When AT&T announced it would offer 100+ cable television and broadcast network channels under the DirecTV Now brand for $35 a month, Wall Street had a fit.

Craig Moffett, an analyst with Moffett-Nathanson, speculated that AT&T would make at most a profit margin of $5 a month for its $35 a month plan, once programming costs were covered. But then AT&T announced it would sweeten the deal with a free Apple TV Player or Amazon Fire Stick for those confident enough to prepay for the new service. That makes DirecTV Now a purposefully unprofitable service, creating considerable stress for both the cable and satellite industry and their investors.

Variety notes the average DirecTV satellite subscriber delivers about $60 a month in profit to its owner, AT&T. That led the industry magazine to speculate DirecTV Now is a “loss leader” designed to sell its parent company’s AT&T-Time Warner, Inc. merger deal to regulators on the premise of increased competition delivering real savings to consumers.

Thankfully for Wall Street’s nerves, AT&T’s usual practice of marketing things with a lot of fine print emerged in the nick of time, and the $35 dollar price has now turned out to be an introductory offer for early adopters. In the not-too-distant future, AT&T will enroll new customers for its “Go Big” package at a much more profitable $60 a month. Customers who sign up at the $35 rate and stay customers will be able to keep that price as long as they make no changes to their account after the promotion ends.

Moffett

But Moffett warned investors that the traditional cable television model is still under serious threat, and AT&T’s less-promoted “Live a Little” package offering 60 popular cable networks for the everyday price of $35 is the equivalent of AT&T “running with scissors” because it alone could cause millions of cable and satellite customers to cut the cord and stay more than satisfied with a slimmed down cable package.

“Virtually all the channels that anyone would really want, save for regional sports networks” are included in the lighter “Live a Little” package, Moffett added. Customers who loathe watching sports but want a beefier package can also sign up for a $50, 80-channel “Just Right” package that primarily omits sports-oriented channels and a handful of spinoff cable networks few would miss.

Moffett and other Wall Street analysts were hoping AT&T would bloat its cheaper package with home shopping, religion, and other little-watched, low-cost cable networks and then entice customers to upgrade to unlock more popular cable channels. Instead, AT&T’s most premium package — “Gotta Have It” which costs $70 a month adds the “can live without” networks like Boomerang, Cloo, El Rey, Centric, and other little-known channels that typically live unnoticed in Channel Siberia on 500+ channel cable lineups. The highest premium priced package is attractive only for those looking for Starz/Encore channels and the basic cable network that gets no respect — Hallmark Movies & Mysteries (a/k/a the Dick van Dyke Permanent Employment Network.)

“By stacking their base package with all the best networks — likely a requirement for getting the programming contracts at all — they still have the same problem that was highlighted initially,” by Moffett. “Put simply, they aren’t going to make any money.”

That quest for profit is further challenged with subscriber acquisition programs that dole out free Apple TV units to customers willing to prepay for three months of service at the $35 rate or an Amazon Fire Stick (with Echo remote) in return for prepaying for one month of service. Anyone in the market for either device can sign up for DirecTV Now, get the equipment at an attractive price, and consider the 1-3 months of service a free extra bonus. Customers were reportedly lining up at AT&T’s owned and operated retail outlets (not authorized resellers) to pick up devices and sign up for service today.

At these prices and with these promotions, AT&T DirecTV Now could first decimate the subscriber base of its immediate competitors Sling TV and PlayStation Vue, either of which offer a much less compelling value. AT&T can afford to charge a lower price because it has deeper pockets and enormous volume discounts on the wholesale price of cable programming — combining millions of DirecTV and U-verse TV subscribers together to negotiate what industry insiders suspect are major discounts the smaller providers cannot get.

But there are issues likely to be deal-breakers for some would-be DirecTV Now subscribers:

• Local broadcast stations are available only in a handful of selected cities and only a very few include all ABC, NBC, and FOX affiliates. CBS is not participating in DirecTV Now at this time, and that is a major omission;
• NFL Network isn’t on the lineup;
• Regional sports networks are spotty and geographically restricted. Here is a detailed PDF outlining options by zip code;
• There is a limit of two concurrent streams and although video quality is very good, it is not the 1080/HD experience AT&T’s marketing material would suggest. The quality of your internet connection will make a difference;
• No DVR option at this time.

CNET compiled an excellent channel comparison chart to help consumers figure out which, if any, of these upstarts make sense as a cable TV replacement:

$5 a month each for HBO and Cinemax.

Time Warner, Inc. did its part, offering a substantial deal to DirecTV Now to allow customers to add HBO and Cinemax for just $5 a month each, substantially less than what both networks charge customers signing up a-la-carte. This also unlocks access to streaming options on both networks’ websites.

In fact, as a DirecTV Now customer, you will also become an authenticated pay television subscriber, unlocking access on various cable network websites to extra streaming and on-demand options.

The implications of DirecTV Now depend on how long AT&T extends its $35 offer, which is going to be compelling for a lot of Americans. Moffett predicts DirecTV Now could sign up a staggering 11 million Americans — at least two million cannibalized from its own DirecTV satellite customer base, six million cutting the cord on their cable company (including AT&T U-verse) and another three million cord-cutters or “cable-nevers.” Most of the latter are Millennials, and research suggests $35 may be low enough of a price point to sign them up.

AT&T is also raising concerns among internet activists because online streaming of DirecTV Now will not count against an AT&T postpaid customer’s data allowance. This zero rating scheme is seen as an end run around Net Neutrality, particularly because AT&T is not as generous with its competitors. AT&T said it will offer other video streamers the possibility of being exempted from AT&T data allowances, if they pay AT&T for the privilege.

How It Works/Signing Up

AT&T DirecTV Now starts with the Google Chrome 50+, Safari 8+ or Internet Explorer 11+ (on Windows 8 and up) web browsers or the DirecTV Now app. AT&T recommends Chrome for desktop viewing. The service doesn’t work with Firefox, Microsoft Edge, or legacy browsers.

The first step is registering for a 7-day free trial. Before handing over your credit card number, if you scroll down you will find a small free preview option is also available that includes a largely useless streaming barker channel promoting the service and a respectable collection of video on demand options from basic cable networks. The free video streaming option will give you a clue about how the service is likely to perform on your internet connection and devices. For the record, DirecTV Now now supports:

• Amazon Fire TV
• Amazon Fire TV Stick
• Apple TV (4th generation)
• Android^TM phone 4.4 and higher
• Android tablet 4.4 and higher
• Chromecast (for Android only)
• iPad iOS 9 and higher
• iPhone iOS 9 and higher
• iPod Touch version 9 and higher

Support for other devices like Roku is coming next year.

Customers must be within the United States to use the service. If you travel abroad or to any U.S. territories like Guam, the Virgin Islands, or Puerto Rico, DirecTV Now will stop working until you return. When you sign up, keep in mind your billing zip code will mean a lot when it comes to accessing regional sports and local broadcast channels. DirecTV Now uses your billing zip code and your actual location to determine whether you are qualified to access regional sports networks and local stations.

Score a Free Apple TV Player or Amazon Fire TV Stick

Apple TV (4th Generation): Effectively free after prepaying for three months of service.

If you are looking to score an Apple TV (4th generation) or an Amazon Fire TV Stick, you will want to skip the 7-day free trial and enroll in a paid plan immediately, which will allow you to select which player you want. If you want the Apple TV, you will prepay for three months at $35 a month ($105). The Amazon Fire TV Stick only requires you to prepay for the first month of service ($35). One device per email address, but you can sign up for multiple accounts (using individual email addresses) and get a device for each — especially useful for larger families that could run into DirecTV Now’s two-stream limit.

Consider your choices before enrolling. If you want to add premium channels or upgrade your plan, and you select the three-month prepay option to grab an Apple TV Player, adding premium channels like HBO and Cinemax or moving to a higher plan will result in three months of prepaid charges for those upgrades as well, billed automatically to your credit card on file — which amounts to a $30 charge if you select HBO and Cinemax. After your promotional prepaid term ends, your account will continue to be billed at the $35 (plus any add-ons) rate until you cancel. AT&T covers you for the forfeited first free week by extending your bill date out by seven days. Allow 2-3 weeks for the device(s) to be shipped to you.

You can also sign up at an AT&T owned and operated retail store, but be aware AT&T “authorized” reseller stores are not participating in this promotion. That may allow you to bring home a device today.

Don’t care about the device promotions? Take the 7-day free trial, but be aware that you are giving AT&T your credit card number and charges begin immediately after the free week ends unless you cancel. Here’s how:

1. Sign in to your account.
2. From your User Account overview page, select Manage My Plan.
3. Select the Cancel Plan link.
4. Choose one of the listed reasons.
5. Select Cancel Now to confirm cancellation.

Your subscription will continue until the end of the billing cycle. No refunds or credits are provided for partial months. Your account will revert to Freeview demo status after you cancel a subscription.  You can add a subscription package back at any time.

Oddly, AT&T is not charging sales tax for New York, California, Maryland or Virginia residents. Customers in states like Tennessee where AT&T provides local phone service were most likely to face sales taxes. Those signing up early are in the best position to exploit what appears to be an oversight, or it represents the first time the New York Department of Taxation and Finance left money on the table.

Streaming from Your AT&T Wireless Device Does Not Count Against Your Data Allowance

If you’re a DirecTV Now and AT&T Wireless customer, streaming most DirecTV Now movies and programs over the AT&T wireless network won’t count against your data usage allowance, according to AT&T. But believe it or not, AT&T’s fine print indicates advertisements and non-streaming app activity do count! There are some other important disclosures to be aware of:

• You must be on the AT&T Wireless network within the U.S. (U.S. territories are not qualified for zero rating);
• You must be a postpaid, not a prepaid AT&T wireless customer to qualify and must not have “data block” on your mobile line;
• If you are grandfathered on an unlimited data plan, using DirecTV Now will not count against the 22GB data threshold which subjects you to speed throttling;
• This offer may disappear at any time and/or is subject to change.

DirecTV Now Qualifies You as an Authenticated Pay Television Subscriber

Many cable networks require customers enter their cable, satellite, or telco TV login credentials to unlock video streaming and on-demand features. DirecTV Now is a qualified provider for these websites (more coming):

• ABC
• Disney
• Disney Jr.
• Disney XD
• ESPN (WatchESPN)
• Freeform
• HBO GO (requires subscription to HBO)
• MAX GO (requires subscription to Cinemax)

Other networks are not yet enabled for DirecTV Now. CNN, for example, has a prompt for DirecTV satellite customers to log in, but DirecTV Now has its own account registration system.

Local Channels Are Very Spotty

Local over the air channels are very limited on DirecTV Now and are geographically restricted. You can access these channels only if you are located in or very near to the cities listed below and your billing zip code is in the same area. If you travel outside of the immediate area, live streaming will stop working until you return.

Giving the Service a Test

Stop the Cap! enrolled as an ordinary customer this morning and gave the service a rigorous test, including multiple streams over our 50/5Mbps internet connection. The service debuted today, and there is little doubt there is intense interest from consumers, so we expected some performance problems from the initial demand. We didn’t see any evidence of traffic congestion, however, and that is a good sign.

AT&T’s John Stankey explaining DirecTV Now.

A similar test of Sling TV did not perform as well during peak viewing times, when streaming problems emerged. DirecTV Now seems to be built to withstand intense demand.

One customer with a 6Mbps U-verse internet connection “in the boonies” was impressed the video quality of DirecTV Now was high even on a relatively slow DSL-like connection.

“This blows SlingTV away,” the person shared. “I only have U-verse 6Mbps internet service and it is not pixelated or buffering at all. Looks exactly like my regular DirecTV picture.”

AT&T published these recommendations for DirecTV Now customers regarding internet connection speeds:

• 150kbps – 2.5Mbps – Minimum broadband connection speed for Mobile devices
• 2.5 – 5.0Mbps – Recommended for HD quality

We’ve been led to believe DirecTV Now should perform equivalently to 1080i HDTV service (depending on the video source of course). We cannot say we agree it does right now. We noticed significant artifacts on high-motion video and picture graininess that left us feeling this was closer to a 720p HD experience. It isn’t possible to say whether the video player reduced playback quality because of internet traffic issues we were unaware of or if this is how the picture is supposed to look. It did not significantly detract from the viewing experience and the lack of buffering and pixelation was far more important to us.

AT&T store in NYC.

DirecTV Now would serve adequately as a cable TV replacement if it had local station coverage and some type of DVR. At present, DirecTV Now is limited to a “Restart” feature that allows you to restart shows already in progress on certain channels, but you cannot fast-forward or record a restarted show. Once AT&T introduces a cloud-based DVR and fills out the local station lineup, this service could be lethal to overpriced cable TV packages.

AT&T’s marketing attempts to undercut the powerful position of inertia by setting an unknown time limit for customers to enroll in the $35 a month video package. If you don’t sign up today, you may not get the “free” Apple TV or Amazon Fire Stick and a respectable cable TV package for just $35 a month — about half what cable operators are charging these days for their bloated video packages. AT&T doesn’t care if you stick with your current cable provider and signup for DirecTV Now, if only to grab free streaming video equipment while sampling the service. They get their money either way.

Had AT&T permanently kept the price at around $35, many consumers would likely sit back and wait for AT&T to sort out the streaming contract issues it has with the TV networks — CBS in particular, and come up with a DVR solution before those potential customers decided to sign up and make the change. Based on several “hot deals” websites, the mentality among many consumers is to “lock in” the $35 price now and wait for AT&T to build out the package while continuing to invest $35 a month on it. That doesn’t seem so bad when you get free electronics as part of the deal.

Our Final Take

AT&T’s DirecTV Now is a potential winner and worth signing up for because of the introductory price and free equipment offers. But if you decide not to disconnect your cable/satellite television service, it is probably safe to drop DirecTV Now after your prepayment expires and return to resume service a little later. There will probably be some warning when AT&T will end the introductory price for the service, and interested customers can hop back on board before that date arrives. DirecTV Now will be a formidable competitor, but it will fight against consumer resistance to confront the cable company and cut cable’s cord until it solves the local channels issue and has a credible DVR option. The service could also use an add-on to make adding additional concurrent streams possible and more affordable than just signing up for a second account.

Don’t count out Big Cable just yet. With data caps and other internet overcharging schemes, Comcast, Cox, Suddenlink, and others can play games with usage allowances to deter customers from streaming all of their video entertainment online at the risk of blowing past their allowance. DirecTV Now’s $35 price won’t mean much after overlimit fees begin appearing on your internet bill.

Making America Great for Robber Barons Again

The president-elect’s choice for chairing the Federal Communications Commission may conclude there is little reason to even have a regulatory agency for telecommunications.

Donald Trump has gone farther to the right than any president-elect in modern history, at least in how he has chosen to staff his transition team. Having a place on that team is traditionally seen as a fast track to getting a plum cabinet position or leadership role in Washington’s bureaucracy, and Mr. Trump’s choices for overseeing tech and telecom policy have more in common with Ayn Rand than Ralph Nader.

Two of the top picks for his FCC transition team are true believers in the “laissez-faire/the free market always knows best” camp, but both have also been on the payroll of Big Telecom companies that believe special favors are perfectly acceptable.

The notorious D.C. revolving doorman Jeffrey Eisenach, now a leading contender for the next chairman of the FCC, is a man with so many hats that the New York Times published an exposé on him, noting it has become hard to tell whether Eisenach’s views are his own, those of his friends at the corporate-friendly American Enterprise Institute (AEI), or those of various telecom companies like Verizon that have had him on the payroll.

Eisenach has been heavily criticized for his especially close ties to telecom companies, fronting their positions at various Washington events often under the cover of his role as a “think tank scholar” at AEI. Eisenach despises Net Neutrality with a passion, and has used every opportunity to attack the open internet protection policies as overregulation. At the same time, Eisenach’s consulting firm was also doing work on behalf of the cellular telephone industry, including Verizon and other cell companies.

Eisenach is exceptionally casual about disclosing any paid financial ties, and has received criticism for it. His prominence as a member of the Trump transition team is therefore curious, considering incoming vice president Mike Pence has tried to clean the transition team of lobbyists.

Eisenach

Trump’s other leading contender is Mark Jamison, a former lobbyist for Sprint who now works for AEI. Jamison has received less attention and scrutiny from the telecommunications press, but in some cases his views, well-represented on his blog, are even more extreme than those of Mr. Eisenach.

In a 2013 report to the Florida Public Service Commission, Jamison looked down on consumer involvement in creating and enforcing telecom regulations:

Does customer involvement in regulation improve outcomes? Not always, according to PURC Director Mark Jamison. Speaking at the Australian Competition and Consumer Commission annual conference in Brisbane, Australia, Dr. Jamison explained that the key question is, “Who do we expect to change when regulators and customers engage?” Most discussion on customer engagement is about customers informing regulators about customer preferences and utility practices. Learning by regulators is important, but so are the building legitimacy, ensuring regulator integrity, and engaging in adaptive learning that are largely about changing customers. An over emphasis on changing regulators can result in pandering to current norms, which hinders institutional strengthening and adaptive work.

In that same report, Jamison echoed some of the same sentiments he has made on his blog, questioning the wisdom of regulating telecommunications policies, providing subsidies to ensure affordable telephone service (Lifeline), subsidizing rural broadband expansion, and maintaining the core concept of universal service, which means assuring every American that wants utility service can affordably get it.

Jamison even questioned the need for the FCC in its current form, particularly overseeing rate regulation, fair competition, and enforcing rules that overturn the telecom industry’s cartel-like agreement on mandated set-top boxes (and rental fees), Net Neutrality and interconnection agreements and fees, and consumer protection:

Most of the original motivations for having an FCC have gone away. Telecommunications network providers and ISPs are rarely, if ever, monopolies. If there are instances where there are monopolies, it would seem overkill to have an entire federal agency dedicated to ex ante regulation of their services. A well-functioning Federal Trade Commission (FTC), in conjunction with state authorities, can handle consumer protection and anticompetitive conduct issues.

Content on the web competes well with content provided by broadcasters, seeming to eliminate any need for FCC oversight of broadcasters. Perhaps there is need for rules for use of the airwaves during times of emergency, but that can be handled without regulating the content providers themselves.

The only FCC activity that would seem to warrant having an independent agency is the licensing of radio spectrum. Political interference in spectrum licenses would at least dampen investment and could lead to rampant corruption in the form of valuable spectrum space being effectively handed out to political cronies.

Jamison

Jamison’s theories are interesting, but in the real world they are impractical and frankly untrue. Readers of Stop the Cap! have long witnessed the impact of the insufficiently competitive telecom marketplace — higher broadband fees, data caps, and relentlessly terrible customer service. The costs to provide service have declined, but prices continue to rise. For many consumers, there is barely a duopoly for telecom services with cable companies taking runaway victory laps for providing 21st century broadband speeds while an area’s phone company continues to try to compete with underinvested DSL. The FTC has been a no-show on every important telecom issues of our time, in part because the industry got itself deregulated, leaving oversight options very limited.

It wasn’t the FTC that halted AT&T’s attempted buyout of T-Mobile and Comcast didn’t lose its struggle to acquire Time Warner Cable because of the FTC either. Pushback from the FCC and Department of Justice proved to be the only brakes on an otherwise consolidation-crazed telecom sector.

Oversight of broadcasting remains important because unlike private networks, the airwaves are a publicly owned resource used for the good of the American people. Jamison would abandon what little is left of regulations that required broadcasters to serve the public interest, not just private profit motives. Programming content is not the only matter of importance. Who gets a license to run a television or radio station matters, and so does the careful coordination of spectrum. It is ironic Jamison theorizes that a lack of regulation (of spectrum) would lead to political interference, rampant corruption, and cronyism. Anyone who has followed our experiences dealing with many state regulatory bodies and elected officials over telecom mergers and data caps can already use those words to describe what has happened since near-total deregulation policies have been enacted.

Public and private broadband competitors like local communities and Google have been harassed, stymied, and delayed by organized interference coordinated by incumbent telecom companies. Allowing them off the leash, as Jamison advocates, would only further entrench these companies. We have a long history in the United States dealing with unfettered monopoly powers and trusts. Vital infrastructure and manufacturing sectors were once held captive by a handful of industrialists and robber barons, and consumers paid dearly while those at the top got fabulously rich. Their wealth and power grew so vast and enduring, we are still familiar with their names even today — Rockefeller, Vanderbilt, Morgan, Schwab, Mellon, Duke, and Carnegie, just to name a few.

Jamison wrote a blog entry mapping out how to ultimately destroy the effectiveness of the FCC:

• Take direction from politicians,
• Promote partisan divides,
• Change the language in orders after the FCC votes,
• Ignore the facts, or at least manipulate them.

Jamison intended to argue that represented the current state of the Obama Administration’s FCC, but it is just as easy to ponder what comes after the Trump-lit bonfire of burned regulations and oversight, leaving only Big Telecom companies and their paid mouthpieces to manipulate the facts.

Jamison also undercuts his own argument in two other ways: first by declaring Michael Powell one of the great FCC chairmen of the modern era (after leaving the FCC he became president of the country’s biggest cable industry lobbying group) and second by relying extensively on quoting people with direct and undisclosed financial ties to the telecom companies that will directly benefit from implementing Jamison’s world views.

New York Times: In a 2014 email, Mr. Eisenach encouraged Michael O’Rielly, a Republican FCC commissioner, to use an American Enterprise Institute event to “lay out the case against” internet regulations.

Who doesn’t ultimately matter much in this debate, according to Jamison, are customers and consumers, whose input in these discussions is dismissed as either trendy or misinformed. No similar conclusions are forthcoming from Mr. Jamison about the influence and misinformation emanating from huge telecommunications companies that keep more than a few of his self-interested sources in comfortable suburban Virginia homes, driving their nice cars to and from the offices of shadowy think tanks that receive direct corporate funding or go out of their way to hide their benefactors.

Appointing either Mr. Eisenach or Mr. Jamison to the Federal Communications Commission would be the ultimate rubber stamping of business as usual in Washington, exactly what Donald Trump ran against. That may make Verizon or Comcast “great again,” but it certainly won’t help the rest of the country.

The stunning victory by Donald Trump in Tuesday’s election ended two years of campaigning, negativity, and divisiveness.

Wednesday probably marked the beginning of Election 2020, which will involve four years of campaigning, negativity, and divisiveness.

Before looking at the implications of the forthcoming Trump Administration, some personal words about the results from the perspective of a lifelong resident of western New York, on the periphery of the Rust Belt region that evidently made all the difference for Mr. Trump on Tuesday night.

Casting my vote here in western New York while suffering a severe cold that has now evolved into walking pneumonia, I reflected on the fact this nasty election probably gave it to me. Despite that, I have the good fortune of living in a diverse community. Our next door neighbor, and by far the closest to us personally, is an ardent Republican who supported Sen. McCain, Gov. Romney, and Mr. Trump. Across the street, a reliable panoply of Democratic candidate lawn signs sprout every other fall. I spend my Friday afternoons in a community south of Rochester where Hillary Clinton has been largely reviled since she was a senator of New York. She didn’t win in Ontario County this year either. But Sen. Chuck Schumer routinely wins his elections with little effort or opposition.

Politics in the western half of New York State (known as “somewhere around Canada” to those in New York City and Long Island) is far more comparable to the battleground state of Ohio than reliably Democratic Manhattan. Our urban centers in Buffalo, Rochester, and Syracuse are solidly Democratic, while the suburbs and rural areas are just as likely to elect Republicans to office. Among those disappointed Democrats pondering a surprising election of Donald Trump, many cannot understand how such a result is possible. But having been a lifelong resident in a region that has seen profound changes from the decimation of blue-collar, high-paying manufacturing jobs in states that still cling to tax rates that assume everyone still has one, the Trump rebellion predicted by Michael Moore was hardly outlandish. Across the Rust Belt, more than a few voters have given up believing politicians, and are still waiting for relief from the relentless pressure on the declining middle class. Some of the worst job declines came in this region during the first Bush Administration and then again under President Bill Clinton. Memories are still fresh.

The changes to local economies in this region are profound and extremely difficult to navigate for those who lack advanced degrees or special technical skills. A state like North Carolina understands these changes well. An economy quickly transformed away from tobacco and textiles towards high technology created enormous challenges for many families. Those problems still exist in many parts of the state where infrastructure and good jobs are still lacking more than two decades later.

In Rochester, the formerly solid and reliable employers like Eastman Kodak and Xerox are a fraction of the size they were in the 1980s. My father met my mother at Eastman Kodak, a company that also employed more than half my extended family. But not for long. I vividly recall watching the inauguration parade of President Bill Clinton on television in 1993 on a day that Eastman Kodak carried out another wave of draconian job cuts. My father’s job survived, but my uncle’s did not. My grandfather had retired by then.

Michael Moore correctly predicted the reality of a Trump victory with the support of a disaffected middle class in economically distressed states.

Twenty-three years later, the largest employer by far in this area is the University of Rochester/UR Medicine, which includes the university and an enormous medical treatment infrastructure. Together, this accounts for 22,500 workers. The second largest employer in Rochester is a grocery store. A great grocery store — Wegmans, founded and based here, but a grocery store nonetheless. It accounts for 13,500 jobs. Another 13,000+ workers are employed in medical treatment and hospital services that compete with the U of R. Rounding out top employers are the Rochester City School District with 5,500 teachers, administrators and staff, which is almost as big as Monroe County’s government, which accounts for 4,500 employees. The biggest remaining manufacturer is Xerox, which employs 6,300 workers. But consider this contrast: in 1982 Kodak employed 60,400 in the Rochester area. Today, that number is just 2,300.

Rochester had it easy compared to heavy manufacturing cities to our west. Buffalo, western Pennsylvania, Ohio, and Michigan have been walloped twice — first by the offshoring of heavy industry and then a second round of manufacturing job losses many voters blame on various free trade agreements. Many tens of thousands of these displaced workers have relocated to other states. Exiting residents of Rochester overwhelmingly prefer North Carolina and Arizona for various reasons, while blue-collar workers further west often end up in Kentucky, Tennessee, Alabama, and other southern states. Many of those that remained behind and remember their old jobs are angry, very angry. Some of them supported Bernie Sanders, especially in Michigan. But once the choice came down to Hillary Clinton or Donald Trump, more than a few voted for Mr. Trump, not out of a great allegiance to the Republican party, but because Trump vilified free trade and business as usual in D.C. To these voters, fair or not, Hillary seemed to embody the establishment that has done little or nothing except make speeches.

The election is now over and we have the results. My candidate did not win because she did not run. (Elizabeth Warren in 2020!) On the broadband issues Stop the Cap! is concerned with, a Trump Administration is likely to be bad news for consumer protection, fair pricing, and community broadband, primarily because the people Mr. Trump has chosen thus far to advise him on tech issues are the usual sort with close ties to the largest telecommunications companies in the country, and many have penned papers that have closely aligned with those companies’ public policy positions.

Phillip Dampier: This election gave me walking pneumonia.

Trump transition team adviser Jeffrey Eisenach, for example — who we wrote about back in August, could hold considerable power over the direction President-elect Trump will take tech policy in this country. Eisenach has written papers opposing Net Neutrality, is unconcerned about data caps and zero rating policies, and called fears about consolidation blowouts like the now-dead Comcast-Time Warner Cable mega-merger overblown.

Trump did state opposition to the recent merger announcement from AT&T and Time Warner, Inc., which has Wall Street concerned the deal will be DOA by the time the merger papers are filed sometime early next year in Washington. If President Trump keeps his word on that, there are many more mergers and acquisition deals that will emerge in 2017 that will likely never be on his radar, but will be reviewed by a Federal Communications Commission stacked with commissioners closer in ideology to Ajit Pai and Michael O’Rielly than Thomas Wheeler. In our view, Commissioners Pai and O’Rielly have yet to support any significant pro-consumer policy change on broadband before the FCC. Instead, they have largely parroted Big Telecom’s talking points.

It is our suspicion that most of the merger and acquisition deals dreamed about on Wall Street that would never have gotten through the Obama Administration’s Justice Department and FCC will receive quick approval under a Trump Administration.

While Mr. Trump alludes he will prove to be a complete game-changer to business as usual in Washington, his transition team is being swarmed by the usual faces — corporate lobbyists, big donors, and political hacks angling for cabinet or agency positions. Most of them are Beltway insiders, and many have been through D.C.’s revolving door before — lobbyist -> public servant -> lobbyist.

So while Mr. Trump tells America AT&T and Time Warner is “too much concentration of power in the hands of too few,” we remain uncertain he will speak as loudly about other likely deals, particularly involving Altice, Cox, Mediacom, CenturyLink, Windstream, Frontier, Sprint, and T-Mobile — just some of the hunters and the hunted that may get consolidated in 2017.

On other issues:

• Net Neutrality: Republicans vilified Net Neutrality and a Republican-dominated FCC will likely kill or dramatically downplay any efforts to enforce it. Trump himself has never been a fan. Any new powers won by Chairman Wheeler to regulate internet providers under Title II will also likely be jettisoned by a Chairman Pai or O’Rielly;
• Data Caps/Zero Rating: This issue is important to us, but isn’t likely to see any regulatory action under a GOP-dominated FCC. Internet providers are likely to see a Trump Administration as a green light for data caps and consumption billing;
• Internet Privacy: Efforts to regulate internet privacy will also likely face a reversal from skeptical Republicans who will combine excuses for national security with a “hands off” attitude on telecommunications regulation.
• Community Broadband: The issue of turning back bans on public/municipal broadband will have to be won on the state level. We do not expect to see many friends for municipal broadband in Republican-dominated Washington. The influence of the Koch Brothers, notoriously opposed to public internet projects, has only gotten stronger after this election.

With a GOP-sweep across the Executive and Legislative branches, we expect more deregulation, which is likely to further entrench the broadband duopoly in the United States, if not further expand it with additional consolidation-related mergers and acquisitions, at least among the small and mid-sized players.

On a more personal level, I have been involved in public policy battles surrounding telecommunications issues since 1988. In the late 1980s, I fought for increased competition and regulatory relief for home satellite (TVRO) dishowners and we joined forces to help pass the 1992 Cable Act, which laid the foundation for the emergence of competitors DirecTV and Dish Networks — the first serious competition to the cable industry. That law was vetoed by President George H.W. Bush, but that veto was overridden by the U.S. Congress — the only bill to successfully become law during the first Bush Administration over his objection. Republicans pay cable bills too.

(Image courtesy: Steve Rhodes)

Administrations come and administrations go, but we are still here.

The need for robust consumer protection, true competition, and a level playing field never changes. Your involvement remains essential regardless of what party is in power in Washington. Some battles will be more challenging, but not all. Direct consumer action can make an impact on companies concerned about their brand and public image. Just as consumers are passionate about rising cable bills, broadband is always a hot button issue, especially where service is unavailable or comes only at a price that resembles extortion.

The president-elect says that America doesn’t win anymore. We sure haven’t been winning on broadband, either on speed, pricing, or availability, in comparison to Europe and Asia. The solution is not to turn the problem over to the same companies that created the conditions for broadband malaise we are dealing with now. As seen in fiercely competitive markets like France, true competition is often the only regulation you need. A duopoly answers to itself. Having the choice of four, five, six, or more competing providers answers to customers. Consolidated and entrenched markets resist innovation and the need to compete stagnates. Corporate welfare and ghost-written telecom laws that forbid community broadband restricts economic growth and kills jobs, stranding countless rural residents from the digital economy. That -is- business as usual in too many states where groups like the American Legislative Exchange Council (ALEC) facilitate legislative fixes and legal protectionism that restricts or disadvantages competition.

If Mr. Trump truly believes the words he has spoken, he must be vigilant. He must not surround himself with the same politicians and their minders that created the very problems he promises to fix. The voters that elected him to office expect nothing less than blowing up business as usual. But the nation’s capital has a better track record of changing the politician while resisting change to the status quo.

We wish President Trump success for our country, but we’ll be watching to make certain his rhetoric meets the reality.

It was a busy weekend for AT&T’s Randall Stephenson and Time Warner (Entertainment)’s Jeff Bewkes, culminating in an announcement from AT&T it was acquiring Time Warner in a deal worth $85.4 billion.

AT&T CEO Stephenson will remain as CEO while Bewkes stays temporarily to help oversee the transition of the merged company.

The deal has sparked confusion among some consumers who associate Time Warner with Time Warner Cable, but in fact the two entities are independent companies. Time Warner, Inc., is the entertainment and content provider that owns HBO, Warner Bros., CNN, TNT, and other networks. Time Warner Cable was spun-off in 2009 as an independent cable operator that was purchased by Charter Communications earlier this year.

AT&T’s interest in Time Warner is entirely about its video content. By owning Time Warner, AT&T can win deals to place its video programming on U-verse, DirecTV, and AT&T wireless smartphones and tablets without running into heated contract renewal negotiations, spiraling prices, and restrictions on how that content is viewed.

AT&T is hoping its acquisition will generate more revenue to make up for stalled wireless revenue growth. AT&T customers already can view DirecTV content on their smartphones without it counting against one’s usage allowance. AT&T could offer a similar usage cap exemption for Time Warner-owned programming, although it would raise the ire of consumer groups fighting for Net Neutrality, which prohibits preferential treatment of internet content.

Stephenson

Stephenson hopes the addition of Time Warner to the AT&T family will strengthen his existing plan to compete nationwide with cable television providers, offering a streamed bundle of cable channels under the DirecTV brand starting as early as this winter.

Stephenson has talked to Bewkes about a merger of the two companies since August, but Time Warner has always proved an elusive seller, having earlier rebuffed a buyout attempt from 21st Century Fox. Stephenson was talking to a man who pushed Time Warner Cable out of its corporate family nest back in 2009, and the reasons for doing so were ironic considering this weekend’s acquisition announcement:

Time Warner’s management believed that the separation was the right step for Time Warner based on the changes in Time Warner Cable’s business over time. […] Time Warner’s management believed that there were a number of potential benefits from the separation transaction:

• Time Warner would become a more streamlined portfolio of businesses focused on creating, packaging and distributing branded content.
• Time Warner and Time Warner Cable would each have greater strategic flexibility and each would have a capital structure that better suits their respective needs.
• The separation would provide investors with greater choice in deciding whether to own shares of Time Warner or Time Warner Cable or both companies based on their separate portfolios of businesses and assets.

What regulators ultimately think about the deal will probably take at least a year to learn, but reaction from Wall Street and both political parties was decidedly negative. AT&T’s decision to pay half the purchase price in cash worries investors more than the remainder of the cost paid in stock. AT&T’s stock price is falling, upsetting investors concerned about AT&T’s dividend, and the market may be signaling concern the merger might be a mistake of epic proportions similar to the disastrous $164 billion AOL-Time Warner merger in 2000.

Bewkes

Tom Eagan, an analyst with Telsey Advisory Group, said owning Time Warner for its content didn’t make much financial sense when it could license it for considerably less, as it does now.

“Why buy the cow when you get the milk for free?” Eagan wrote his clients.

Many analysts are wondering what changed Bewkes’ thinking that led to him spinning off Time Warner Cable in 2009, with his decision to sell in 2016. Time Warner got rid of its video distribution business because consumers were increasingly looking for alternatives to cable television. In 2000, that came primarily from satellite providers. Today it’s cord cutting.

Combining AT&T and Time Warner would create a mega-corporation that would own or control many of the largest cable networks and a major Hollywood studio and allow AT&T to maintain absolute control over how that content was distributed. Shareholders were concerned about the price tag of the deal, driving shares down in both companies. Combining AT&T’s existing debt with Time Warner will leave the combined company saddled with $175 billion in debt — a massive amount of money that may not be financed at near zero percent interest for long, if the Federal Reserve boosts interest rates. Moody’s has put AT&T’s credit ratings up for review for a possible downgrade as a result.

Both Republicans and Democrats reacted with unease about the prospect of creating another Comcast/NBCUniversal-sized entertainment company. Almost all were skeptical about the benefits to consumers. AT&T’s competitors seemed even more chilled, fearing AT&T’s control of both the content and the means to distribute it would give the juggernaut an unfair advantage. For example, AT&T could give itself a discount to carry Time Warner programming on U-verse and DirecTV that would be unavailable to competitors. It might also take a harder line on competing providers at contract renewal time.

Some regulators and politicians believe bigger has not proved better for consumers in the telecom space, particularly after seeing the results of Comcast merging with NBCUniversal. Critics contend Comcast has never taken the deal’s approving consent decree seriously, and have dragged their feet on adhering to the deal’s many conditions. Consumers have gotten almost nothing from the merger except higher cable bills.

Analysts predict AT&T will do everything possible to minimize regulator review of its deal. The first step will be to eliminate the FCC from the deal review process, which is a very real possibility considering Time Warner and AT&T have few deal-related FCC-issued licenses beyond a single independent television station in Georgia owned by Time Warner. That station could be sold or transferred to a separate entity within months. The deal will get a mandatory review by the Justice Department, looking for evidence of antitrust. AT&T plans to claim the merger combines two entirely different companies and won’t have any implications on competition.

Critics of the deal think otherwise, pointing to the potential of favoring AT&T over cable companies with lower programming rates. Net Neutrality proponents are also concerned about AT&T’s practice of zero rating its own content, which gives AT&T a competitive advantage in the wireless space.

Republican presidential hopeful Donald Trump’s campaign has sent personal invitations to some of the telecom industry’s most powerful lobbying groups asking them to attend an “information session” that will give the lobbyists “an inside look on the work underway on planning for the transition,” should Donald Trump become the next president of the United States.

Communications Daily reports the secretive meeting will be held at the powerhouse D.C. law firm Baker Hostetler, and will feature Trump transition team leader Chris Christie, the current governor of New Jersey.¹

The Trump campaign has remained almost totally silent on telecom public policy issues, but the meeting will give some of the country’s biggest telecom companies face time to influence an incoming Trump Administration on telecom issues ranging from wireless spectrum to Net Neutrality to competition and regulation matters.

Transition team member Andrew Bremberg, a former aide to Senate Majority Leader Mitch McConnell (R-Ky.) sent the invitations. Likely to attend are lobbyists from NCTA-The Internet Association (cable lobby) and the CTIA (the wireless industry’s principal lobbyist). Also expected are individuals representing some of the largest telecom companies in the country. Up to 100 lobbyists are expected to attend.

The Trump campaign has refused to confirm the event and efforts to reach lobbyists expected to attend to confirm the meeting have also been rebuffed.

Such meetings give lobbyists invaluable face time with important incoming administration officials and often stimulate political campaign contributions. Consumers or their representatives are never invited to attend.

The Trump campaign has proven elusive about the candidate’s views on telecom policies. The Clinton campaign has been more forthcoming, released dozens of pages outlining a comprehensive telecom policy with claims the candidate favors Net Neutrality and wants to spend a considerable sum of taxpayer dollars on enhancing rural broadband.

¹Telecom Officials Likely on Deck for Next Week’s Trump Transition Meeting – Communications Daily/Comm Daily® Notebook, 30 Sep 2016, Ref: 1609290070 – (Subscription req’d.)