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Deutsche Telekom Loses All-You-Can-Watch StreamOn Dispute in Germany Over Net Neutrality Violation

While net neutrality in the United States has been neutered by the Republican-controlled FCC, the concept of an online level playing field is alive and well in Germany, and T-Mobile’s parent company Deutsche Telekom (DT) just got called out for a foul ball.

The German telecom giant has lost its legal battle with Germany’s telecom regulator, the Federal Network Agency (Regulator Bundesnetzagentur) over StreamOn, its all-you-can-stream mobile video product that does not count against customer usage allowances. The company introduced the unlimited video streaming service in Germany in 2017, emulating a similar service available in the United States that offers zero rated mobile video content at a reduced video resolution. An appeals court in Münster this week ruled that the German regulator was correct to forbid DT from continuing to offer StreamOn to customers in its present form for two reasons:

  • StreamOn was only available to T-Mobile customers inside Germany or those who visited the country, violating Europe’s “roam like at home” rules that require carriers to not restrict or charge more for mobile services or features when traveling between member states of the European Union.
  • StreamOn violates German net neutrality rules by delivering only T-Mobile approved, speed-throttled, low resolution video content that won’t count against a customer’s usage cap.

“StreamOn must conform to the ‘roam like at home’ principle and customers must have video streaming available in an unthrottled bandwidth,” said Federal Network Agency president Jochen Homann. “The rule of equal treatment is a cornerstone of European net neutrality regulations. The principle of equal treatment has made the internet a driver of innovation, and the diversity of applications and services benefits all consumers.”

Hohmann

DT immediately contested the regulator’s decision and sued. The case has been drifting through German courts since December 2017, with the most recent ruling in favor of the regulator issued by an appeals court, which declared its ruling to be final.

DT has claimed it finds the regulator’s objections “very puzzling indeed,” claiming StreamOn has been wildly popular in the United States and Germany. Two years ago, it warned that if the courts upheld the regulator’s ruling, it would force the company to stop offering it.

“The Bonn-based regulatory authority is ordering us to also offer StreamOn in other EU countries. It bases this order on the EU Roaming Regulation,” DT said in a statement in 2017. “Fulfilling the order would mean the end of our free service, because we would not be able to offer it cost-effectively in other countries.”

Despite its threat to shutter StreamOn in Germany, the company claimed this week it would continue offering the service for the time being, without increasing prices.

“We are delighted that the court has confirmed our interpretation of the law,” a Federal Network Agency spokesman said after the decision was announced. “We will take quick action to ensure that Telekom adjusts its product accordingly.”

“We expect the [Federal Network Agency] to allow an appropriate amount of time to make the necessary adjustments,” a DT spokesman said. “We are convinced that StreamOn is a legal product and will explore all our legal options.”

Cable Infrastructure Suppliers Hurting After Cable Industry Slashes Investment, CapEx Spending

Despite claims from Republican FCC commissioners that cable companies are boosting investment in their networks as a result of the FCC’s repeal of net neutrality, cable infrastructure suppliers reported first quarter 2019 revenues nosedived 38%, reflecting an “extreme” cutback in cable industry spending not seen in over five years.

ARRIS/CommScope and Casa Systems, two major suppliers of cable system infrastructure, saw a broad decline in orders starting this year as companies like Comcast and Charter Communications slashed investment in broadband upgrades. Executives at both cable companies informed investors they expected significant spending cutbacks after completing their DOCSIS 3.1 upgrades, which have made gigabit download speeds available in large portions of the country. Comcast and Charter executives also told investors that large-scale spending is not planned in the near future.

The spending cuts were acknowledged by CommScope CEO Eddie Edwards in a conference call with investors.

“The ARRIS business is off to a challenging start to the year, driven largely by the significant reduction in CapEx spend by certain large cable companies, many of whom have commented publicly on 2019 network and capital priorities,” Edwards said.

The nation’s top two cable operators spent $1.1 billion in the third quarter and $1.4 billion in the fourth quarter of 2018 on system upgrades and investments. But during the first quarter of this year, spending plummeted to $600 million. Jeff Heynen, Dell’Oro’s research director, told Light Reading he has not seen revenues in the cable access network sector drop to such a low level since 2013.

“We’re talking about a significant decline sequentially just for CapEx for two of the largest cable operators in the world,” Heynen told the trade journal. “But this isn’t just one or two operators cutting their CapEx. It’s quite a few of them, and the big ones, too. This was bound to have a significant impact on the infrastructure market.”

Analysts expect cable industry spending will remain sluggish for much of 2019, with a possible turnaround sometime late this year, but more likely in 2020.

RT and New York Times War Over 5G’s Possible Health Impacts

A war between RT, Russia’s external English language news channel and the New York Times over the health impact of 5G technology has given the telecom industry a new talking point: Claims that 5G signals are dangerous are nothing more than Russian fake news.

Generous news coverage about 5G deployment has brought out fringe critics claiming wireless mobile technology causes brain cancer, infertility, autism, heart tumors and Alzheimer’s disease. In some cities in the western U.S., mysterious “Public Health Warning” signs have been placed on utility poles, showing the alleged locations of future 5G cell sites. No one has come forward to claim ownership of the signs, and they are not the work of local officials.

The Times instead blamed the Kremlin’s state-sponsored news outlet RT for stirring up opposition to 5G. Reporter William Broad claimed RT had largely ignored 5G until this year, when it suspiciously aired seven stories about its health risks:

RT’s assaults on 5G technology are rising in number and stridency as the American wireless industry begins to erect 5G systems. In March, Verizon said its service will soon reach 30 cities.

RT America aired its first program assailing 5G’s health impacts last May, its only one in 2018. Already this year, it has run seven. The most recent, on April 14, reported that children exposed to signals from 5G cellphone towers would suffer cancer, nosebleeds and learning disabilities.

[…] The network is now applying its playbook against 5G by selectively reporting the most sensational claims, and by giving a few marginal opponents of wireless technology a conspicuous new forum.

RT’s Rick Sanchez devoted a substantial amount of time on a recent show attempting to refute a New York Times article that claimed Russia was trying to interfere with America’s 5G expansion using fear-mongering. (19:32)

The “Balaclava EMF Shield” is designed to protect you from ambient radiofrequency energy.

One RT host, Rick Sanchez, devoted 20 minutes of a recent show critiquing the Times story and expressing disappointment over the caliber of its reporting. Sanchez suggested the New York Times report was virtually an advertisement for Verizon and narrowed in on an admission near the bottom of the piece that the phone company and the newspaper are now business partners:

Wireless high-speed communication could transform the news industry, sports, shopping, entertainment, transportation, health care, city management and many levels of government. In January, The Times announced a joint venture with Verizon to build a 5G journalism lab.

Sanchez also sought to tie the push for 5G as another example of corporate influence over Washington, noting FCC Chairman Ajit Pai was a former lawyer for Verizon. He also tied 5G into the assault on net neutrality, without explaining why. For its part, the Times suggests, with little evidence, that RT is running a propaganda campaign against 5G to slow down its deployment in the United States, allowing Russia to leap ahead:

Even as RT America has worked hard to damage 5G, the scientific establishment in Russia has embraced a contrary and questionable position: that the high frequencies of 5G communications are actually good for human health. It recommends their use for healing wounds, boosting the immune system and treating cancer. Millions of Russian patients are said to have undergone such high-frequency therapies.

Beauty clinics in Moscow use these high frequencies for skin regeneration, according to a scientific study. One company says the waves can remove wrinkles and fight hair loss.

The back-and-forth arguments have now attracted Washington’s attention, and some in Congress want to hold hearings about a reputed “disinformation campaign” run by Russia against 5G technology. Wireless carriers will welcome such hearings, allowing them to further argue for deregulation of cell placement rules and other zoning matters and claim the U.S. is falling behind in the global 5G race. It is also much easier to dismiss objections to 5G as Russian fake news than to finance a team of experts to counter those claims.

Lost in all of this is the original question about the risks of 5G technology. Much of the health an d safety opposition to wireless technology began long before the concept of 5G was unveiled. Some parents have opposed in-school Wi-Fi as medically harmful. Others fear traditional 3G or 4G radiofrequency energy, which some claim (without substantial evidence) causes cancer.

The health impacts of 5G have not been definitively proven, and it will be important to distinguish between different flavors of 5G to even consider the question. Millimeter wave 5G networks that depend on small cells those signs affixed to utility poles warn about operate at very high frequencies with very low power. No person will likely be within 10-15′ of a small cell because they will be erected on top of utility poles. They also emit a very short range signal unlikely to penetrate walls of buildings, much less your brain or vital organs. The other version of 5G will be placed on existing cell towers and will be no more harmful than 3G or 4G. If one fears radiofrequency energy, they are much more likely to get a large dose of it driving past (or living by) an AM, FM, or TV transmitter that operates at much higher power.

KOIN-TV in Portland, Ore. reported the sudden appearance of ‘Public Health Hazard’ signs warning of the risks of 5G. But are the signs for real? (2:31)

‘Drive-By Pai’ Takes Out Consumer Interests by Favoring T-Mobile/Sprint Merger

Pai

FCC Chairman Ajit Pai found a lot to like about the proposed merger of T-Mobile and Sprint and has recommended his fellow commissioners approve the transaction after the companies offered new commitments to ease anti-competitive and anti-trust concerns.

That typically means the FCC’s 3-2 Republican majority will quickly approve the deal in a forthcoming vote, with three Republicans in favor and two Democrats opposed, if tradition holds.

Pai’s support for the merger is hardly surprising. Since joining the FCC as a commissioner in the second half of the Obama Administration, Pai has consistently opposed every pro-consumer item on the FCC’s docket. He loves industry-consolidating mergers, hates telecom companies being forced to open their businesses to competition on things like set-top boxes, and considers almost all pro-consumer protection policies from net neutrality to merger deal conditions examples of “overregulation” that he argues are harmful to the free market and investment.

The troubled merger, which would create what we will call T-Sprint, has remained under review for months, recently stalled over revelations the two companies tailored the transaction to appeal to President Trump. T-Mobile executives spent $195,000 repeatedly renting rooms at the Trump International Hotel in Washington and spent large sums hiring Trump-connected “advisors” including Reince Priebus and Corey Lewandowski. The merger pitch was changed to emphasize its impact on rapidly growing 5G networks, a talking point favorite of President Trump, who wants to beat the Chinese over the development of next generation wireless networks.

The merger must win approval from both the FCC and the Justice Department. The latter is said to be troubled about the anti-competitive impact of reducing the number of national wireless carriers from four to three. Such a consolidation would likely permanently change the wireless competition paradigm, because there has been no interest among new entrants to construct multi-billion dollar national cellular networks to compete with established wireless companies.

On Monday, T-Mobile and Sprint delivered additional concessions which seem to have won the approval of Mr. Pai.

“Two of the FCC’s top priorities are closing the digital divide in rural America and advancing United States leadership in 5G, the next generation of wireless connectivity,” Pai said in a statement Monday. “The commitments made today by T-Mobile and Sprint would substantially advance each of these critical objectives.”

But a closer examination of “T-Sprint’s concessions” shows there is remarkably little there to protect competition and consumers:

  • A proposed spin off of prepaid Boost Mobile, which relies on the weaker Sprint network, is hardly much of a concession considering it will likely be impacted by the decommissioning of Sprint’s network, requiring at least some customers to buy new equipment that works on T-Mobile’s network. T-Sprint would also continue to control Boost competitors Virgin Mobile and MetroPCS, putting Boost at a distinct disadvantage.
  • The “nationwide” 5G network promised by T-Sprint is replete with fine print. The company will not be formally assessed on its expansion progress for three years, has demanded that T-Mobile’s own employees be allowed to conduct network performance tests — a conflict of interest, and that if it fails to meet its own proposed metrics, the FCC must forego the use of its regulatory forfeiture powers. Instead, the company agrees to pay “voluntary” fines if it fails coverage expansion commitments that are open to wide interpretation and litigation.
  • T-Sprint agreed to expand its “5G” coverage, but will rely heavily on existing macro cell towers and low and mid-band spectrum, shared by a much larger number of users than millimeter wave/small cell technology. That will probably deliver a more modest, incremental upgrade over existing 4G LTE technology, not a game-changer that can deliver gigabit speeds to wireless customers. Nothing precludes AT&T and Verizon from deploying similar upgrades without a competition-crushing merger between the third and fourth largest competitors.
  • T-Sprint’s proposed wireless home broadband replacement does not include a commitment to provide unlimited service. In fact, vague language in the commitment letter suggests T-Sprint will offer the service with a performance and usage expectation akin to other fixed wireless networks. That likely means customers will endure a data cap and speeds that are not comparable to wired technology. Once the company has signed up 9.5 million home broadband customers, any commitments offered to regulators about that service automatically expire.
  • The FCC is expected to give up much of its regulatory authority in return for T-Sprint’s commitments. If T-Sprint walks away from its commitments and not invest billions on its network expansion, it can pay a much smaller fine and have its merger obligations disappear. The FCC will not be able to use its more effective compliance power: forfeiture penalties.

T-Sprint’s argument is that this transaction will accelerate the deployment of 5G technology in a war for 5G supremacy with China. But exactly what technology is deployed, on what spectrum, using small cells or macro cell towers, makes a lot of difference. China’s wireless companies are owned and controlled by the Chinese government, which is also underwriting some of the costs. America’s networks are financed with private capital (and customer bills). T-Sprint’s 5G plans are also far less ambitious than those from AT&T and Verizon, and the cost to long-term competition is too high. The FCC should know that.

Congress has noticed that this merger has been rejected before during the Obama Administration for being anti competitive. Nothing has changed with respect to that. But T-Mobile’s lobbying sure has — this time trying to appeal to the Trump Administration for approval. Pai is certainly on board, and that could cost American consumers plenty.

Most telling of all is Wall Street’s reaction to today’s news. A merger that is being sold as as an AT&T/Verizon killer appears to be anything but. Verizon stock rose by 4.2% and AT&T by 4%. Investors recognize that consolidation can mean only one thing: higher prices. It means the end of the wireless price war that had Sprint and T-Mobile taking potshots at their larger rivals, forcing them to cut prices and bring back unlimited data plans.

It would be ruinous for T-Sprint to continue slashing prices and taunting AT&T and Verizon with costly promotions and giveaways. AT&T and Verizon expect T-Sprint will join their comfortable cartel with suspiciously similar plans and pricing, while firing up to 30,000 redundant workers and decommissioning Sprint’s wireless network. That last fact is well known on Wall Street, too. Cellphone tower owners took a beating in the stock market on the news they could lose Sprint as a customer. American Tower was down 1.9%, Crown Castle fell 3.2% and SBA Communications Corp. dropped as much as 4.5%.

The deal still must pass muster with the Justice Department, and attorneys general from multiple U.S. states are also opposing the deal on the state level. But the Republican members of the FCC joining up to support the deal make it more likely that it will eventually get approved.

FCC Chairman Ajit Pai’s Claims Aren’t Worth the Mug He Drinks From

FCC Chairman Ajit Pai drinking from his oversized mug.

Last fall, FCC Chairman Ajit Pai trumpeted claims that as a result of his successful efforts to rid the United States of net neutrality, the days of reduced investment from the nation’s cable and phone companies were over.

“Since my first day on the job, this agency has been focused on cutting through the regulatory red tape and increasing broadband investment, most importantly in rural America where the digital divide remains all too real,” Pai said in October 2018. “Today’s report confirms that the FCC’s policies to promote broadband deployment are working. After internet service providers reduced new investments in 2015 and 2016 under the prior Administration’s regulatory approach [ie. net neutrality], broadband investment increased in 2017 by $1.5 billion over the previous year. That’s real progress for American consumers, and another step toward better, faster, and cheaper broadband for all Americans.”

Of course, his claims were false last fall. Top executives at the nation’s largest telecom companies have repeatedly admitted that net neutrality had little, if any bearing on their spending plans. Much of the increased spending was, in fact, attributable to:

  • AT&T’s required expansion of its fiber to the home network to meet its obligations from the acquisition of DirecTV.
  • Charter Communications’ committed upgrades as part of its acquisition of Time Warner Cable and Bright House Networks, including switching off analog video and deploying DOCSIS 3.1.
  • Comcast’s increased spending on DOCSIS 3.1 and pushing fiber optics deeper into its hybrid fiber-coax network.
  • Wireless carrier investment in further 4G LTE deployments and network densification.

In the past six months, many of these companies have signaled investors the days of big spending are over, despite the fact the so-called regulatory shackles of net neutrality and other reform measures have been abolished under the Republican-led FCC.

Today, Comcast delivered the ultimate truth blow to Pai’s worthless promises, showing the lowest investment intensity in years. In fact, Comcast reported a huge 19.4% drop in capital expenditures, while achieving a 40.1% EBITDA margin — a signal the company is earning even bigger profits than ever, while at the same time literally slashing investment. One thing that did not decrease was Comcast’s total free cash flow, which rose to $4.592 billion dollars in the last quarter.

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