Verizon Wireless, facing scrutiny from FCC chairman Thomas Wheeler, today announced it has canceled plans to introduce a new “network optimization” policy that would have significantly throttled down speeds for heavy users still on grandfathered, unlimited use data plans.

Stop the Cap! received a statement from Verizon Wireless this afternoon announcing a sudden change of heart:

Verizon is committed to providing its customers with an unparalleled mobile network experience.  At a time of ever-increasing mobile broadband data usage, we not only take pride in the way we manage our network resources, but also take seriously our responsibility to deliver exceptional mobile service to every customer.  We’ve greatly valued the ongoing dialogue over the past several months concerning network optimization and we’ve decided not to move forward with the planned implementation of network optimization for 4G LTE customers on unlimited plans.  Exceptional network service will always be our priority and we remain committed to working closely with industry stakeholders to manage broadband issues so that American consumers get the world-class mobile service they expect and value.

Chairman Wheeler questioned Verizon’s strategy almost immediately after the company announced its “network optimization” strategy in July.

Wheeler

“‘Reasonable network management’ concerns the technical management of your network; it is not a loophole designed to enhance your revenue streams,” Wheeler wrote in a July 30 letter to Verizon Wireless CEO Dan Mead. “It is disturbing to me that Verizon Wireless would base its ‘network management’ on distinctions among its customers’ data plans, rather than on network architecture or technology.”

Wheeler reminded Mead the FCC defined network management practices to be reasonable “if it is appropriate and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.”

Wheeler told Mead Verizon’s plans didn’t qualify.

“I know of no past FCC statement that would treat as ‘reasonable network management’ a decision to slow traffic to a user who has paid, after all, for ‘unlimited” service,'” Wheeler wrote.

Wheeler also questioned how Verizon could justify its planned speed throttling under the conditions it agreed to after winning the 700MHz “C Block.” That spectrum was accompanied by a special FCC mandate – open platform rules which prohibits Verizon Wireless from denying, limiting, or restricting the ability of end users to download and use applications of their choosing on the C Block networks. A speed throttle would make using some applications impossible.

In August, Wheeler hammered home his opposition to Verizon’s plans at a news conference.

“My concern in this instance–and it’s not just with Verizon, by the way, we’ve written to all the carriers–is that [network management] is moving from a technology and engineering issue to a business issue, such as choosing between different subscribers based on your economic relationship with them.”

Wheeler has expressed irritation that Verizon’s justification for congestion management only applied to its unlimited customers, while those paying on a per-gigabyte basis could use (and spend) as much as they like.

Verizon responded that other providers — notably AT&T — already have a similar network management policy in place, throttling speeds of grandfathered unlimited customers who consume more than 3GB of wireless traffic on its 3G network or 5GB on its 4G network a month.

“‘All the kids do it’ was never something that worked with me when I was growing up and didn’t work with my kids,” Wheeler responded, noting Verizon was trying to reframe the issue instead of justifying the need for speed throttles for some customers, while giving others unlimited access as long as they pay.

Just when you thought the cable television lineup could not possibly get any larger,  insiders at Comcast are anticipating one of the possible conditions that could be imposed by the Federal Communications Commission in return for approval of its merger with Time Warner Cable is an agreement to carry more independently owned cable television channels.

One of the most vocal groups of consumers opposed to the merger deal have been viewers of independent Omaha, Neb.-based RFD-TV, which has landed carriage deals with Time Warner Cable but has been largely ignored by Comcast. For most of the summer, RFD-TV encouraged viewers to pelt the FCC with complaints about the merger deal, insisting that more networks not owned or operated by the top five media conglomerates get equal treatment on the Comcast cable dial. Thousands of viewers responded.

Comcast vice president David Cohen told Congress Comcast already carries more than 170 small or independent networks, although Comcast counts international networks distributed to customers at premium rates.

“It sounds wonderful. But when you peel back the onion . . . it’s really nothing at all,” Pat Gottsch, founder of RFD-TV told the Philadelphia Inquirer. “Very few [independent] channels have full distribution, other than BBC World News and Al Jazeera.”

Independent networks have little leverage with major cable operators because they cannot tie carriage agreements to more popular mainstream cable networks. That is why little-known networks like Crime & Investigation Channel or the spinoffs of fX – fXX and fXM – have glided onto cable lineups while networks like RFD, The Tennis Channel, and BlueHighways TV have a much tougher time.

Time Warner Cable now widely carries RFD-TV, but often only on an added-cost mini-pay tier. In many Time Warner markets, RFD and Smithsonian TV replaced HDNet, also an added-cost network.

The independent networks fear they will never become viable if they cannot reach the nearly one-third of the country’s cable television subscribers a combined Comcast and Time Warner Cable would serve. Others question whether they will be given fair consideration if their networks compete with an existing Comcast or Time Warner Cable-owned channel.

The Tennis Channel and Bloomberg have both tussled repeatedly with Comcast over carriage agreements and channel placement. The Tennis Channel took Comcast all the way to a federal appeals court, but lost their case. Cable companies have won recognition of their First Amendment rights to choose the channels on their systems.

In years past, cable operators cited limited channel capacity as the most frequent reason a network could not be added to the lineup. Comcast continues to claim they have limited channel space for television channels, but that has not stopped the cable company from launching dozens of little-watched networks they receive compensation to carry (home shopping, TBN and certain other religious networks) or are contractually obligated to carry (add-on sports and entertainment networks owned by Disney, Viacom, Time Warner (Entertainment), Fox, and even Comcast itself, through its Universal division).

Comcast’s claim it already carries nearly 180 independent networks drew scrutiny when the company released the list of networks. At least half were added-cost international or pornography networks — all sold at a higher cost. More than a dozen others were independent sports channels packed into a higher-cost sports tier. Most of the rest were regional networks given very limited exposure. BlueHighways TV, which features bluegrass music, is seen in only 210,000 Comcast homes, mostly in Tennessee. That is less than 1% of Comcast’s total subscriber base.

The only prominent and truly independent networks given wide carriage on Comcast include Home Shopping Network and QVC, which pay a commission to Comcast for every sale made to a Comcast customer, BBC World News, and the Catholic EWTN network.

Mitigating the problem of independent network carriage may push the FCC to the path of least resistance – making carriage of some of these networks a requirement in return for merger approval.

It wouldn’t be the first time. Comcast agreed to launch 10 independent networks as a condition for FCC approval of its buyout of NBCUniversal. That deal is what brought BBC World News to the Comcast lineup, along with a range of little-known networks on high channel numbers: ASPiRE, BabyFirst Americas, Revolt, and El Rey. BabyFirst is targeted to babies and toddlers from 0-3 years old, but is also enjoyed by recreational drug users who find the network’s use of bright colors in their short-form videos entertaining. ASPiRE’s programming has been described by its critics as “crap.”

Official merger announcement due next month.

Several media reports breaking this evening report Softbank/Sprint is close to a deal to acquire majority interest in Deutsche Telekom’s T-Mobile USA in a deal that will combine the two carriers under the Sprint brand.

Bloomberg News reports Sprint has offered $40 a share for Deutsche Telekom’s T-Mobile USA — 50% in cash and 50% in stock. The deal will leave the German wireless carrier with a 15% minority ownership stake in the combined company. Sprint would still dwarf both Verizon Wireless and AT&T and would continue to be hampered by significant coverage caps in suburban and rural areas that neither Sprint or T-Mobile’s home networks cover.

The deal includes a breakup fee payable by Sprint if the merger is blocked by regulators or fails to be executed. Sprint reportedly offered $1 billion in cash and assets if the deal falls through, but Deutsche Telekom is reportedly seeking as much as $3 billion.

Masayoshi Son

Bloomberg News previously reported a deal would probably be announced in June or July. It’s possible a deal announcement could slip into August, a source told Bloomberg. If no deal is reached by then, the sides are likely to stop negotiations for several years and wait for a new U.S. presidential administration more amenable to consolidation.

Billionaire Masayoshi Son, the founder of Japan-based SoftBank, which owns 80 percent of Sprint, faces skeptical regulators who are wary about eliminating one of four national wireless competitors. But in the last few days, executives at Sprint and Deutsche Telekom believe they can get the deal passed regulators preoccupied with a flurry of merger announcements, including Time Warner Cable and Comcast and AT&T and DirecTV. With a tidal wave of consolidation sweeping across the American telecommunications market, some industry insiders believe groups opposed to such deals will be overwhelmed trying to stop all of them.

More importantly, the issue of wireless spectrum was a key motivator to push the two companies towards a quick deal.

The Wall Street Journal reports the FCC originally considered barring AT&T and Verizon Wireless from bidding on airwaves that would have been set aside for smaller carriers. But a fierce lobbying effort by AT&T successfully nixed that plan and slashed the amount of spectrum available exclusively to smaller carriers. Sprint and T-Mobile believe the FCC’s decision gives them an opening to argue the government needs to allow a merger because it isn’t doing enough to help them compete.

Rosenworcel

Another welcome sign for Sprint and T-Mobile is Democratic FCC commissioner Jessica Rosenworcel, who saw nothing wrong with holding private meetings with Wall Street insiders, telling them she would keep “an open mind” when considering the merger. With both Republican commissioners almost certain to approve a merger and Thomas Wheeler and Mignon Clyburn — both Democrats — likely opposed, Rosenworcel may have signaled she holds the deciding vote.

Prior to 2011, wireless consolidation was rampant, with an FCC predisposed to almost rubber stamping approval of buyouts and mergers. That changed in 2011 when AT&T tried to buy T-Mobile. It was the U.S. Justice Department, not the FCC, that led the charge against the deal, calling it anti-competitive. The Justice Department was vindicated when T-Mobile promptly launched new competitive service plans and pricing that forced price reductions and plan improvements from its competitors. T-Mobile has seen dramatic growth since launching its aggressively competitive service plans.

Sprint will likely claim T-Mobile’s competitive gains are illusory and will never offer a real competitive challenge to AT&T and Verizon’s market dominance. Despite the fact the combined company would still be far smaller than either AT&T or Verizon Wireless, Sprint is expected to argue it will be better positioned to fiercely compete for customers.

That argument is tempered by the fact that competition in the prepaid wireless market — already diminished by AT&T’s acquisition of Leap Wireless’ Cricket — will suffer even more if Sprint and T-Mobile, both major competitors in the prepaid market, are combined.

[flv]http://www.phillipdampier.com/video/Bloomberg Sprint T-Mobile Near Accord on Price Breakup Fee 6-4-14.flv[/flv]

Sprint is nearing an agreement on the price, capital structure and termination fee of an acquisition for T-Mobile US that could value the wireless carrier at almost $40 a share, people with knowledge of the matter said. Alex Sherman has more on Bloomberg Television’s “Taking Stock.” (2:34)

The head of the country’s largest Spanish-language television network Univision said on Monday that Comcast’s proposed purchase of Time Warner Cable could be “bad for Hispanic audiences.”

Univision President Randy Falco told Wall Street analysts that the combined cable company would serve 91 percent of all Latino households and be the dominant distributor of multichannel programming in 19 of the 20 largest Spanish-language television markets.

“We are hoping at the very least there is that scrutiny and potentially much tougher restrictions added to the existing [Comcast-NBCUniversal] consent decree that will protect Comcast competitors such as Univision who are serving minority communities in particular,” said Falco.

Although Falco did not directly oppose the merger, he did express concern that Comcast would not treat independent Spanish language networks like Univision as well as NBCUniversal-owned Telemundo network. Falco noted Comcast has refused to carry Univision’s sports network. Time Warner Cable does.

“Either Comcast doesn’t understand that soccer is a passion point for Hispanics or they don’t support competitors who have competing services,” Falco said. “My fear is that the latter is the case and this type of anti-competitive conduct would continue.”

Falco is among the first media executives to publicly criticize the merger. Critics of the deal say programmers are keeping quiet fearing future retaliation from Comcast.

Sen. Schumer

Sen. Chuck Schumer (D-N.Y.), who quickly praised Comcast’s $45 billion buyout of Time Warner Cable on speculation it would preserve jobs in New York has now recused himself from any further consideration of the merger after revelations emerged his younger brother is integrally involved in the deal.

The American Lawyer magazine named Robert Schumer, a partner at Paul Weiss, its “Dealmaker of the Week.” Schumer is leading the Paul Weiss law firm’s team advising Time Warner Cable on its sale to Comcast in a $45.2 billion all-stock deal.

“As Senator Schumer and his brother had never discussed the matter before, the piece in American Lawyer was the first Senator Schumer learned that his brother had worked on the deal,” said Max Young, a spokesman for Schumer, in a statement. “Now that he’s aware of his brother’s involvement, Senator Schumer will recuse himself from Congressional consideration of the matter to avoid any appearance of bias.”

Most of Sen. Schumer’s support for the deal surrounded a commitment he obtained from top Comcast lobbyist David Cohen to honor Time Warner Cable’s plan to add jobs to a commercial services call center opening in Buffalo. Schumer was integral in the effort to get Time Warner to locate the new call center at Compass East, the site of the former Sheehan Hospital on Buffalo’s east side. The call center is expected to employ 250-300 workers and add 150 jobs over five years.  With 1,000 Time Warner Cable jobs on the line in western New York and over 10,000 throughout the state, Schumer sought commitments from Cohen that Comcast would not slash jobs as part of more than $1 billion in cost savings expected from the deal. Cohen would only commit to honoring the jobs at the Buffalo call center and other job commitments already in the works.

Analysts expect Comcast will heavily cut middle management positions from Time Warner’s workforce and eliminate several customer care centers as part of the merger. Comcast’s massive “customer care” operation is heavily committed to offshore call centers staffed by low paid, English-challenged operators. Comcast’s poor customer service earned the company fines last summer in Seattle.

Schumer’s recusal is a blow to Comcast’s effort to win the deal’s approval in Washington, where the deal will face intense anti-trust scrutiny.

Robert Schumer told American Lawyer the deal was specifically structured to expect many of the regulatory questions.

“We obviously had to be confident that we believed the deal could get done,” he told the magazine. “There were significant negotiations around the contract terms involving the regulatory approvals, but obviously we were very comfortable with it.”

But family connections mean Sen. Schumer will not be among those championing the merger deal.