of that business in a deal with T-Mobile was simply impossible. “There was just a line we couldn’t cross, and that’s how we arrived at the conclusion.”

During a call with analysts on Monday, Sprint’s chief financial officer Tarek Robbiati acknowledged investors’ disappointment.

Investors were hoping for an end to deep discounting and perks given to attract new business. T-Mobile’s giveaways and discounting have reduced the company’s profitability. Sprint’s latest promotions, including giving away service for up to a year, were seen by analysts as desperate.

Son’s own vision plan doesn’t dwell on the short-term, mapping out SoftBank’s progress over the next 300 years. But for now, Son is concerned with supporting the investments already made in the $100 billion Vision Fund Son has built with Saudi Arabia’s oil wealth-fueled Public Investment Fund. Its goal is to lead in the field of next generation wireless communications networks. Sprint is expected to be a springboard for those investments in the United States, supported by the wireless company’s huge 2.5GHz spectrum holdings, which may be perfect for 5G wireless networks.

But Son’s own failures are also responsible for Sprint’s current plight. Son attempted to cover his losses in Sprint by pursuing a merger with T-Mobile in 2014, but the merger fell apart when it became clear the Obama Administration’s regulators were unlikely to approve the deal. After that deal fell apart, Son has allowed T-Mobile to overtake Sprint’s third place position in the wireless market. While T-Mobile grew from 53 million customers to 70.7 million today, Sprint lost one million customers, dropping to fourth place with around 54 million current customers.

Son’s answer to the new competition was to change top management. Incoming Sprint CEO Marcelo Claure promptly launched a massive cost-cutting program and layoffs, and upgrade-oriented investments in Sprint’s network stagnated, causing speeds and performance to decline.

Claure tweetstormed damage control messages about the merger’s collapse, switching from promoting the merger’s benefits to claims of relief the merger collapsed:

• “Jointly stopping merger talks was right move.”
• “Sprint is a vital part of a larger SoftBank strategy involving the Vision Fund, Arm, OneWeb and other strategic investments.”
• “Excited about Sprint’s future as a standalone. I’m confident this is right decision for our shareholders, customers & employees.”
• “Sprint added over 1 million customers last year – we have gone from losing to winning.”
• “Last quarter we delivered an estimated 22% of industry postpaid phone gross additions, our highest share ever.”
• “Sprint network performance is at best ever levels – 33% improvement in nationwide data speeds year over year.”
• “We are planning significant investments to the Sprint network this year and the years to come.”
• “In the last 3 years we’ve reduced our costs by over $5 billion.”
• “Sprint’s results are the best we’ve achieved in a decade and we will continue getting better every day.”

In Saturday’s joint announcement, Claure said that “while we couldn’t reach an agreement to combine our companies, we certainly recognize the benefits of scale through a potential combination. However, we have agreed that it is best to move forward on our own. We know we have significant assets, including our rich spectrum holdings, and are accelerating significant investments in our network to ensure our continued growth.”

“They need to spend (more) money on the network,” said William Ho, an analyst at 556 Ventures LLC.

CNBC reports Sprint’s end of its T-Mobile merger deal has hammered the company’s stock. What does Sprint do now? (1:30)

Sprint/Altice Partnership

Sprint executives hurried out word on ‘Damage Control’ Monday that Altice USA would partner with Sprint to resell wireless service under the Altice brand. In return for the partnership, Sprint will be able to use Altice’s fiber network in Cablevision’s service area in New York, New Jersey, and Connecticut for its cell towers and future 5G small cells. The deal closely aligns to Comcast and Charter’s deal with Verizon allowing those cable operators to create their own cellular brands powered by Verizon Wireless’ network.

An analyst at Cowen & Co., suspected the Altice deal may be a trial to test the waters with Sprint before Altice commits to a future merger between the two companies. Altice is hungry for expansion, currently owning Cablevision and Suddenlink cable operators in the U.S. But Altice has a very small footprint in the U.S., leading some analysts to believe a more lucrative merger might be possible elsewhere.

Sprint/Charter Merger

Charter Communications Logo. (PRNewsFoto/Charter Communications, Inc.)

Charter Communications stock was up more than 7% in early Monday morning trading as a result of speculation SoftBank and Charter Communications were restarting merger talks after a deal with T-Mobile collapsed.

CNBC reported that Mr. Son was willing to resume talks with Charter executives about a merger between the cable operator and Sprint. Charter executives have shown little interest in the deal, still distracted trying to merge their acquisitions Time Warner Cable and Bright House Networks into Charter’s current operation. Charter’s entry into wireless has been more tentative, following Comcast with a partnership with Verizon Wireless to resell that considerably stronger network under the Charter brand beginning sometime in 2018.

According to CNBC, John Malone’s Liberty Media, which owns a 27% stake in Charter, is now in favor of a deal, while Charter’s top executives are still opposed.

CNBC reports Charter and Sprint may soon be talking again about a merger between the two. (6:33)

Dish Networks <-> T-Mobile USA

Wall Street’s merger-focused analysts are hungry for a deal now that the Sprint/T-Mobile merger has collapsed. Pivotal Research Group is predicting good things are possible for shareholders of Dish Network, and upgraded the stock to a “buy” recommendation this morning.

Jeff Wlodarczak, Pivotal’s CEO and senior media analyst, theorizes that Sprint’s merger collapse could be good news for Dish, sitting on a large amount of unused wireless spectrum suitable for 5G wireless networks. Those licenses, estimated to be worth $10 billion, are likely to rise in value as wireless companies look for suitable spectrum to deploy next generation 5G networks.

Multichannel News quotes Wlodarczak’s note to investors:

“In our opinion, post the T-Mobile-Sprint deal failure there is a reasonable chance that T-Mobile could make a play for Dish or Dish spectrum as it would immediately vault the most disruptive U.S. wireless player into the leading U.S. spectrum position (w/ substantially more spectrum than underpins Verizon’s “best in class” network),” Wlodarczak wrote. “This possible move could force Verizon to counter-bid for Dish spectrum (or possibly the entire company) as Dish spectrum is ideally suited for Verizon and to keep it out of T-Mobile’s hands.”

AT&T/DirecTV Buyout of Dish Network

Wlodarczak has also advised clients he believes the deregulation-friendly Trump Administration would not block the creation of a satellite TV monopoly, meaning AT&T should consider pairing its DirecTV service with an acquisition of Dish Networks’ satellite TV business, even if it forgoes Dish’s valuable wireless spectrum.

“AT&T, post their Time Warner deal, could (and frankly should) be interested in purchasing Dish’s core DBS business taking advantage of a potentially more laissez faire regulatory climate/emergence of V-MVPD’s, to significantly bolster their DirecTV business (and help to justify the original questionable DirecTV deal) by creating a SatTV monopoly in ~10-15M US households, increased programming scale and massive synergies at a likely very attractive price.”

Such a transaction would likely resemble the regulatory approval granted to merge XM Satellite Radio and Sirius Satellite Radio into SiriusXM Satellite Radio in 2008. Despite the merger, just months after its approval, the combined company neared bankruptcy until it was bailed out with a $530 million loan from John Malone’s Liberty Media in February 2009. Liberty Media maintains an active interest in the satellite radio company to this day.