California attorney general’s opposition to T-Mobile/Sprint deal will be the deciding factor in CPUC’s review

by Steve Blum • , , , ,

Tmobile san francisco 18may2019

Advice from California’s attorney general hasn’t played much of a role in the California Public Utilities Commission’s review of major telecoms mergers in recent years, but T-Mobile’s proposed takeover of Sprint will be different. Attorney general Xavier Becerra’s forceful opposition to the merger will, all but certainly, figure prominently in whatever decision the CPUC makes.

When evaluating major transactions involving regulated utilities, state law requires the CPUC to “request an advisory opinion from the attorney general regarding whether competition will be adversely affected and what mitigation measures could be adopted”.

Mere advice or not, the AG’s office expects the CPUC to listen. Or at least it did in 2015 when it gave a green light to the Frontier’ purchase of Verizon’s wireline telephone systems. The opinion from then-attorney general Kamala Harris warned that even though California law considers it “as advisory” and does not require the commission to defer to it, “the attorney general’s advice is entitled to the weight commonly accorded an attorney general’s opinion” and “attorney general opinions are generally accorded great weight”.

Three big telecoms deals have been reviewed by the CPUC in the past five years – Frontier’s takeover of Verizon’s territories, Comcast’s three-way purchase and market consolidation deal with Charter Communications and Time Warner Cable and, after that was killed by federal antitrust enforcers, Charter’s takeover of Time Warner.

I’ve looked through the records of those three cases, and a formal opinion from the California AG appears in only one – Frontier/Verizon. It found that allowing Frontier to take over operation of Verizon’s decaying copper lines would “not adversely impact competition”, since the two companies didn’t compete directly with each other and the deal wouldn’t block new market entrants. That finding was cited among the many reasons the CPUC approved the transaction, albeit with a long list of conditions.

No mention was made, though, of AG opinions in the course of the CPUC’s review of the two cable transactions. It’s worth noting that the same logic might be applied – like telcos, cable companies don’t directly compete with each other in local markets.

That’s not true of T-Mobile and Sprint. They’re fierce competitors, particularly at the lower end of the mobile broadband and voice market, and approval of their merger depends on whether DISH can plausibly replace the competitive heat that would be lost if they combine. That’s a far more complicated question to answer. I think it’s a safe bet that the AG’s office will respond to the CPUC’s pro forma request for advice, and it won’t be ignored.

What Becerra will tell the CPUC about T-Mobile/Sprint merger

by Steve Blum • , , , ,

Tmobile billboard las vegas 6jan2020

California’s attorney general has more than one roadblock he can try to throw into T-Mobile’s path to a takeover of Sprint. The antitrust suit that Xavier Becerra and other state attorneys general filed in a New York federal court is one possibility. Closing arguments were made in that case last week – the judge hearing it didn’t ask any questions, so there are no clues about what he’s thinking. His decision is expected in the late February/early March time frame. Maybe.

Becerra’s other option lies with the California Public Utilities Commission, which is also reviewing the deal. Assuming it’s treated as a major merger (i.e. involves a utility company under CPUC jurisdiction with at least $500 million of annual Californian revenue – that’s one of many points lawyers are wrangling), California law says

Before authorizing the merger, acquisition, or control of any…telephone corporation organized and doing business in this state…the commission shall find that the proposal not adversely affect competition. In making this finding, the commission shall request an advisory opinion from the Attorney General regarding whether competition will be adversely affected and what mitigation measures could be adopted to avoid this result.

That opinion is requested and delivered privately, and typically doesn’t become public until the CPUC publishes a proposed decision. But it’s not hard to guess what Becerra will say. After the New York hearing wrapped up, Becerra put out a statement saying…

There should be no question now: this attempted megamerger would thwart competition in the telecom market and harm consumers from California to New York, and everywhere in between…At trial, we have repeatedly demonstrated the dramatically increased market concentration that would result if T-Mobile and Sprint were to merge.

Right now, Sprint and T-Mobile compete intensely with each other on price, features and quality. That’s competition we can’t afford to lose.

As you might expect in the middle of litigation, Becerra didn’t publicly suggest any “mitigation measures” – his stated solution is to not allow the merger at all. If that’s the advice he’s offering privately, then the CPUC will either have to try to block it (whether it can or not is another billing bonanza for the lawyers), or reach into the evidence presented and demonstrate why Becerra is wrong.

It’s one thing to sort out the arguments made by litigating parties – in this case it’s the CPUC’s public advocates office, the Communications Workers of America, consumer advocacy groups versus T-Mobile, Sprint and, following megabuck payoffs to buy their support, DISH and the California Emerging Technology Fund. It’s quite another for the CPUC to argue T-Mobile’s case against the California attorney general.

Penalties, but not prevention, for deceptive ISP billing practices

by Steve Blum • , , , ,

Consumer reports cable billing 3oct2019

It’s common practice for big, monopoly model broadband providers to promise low prices to new subscribers, then tack on arbitrary fees after they’re locked into long term contracts. AT&T was recently slammed for adding a property tax surcharge to some customers’ bills – no one has figured out yet why AT&T thinks it can do that in the first place, let alone why it more than doubled the charge – California property tax rate hikes are tightly restricted. Frontier Communications also adds fees on top of the rates customers have agreed to.

Comcast is a frequent target of consumer billing complaints, and state attorneys general are listening. Just about a year ago, the Minnesota attorney general took Comcast to court over billing practices. The case was settled on Wednesday. According to the Minnesota AG

Part of being able to afford your life means knowing the full cost of what you’re getting, getting what you were promised, not being overcharged for things you didn’t ask for, and not being unfairly charged to get rid of things you didn’t ask for. But when people signed up for Comcast, that’s what happened to them…This settlement will help put money back in Comcast’s customers’ pockets where it should have been in the first place. Just as importantly, it provides millions of dollars’ worth of debt relief. And we’ve made sure that going forward, Comcast customers will know exactly how much they’ll pay for service before they sign up for it. That should put an end to unpleasant surprises.

Another deceptive billing case in Washington state last year resulted in Comcast being hit with a $9 million fine, plus orders to make refunds to customers.

It’s not just broadband service – arbitrary fees are added to the full range of products and services that telephone and cable companies provide. A study by Consumer Reports showed that the typical cable TV customer pays an extra $450 a year, just because. The graphic above breaks that down.

So far, little has been done to stop deceptive billing practices in the first place. That could change. The Federal Communications Commission’s declaration that broadband isn’t a telecommunications service passed the buck to the Federal Trade Commission, which might or might not get around to doing something about it. State governments also have a role to play – a federal appeals court opened the door to broadband consumer protection laws and other state-level regulation last year. So far though, no one in Sacramento has shown much interest in walking through it.

Pai offers net neutrality rules custom made for AT&T’s, Comcast’s business models

by Steve Blum • , , , ,

Pai shapiro 1 ces 7jan2020

Ajit Pai’s three-year delayed debut at CES as Federal Communications Commission chair last week was a friendly, and at times lighthearted, conversation with Gary Shapiro, the CEO of the Consumer Technology Association, which produces the show. Pai used the opportunity to float what he seems to thinks are consensus network neutrality rules. What he’s really proposing is to cement major ISPs and mobile carriers’ monopoly model business plans into federal law.

Shapiro led off by asking Pai about the FCC’s decision to scrap network neutrality rules two years ago. Pai endorsed net neutrality legislation. But of a sort…

Let’s focus on the things that we can actually agree on, those core principles of an open internet that we all agree upon – no blocking, no throttling, no anticompetitive conduct, transparency – I’ve just described in five seconds a bill that should sail through congress, but this has become more of a political issue than a policy one.

He left a couple of items off the list, at least the list that net neutrality advocates keep: paid prioritisation and zero rating. Those are two related practices that big, monopoly model Internet service providers – AT&T and Comcast, for example – and mobile carriers dearly want to hold onto.

When an ISP zero rates particular content, it doesn’t count the bytes consumed against a user’s monthly data cap. Paid prioritisation happens when an ISP creates a fast lane for content it owns – say, AT&T sending you Road Runner cartoons that it owns faster than Disney movies that it doesn’t – or charges the owner a fee for the same treatment.

Both practices create a hierarchy of content, as a result of an ISP’s ability to manipulate data streams to suit its bottom line. There’s not a meaningful difference between deliberately speeding some content up, versus deliberately slowing – throttling – other content down. Limiting legislation to a carefully wordsmithed consensus allows telcos and cable companies to write U.S. telecoms policy, and lock in privileges for decades to come.

“Fleas of a thousand dogs” add gravitas to T-Mobile/Sprint merger as court challenge wraps up

by Steve Blum • , , , ,

Dog scratch

T-Mobile and Sprint square off today against a coalition of state attorneys general in a federal courtroom in New York, during closing arguments in a trial to determine whether their proposed merger violates antitrust laws. It’s one of the last hurdles for the deal, which has been under regulatory review since 2018.

Approval (or not) by the California Public Utilities Commission is also pending, as is a separate, more technical federal court review in Washington, D.C.

“We are desperately waiting for the outcome of our merger activities”, Jan Geldmacher, president of Sprint’s business to business division said at CES in Las Vegas last week. Nonetheless, he believes “a positive end is near”.

He backed his optimism up with a New Year’s greeting, perhaps in the hope of persuading opponents of the righteousness of his cause. “May the fleas of a thousand dogs infest the arse of anyone who fucks up your new year”, he said. “And may their arms be too short to scratch it”.

The AGs and the deal’s Californian opponents will risk that itch, but the federal justice department won’t. It urged federal judge Victor Marrero to defer to its wisdom and approve the deal. In arguments filed last week, the AGs said they have a say in the matter and, particularly, so does the judge…

The States have a special role in enforcing the antitrust laws on behalf of the public. TheSupreme Court has made clear that neither the States nor this Court need defer to the federal government’s approval of a merger. The States are independent enforcers of the antitrust laws, and it is the role of the Court—not any federal agency—to decide the lawfulness of the merger.

The AG’s latest (last?) filing laid out their case for blocking the deal. It boils down to two points: 1. going from four national mobile broadband companies will concentrate market power to the point that prices will rise and service will fall, and 2. there’s reason to believe DISH can add meaningful competition, even if it keeps its build out promises. The AGs doubt it will.

Don’t expect fiber or 5G in rural communities, FCC commissioners say

by Steve Blum • , , , ,

John deere booth ces 7jan2020

Fiber and mobile 5G are fine for cities and suburbs, but rural communities can look forward to satellites and fixed wireless broadband service, according to the Federal Communication Commission’s republican majority. Speaking at CES in Las Vegas this week, FCC chair Ajit Pai, republican commissioners Michael O’Rielly and Brendan Carr, and their democratic colleague Geoffrey Starks were upbeat about 5G, fiber and, as Carr put it, the “new wave of innovation and services”.

But that wave will only break on urban and suburban beaches, at least via conventional broadband service.

“To say we’re going to have fiber throughout the United States is both not realistic – it’s not technically doable”, said O’Rielly. “There are communities where satellite service is the exact answer”.

Pai said 5G infrastructure that connects a smartphone to fast broadband access – the standard 5G use case – will be built in cities and suburbs. Rural 5G deployments will support other services – fixed wireless broadband, for example – that might or might not be offered by mobile carriers on mobile spectrum. His rural broadband advisor, Preston Wise, who spoke on a rural 5G panel, said the rebooted version of the FCC’s primary broadband subsidy program – now called the Rural Digital Opportunity Fund – will be used “to deploy fixed broadband in parts of rural America”, although he held out the possibility that some of the money would go toward fiber to the premise (FTTP) projects.

Rural FTTP doesn’t fit very well into the business plans of incumbent monopoly model telecoms companies. Rural electric cooperatives, on the other hand, are deploying fiber. Pai hopes to encourage rural utility co-ops to apply for FCC subsidies – he said he doesn’t care which broadband carriers get the money.

I hope that’s true. Although electric co-ops and wireless operators figured prominently in the last round of FCC broadband subsidy auctions, they were only allowed to bid on communities that AT&T, Frontier Communications and other legacy telcos didn’t want to serve.

Legacy telcos were given a right of first refusal and they exercised it. Satellite and fixed wireless fit their rural business plans perfectly. Letting them dictate rural broadband technology choices, as O’Rielly seems happy to do, will lock in a deep divide between rural and urban communities for many decades to come.

Newsom’s broadband budget language doesn’t translate to infrastructure

by Steve Blum • , , , ,

San benito pole route 13apr2019

Broadband references are sprinkled into California governor Gavin Newsom’s state budget proposal but, taken at face value, he’s focused on shifting money from hard capital infrastructure projects to soft programs and annual operating budgets.

Although tagged as an infrastructure investment in Newsom’s budget summary, his “Broadband for All” initiative is about operations, comprising four elements: mapping, education spending, “optimising” existing resources and “prioritising connectivity across executive actions and policies”.

The California Public Utilities Commission already has a fine mapping program, which Newsom wisely intends to expand. It’s the brightest broadband item in his budget. If the CPUC is allowed to combine availability data with comprehensive network maps, inventories of state owned facilities and construction cost data, and make it public, then independent broadband infrastructure projects become more feasible.

Feasible, but not funded.

Consistent with past practice, Newsom proposes to spend $261 million on broadband facilities and information technology acquisitions for schools over the next five years, which is praiseworthy (as are many other items in the $153 billion budget) but has rarely improved broadband infrastructure that’s directly available to consumers and businesses. Keeping broadband top of mind in state government is likewise a good thing, and when agencies look outward and cooperate with private sector telecoms companies – Caltrans’ dig once program is a good example – the general public benefits. More often, though, connectivity improvements are limited to meeting agencies’ internal IT needs. Still, it’s a step in the right direction.

It’s Newsom’s third bullet point – “optimising use of existing resources” – that threatens to divert what little money California spends on general broadband infrastructure development to other purposes. As his budget summary explains…

Informed by GIS-based mapping, the state will review existing fund sources available for broadband adoption and activities. This review will include the California Teleconnect Fund, the California Advanced Services Fund [CASF], and federal funding opportunities to maximize the return on existing investments. In total, these funds provide approximately $900 million over the next five years that can be targeted to critical broadband activities statewide.

The California Teleconnect Fund subsidises broadband service for schools and other organisations. Federal broadband funds are speculative at best – so far, California is shut out of the federal agriculture department’s newest broadband infrastructure subsidy program.

What’s left is CASF. Which holds the only money – somewhere around $300 million – that California earmarks for general broadband infrastructure construction. Which isn’t specifically listed as one of California’s “critical broadband activities”.

Adoption – digital literacy and broadband subscriber acquisition programs – gets a mention. Schools are in for a lot of love. Libraries and state IT departments get a nod too. Broadband for businesses and consumers? Nada.

Schools and community programs are wildly popular; government operations are Sacramento’s core business. Subsides for independent broadband infrastructure are neither, and are opposed by monopoly model incumbents who pay lawmakers millions of dollars to pay attention. Newsom’s budget offers no challenge to that status quo.

WiFi and 5G win spectrum that the satellite and car industries lose

by Steve Blum • , , , ,

Pai shapiro 1 ces 7jan2020

Despite his enthusiasm for federalising any policy that touches on telecoms, big footing state and local governments isn’t at the top of Federal Communications Commission chairman Ajit Pai’s 5G wish list. Pai and three of his fellow commissioners spoke at CES in Las Vegas earlier this week. When asked about the main barriers to widespread deployment of 5G broadband service, Pai listed cost, spectrum and the availability of trained construction crews.

Although there’s not a lot that a telecoms regulator can do about workforce training or construction costs, spectrum availability is the FCC’s core responsibility.

Pai promised to “push” more frequencies, licensed and unlicensed, into the broadband market. But opening up new spectrum for broadband means taking it away from or sharing it with other users, which quickly devolves into a zero sum game in Washington, D.C.

The satellite industry stands to lose 280 MHz of spectrum in the 3.7 GHz to 4.2 GHz ranges – AKA the “C” band. The FCC plans to auction off those frequencies to mobile carriers for exclusive, licensed use, presumably later this year.

The FCC has a plan to repurpose 45 MHz in the 5.9 GHz range, transferring it from the automotive industry and opening it up for WiFi and similar unlicensed uses. Carmakers “had not lived up to the promise” of their 75 MHz of dedicated short range communications (DSRC) spectrum, said Geoffrey Starks, the lone democratic commissioner to speak at CES. The FCC’s plan would assign 20 MHz of the balance to cellular-type vehicular communications – C-V2X in the jargon – and maybe leave 10 MHz for whatever uses the automotive industry eventually develops for DSRC. Or maybe not – WiFi has a huge fan base.

Sharing is contentious in D.C. because it’s often federal agencies that are being asked to give up exclusive use of frequencies they’ve had to themselves for decades. “I’ve learned in Washington there are three things you don’t discuss three things in polite society, religion, politics and sharing of spectrum”, Pai said.

California’s consumer privacy law is a call to action for federal regulators

by Steve Blum • , , , ,

Flashers

Federal Trade Commission chair Joseph Simons was on the undercard for Consumer Technology Association CEO Gary Shapiro’s “fireside chats” with federal policymakers at CES in Las Vegas on Tuesday. Warming up the audience ahead of Federal Communications Commission chair Ajit Pai’s long awaited CES debut, he urged congress to give his agency the U.S. privacy cop job that California now holds by default. The FTC is already pursuing privacy enforcement actions under existing law “because the big tech platforms are becoming so consequential to our lives and so large”, Simon said.

Simon favors federal privacy legislation over the state by state approach. “Of course, now we’re dealing with California”, he said. There’s a place for state-level consumer privacy legislation, but “it depends on how the states evolve and how the federal law evolves”. So long as a state law tracks with federal requirements he seems to be okay with it, but if it doesn’t he wants congress to step in. In other words, states can tinker with the details so long as they stay in the federal privacy policy sandbox.

There is bipartisan agreement in Washington, D.C. that the sandbox should be built, but democrats and republicans disagree on a couple of key issues. Two FTC commissioners – democrat Rebecca Slaughter and republican Christine Wilson – took part in a separate panel discussion later in the day. They both favor federalising consumer privacy rules. Wilson said that California’s privacy law, along with the European Union’s privacy regulations, makes federal action urgent “because interoperability is needed”.

They disagreed about a couple of key details, which largely define the partisan gap on privacy legislation: whether congress should completely occupy the field and preempt states and whether private individuals – in reality, trial lawyers – should be able to sue companies that don’t follow the rules. Democrats, like Slaughter, tend to say yes to both; republicans, like Wilson, are on the no side.

FCC promises more of the “P-word” – preemption – in 2020

by Steve Blum • , , , ,

Line to see pai ces 7jan2020

Due to the nature of the program, you’re going to have to go through metal detectors.
CTA staffer to long queue waiting to see Ajit Pai.

Ajit Pai made his first appearance at CES as chairman of the Federal Communications Commission yesterday, sitting down for a talk about the coming year with Gary Shapiro, the CEO of the show’s organiser, the Consumer Technology Association. Much of the conversation was about 5G infrastructure, and the public policy that surrounds it.

More preemptions of local and state authority over wireless sites, utility poles and the use of the public right of way are on the FCC’s agenda. Pai reiterated his belief that wireless policy should be made at the federal level, including policy that’s traditionally in the hands of states and local governments.

“We want to see a consistent, easy to understand set of regulations that anyone can innovate around”, Pai said. Mobile carriers and infrastructure companies want “a consistent level of regulation” as they build out 5G networks. Which means rules should be set by the FCC and not state legislatures or city councils. Pai intends to “encourage” state and local governments to approve permit applications small cell sites and other wireless facilities. “Multiple layers of government” are “not conducive to infrastructure investment”, he said.

His wingmen in the FCC republican majority echoed his comments. Commissioners Michael O’Rielly and Brendan Carr, along with democratic commissioner Geoffrey Starks, took part in a panel discussion later in the afternoon at the Las Vegas show. O’Rielly put it bluntly…

It’s not just small cells. It’s going to mean more macro towers. That means dealing with difficult issues on placement when states and localities want to either extract too much money or try to dictate what services will be offered. That’s problematic and I’ve been talking about this for a long time. It does come with the P-word, which is – it requires preemption. And that is something the commission is going to have to continue to do.

Cities and counties should expect more “bold actions”, as Carr put it, from the FCC.