Midwestern broadband experiments get most of the love from the FCC

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No mountains or trees to get in the way of the view. Or the broadband.

Six Internet service providers have been given the green light by the Federal Communications Commission to move ahead with a total of 15 projects in its rural broadband experiments program. All together, the projects will receive $12.6 million in subsidies over ten years to serve areas that lack 3 Mbps down/768 Kbps up service.

As with most federal broadband subsidy programs, the lions share of the money went to projects in the midwest. California was on the list, but that was expected – the three companies that were initially selected for the program couldn’t meet due diligence requirements and were dropped from the list. Only one company west of the Rockies – First Step Internet – made this first round of approved projects and will get a total of $416,000 for a project in Idaho and another in Washington. It was also the smallest award announced.

The other 13 projects are spread across midwestern states of North Dakota, Iowa, Illinois, Kansas and Oklahoma, plus Texas.

The FCC set up three different categories for the experiments. Most of the money – $75 million – was allocated to projects that proposed to deliver 100 Mbps down/25 Mbps up at prices and terms of service comparable to what’s available in urban areas. Two companies are on that list: Northeast Rural Services in Oklahoma ($884,000) and Skybeam in Illinois, Kansas and Texas. Skybeam is getting $4.5 million, the biggest chunk of change of any of the current group of bidders.

The rest of the money goes to projects that can deliver 10 Mbps down/1 Mbps up at prices and terms that are more on a par with existing rural options, with $10 million set aside for areas that the FCC deems to be particularly costly to serve. Two companies – Consolidated Communications Networks in North Dakota and Delta Communications in Illinois – went for the hard cases and received $3.1 million and $2.2 million respectively, more than half the total for that category. First Step was the middle group, so was Allamakee-Clayton Electric Cooperative which gets $1.5 million.

No details were released on the technology involved, but by looking at how many census blocks will be covered by each project it’s a fair guess that most but not all of the projects involve wireless systems. The geographic and technology mix could easily change, though. This first batch of projects only represents about one-eighth of the money that the FCC has set aside for the experiments.

FWIW, the FCC also released an updated list of frequently asked questions about the rural broadband experiments, [click here to see it]().

Comcast discloses attempt at one-on-one back room negotiations in California

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You call those suits?

As it said it wanted to do, Comcast did in fact try to bargain directly with the commissioner assigned to handle the California Public Utilities Commission’s review of its bid to take over Time Warner and Charter cable systems in California. In a disclosure filing that was made public last week, Comcast detailed how a posse of its suits met with commissioner Carla Peterman and two aides for an hour – twice the time originally expected – in March to detail its objections to the conditions the commission was considering if it approved the deal

Comcast described how the conditions in the Proposed Decision could be improved by revising them to be within the parameters of Commission programs with preexisting rules or by establishing metrics that are clearer and easier to measure than what has been proposed. During the meeting the representatives provided some of their initial ideas along these lines to enhance the conditions contained in the Proposed Decision and to address jurisdictional limitations described in detail in their comments.

Those ideas included an outright rejection of many of the proposed conditions, like setting take-up targets for its low income Internet Essentials program. Comcast was willing to “consider committing to upgrade [its broadband] facilities throughout the California service territory to offer at least 25 Mbps download and 3 Mbps upload broadband speeds—including in current video-only systems”, but it wanted to take five years doing it, not the 2 years proposed. That’s assuming “consider” ever became “commit”, which was by no means certain.

Peterman’s response to Comcast’s overtures wasn’t mentioned. A week later, at a regular CPUC meeting, Peterman said no back room deals were being done

Someone expressed some concern that some parties might have unique access through the ex parte process to kind of negotiate or influence decisions and particularly there was a mention of the Comcast Time-Warner proceeding. And so as the assigned commissioner to that proceeding I really wanted to address that head on now in case, you know, it came before all of you and say that’s simply not true. All parties, you know, get the same treatment from me in ex parte meetings and as the assigned commissioner I have conducted this proceeding in an open and transparent manner.

The deal is dead, but the CPUC proceeding lives on. Formal rejection of the merger is scheduled for commission consideration late next month. That vote could go a long ways towards setting standards for the next big California deals in the hopper: Frontier’s acquisition of Verizon’s wireline phone systems and Charter’s take over of Time Warner.

A new cable mega-deal for Charter and Time Warner

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I said I’d pull myself back together.

Now it’s Charter Communications’ turn to try to buy Time Warner Cable. The latest mega deal would have Charter hanging onto its deal to buy Bright House, and paying $57 billion for Time Warner’s cable systems and 15 million subscribers. If successful, it would make Charter the second largest cable company in the U.S. and the largest in California.

Federal Communications Commission chairman and lobbyist-in-chief Tom Wheeler wasted no time in reassuring the world that this latest deal won’t necessarily meet the fate of the Comcast-Time Warner-Charter mega-deal that was killed by federal regulators…

The FCC reviews every merger on its merits and determines whether it would be in the public interest. In applying the public interest test, an absence of harm is not sufficient. The Commission will look to see how American consumers would benefit if the deal were to be approved.

Combining Charter, Time Warner and Bright House will create another giant cable company. From a federal perspective, it might not look too much different than the rejected Comcast deal. The end result of that one would have been a bigger Comcast, but also a more tightly consolidated Charter. And a much bigger one, if you count the cable systems that would have gone to a new company that would have been, to a significant degree, under Charter’s control. Either way, Time Warner is gone and the net result is two giant cable companies – Comcast and Charter – where there used to be three.

There’s still a chance that Altice – the european company that did a deal to buy Suddenlink last week – could try to overbid Charter. Or go after one or more of the merely large cable companies that still survive – Cablevision, Cox and/or Mediacom, say.

Californian regulators will look at the Charter-Time Warner-Bright House deal differently than the feds. Stay tuned.

Frontier tells CPUC to stay away from broadband issues

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Don’t go there.

Frontier Communications and Verizon are trying to make the same argument that Comcast made, and lost, when it tried to restrict the California Public Utilities Commission’s review of its proposed mega-merger to some very narrow, telephone-centric considerations.

In this case, Frontier wants to buy out Verizon’s wireline systems in California. The CPUC’s office of ratepayer advocates is urging the commission to decide if that’s in the public interest, in part, on whether it’s good or bad for the broadband market here. In reply comments, Frontier says that’s out of bounds

[California public utilities law] expressly prohibits the Commission from regulating broadband and IP-enabled services, and nothing in [federal law or the FCC’s decision to impose common carrier rules on broadband] overrides the California legislature’s explicit limitation upon this Commission…the FCC’s recent order again confirmed that broadband Internet access services are inherently interstate services for regulatory purposes. In short, the Commission does not have jurisdiction to regulate broadband or VoIP or to impose conditions related to broadband or VoIP in its consideration of this Transaction.

In the long run, there are really two questions to answer: does the CPUC think it has that authority, and do the courts agree? So far, all we know is that some commissioners, to one degree or another, think that authority exists. But so far, the commission as a whole hasn’t baked that principle into an official decision. It still might. On 25 June 2015, a formal rejection of the Comcast deal – largely on those grounds – is scheduled for consideration. The outcome won’t matter overly much to Comcast, at least not immediately, but how commissioners vote should let Frontier and Verizon know where they stand.

The filing was made in the name of both Frontier and Verizon, but I’m attributing the comments to Frontier. That’s partly due to the CPUC’s online attribution, although it might be a truncation of convenience, and partly because it’s a well reasoned and written document, completely unlike the whack-job logic and infantile whining obtuse and petulant verbiage I’ve come to associate with Verizon’s style. But read it for yourself, YMMV.

FCC’s unwritten privacy rules will have an equally ill-defined effect on Internet business

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We can hope.

Your Internet service provider collects a lot of information about you and they use some of it for marketing purposes. AT&T is getting particularly aggressive about doing so, offering a discount on its GigaWeasel service to customers who agree to let it watch what they’re watching, and target ads accordingly..

Assuming that the Federal Communication Commission’s new, common carrier Internet regulations go into effect next month, the restrictions on what ISPs can do with their knowledge of you will get tighter. How tight? No one, not even the FCC’s enforcement bureau, knows. The only guidance they’ll offer publicly is to point at section 222 of federal telecoms law and say follow that.

That has some interesting tidbits in it. For example

A telecommunications carrier that receives or obtains proprietary information from another carrier…shall not use such information for its own marketing efforts.

Except as required by law or with the approval of the customer, a telecommunications carrier that receives or obtains customer proprietary network information…shall only use, disclose, or permit access to individually identifiable customer proprietary network information in its provision of the telecommunications service from which such information is derived.

On the other hand…

Nothing in this section prohibits a telecommunications carrier from using, disclosing, or permitting access to customer proprietary network information…to provide any inbound telemarketing, referral, or administrative services to the customer for the duration of the call, if such call was initiated by the customer and the customer approves of the use of such information to provide such service.

Those are, in fact, the kind of “telephone-centric rules” that the FCC “declined to apply” to broadband. So it’s really not clear what phrases like “with the approval of the customer” mean for the online world. Does navigating to a web page with a disclaimer at the bottom count? What about clicking on a discount package without reading the fine print?

There’s a devil of a lot of detail that’s still to be determined. And by determining it, the FCC will put itself in the position of managing a lot of the details of the business of running the Internet. Given the overwhelming role that customer data plays in driving online revenue, it’ll be difficult to square that level of oversight with the FCC’s promise of “light touch” regulation.

The Internet might not be a freeport much longer

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Internet access service is largely exempt from taxes in the U.S., thanks to a bill passed back in 1998, and given a last minute, one year extension last year. That extension will expire in October, unless federal lawmakers agree on either another extension – for however long – or a permanent bill.

On the one hand, it’s pretty simple: we’ve built a revolutionary and explosively valuable economy over the past 17 years without directly taxing the service that’s made it possible. The Internet industry certainly pays taxes – income, capital gains and property taxes are top of the list – but what you don’t see on the bill from your ISP is the long list of taxes, often mislabeled as fees, that you see on your phone bill.

On the other hand, it’s complicated. The wrangle over Internet access taxes is linked to the debate over whether online retail purchases are subject to sales tax. That’s a murky issue. California tries to collect usage taxes – a sales tax by another name – directly from businesses and consumers who buy products on line. States and local governments don’t want any federal restrictions on their taxing authority, and are lobbying hard for exceptions to the ban, for example urging that sales tax levies approved by voters be allowed.

There has also been murmuring to rewrite federal definitions of broadband networks and Internet access. If done strictly in the context of the tax code, it’s not that big of a deal, except that it would serve as exhibit A for the case against the FCC’s decision to run the Internet according to common rules.

The prospect of taxes on Internet service/services was one of the black helicopters opponents warned about – probably correctly. Nearly everyone I’ve talked to about it – off the record – expects broadband taxes to arrive eventually. If nothing else, as a matter of equity universal service taxes will have to shift from being 100% telephone-funded to some mix of telephone and broadband. If the money is going to broadband, it follows (even to me) that the money should come from broadband.

But messing with the tax code is course of business in Washington and Sacramento, and the real deal making gets done at the last minute and behind closed doors. My prediction: no need to check back until September.

FCC issues Catch-222 advisory

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I’m glad we had this chat.

In case you were still wondering, the Federal Communications Commission’s decision to bring Internet service and infrastructure under common carrier regulation was not simply about whether Comcast can block you from watching Netflix. As a statement from the FCC’s enforcement bureau emphasises, there are a lot of other rules involved, particularly those that deal with how Internet service providers use and/or safeguard information about you.

Except, no one, not even the FCC enforcement bureau, knows what those rules are. So, it’s helpfully offering to review any consumer privacy policies that ISPs have in place and maybe provide an opinion on “whether a broadband provider’s acts or practices are reasonable and whether such a provider is acting in good faith to comply with Section 222″. That’s the section of federal telecoms law that deals with “privacy of customer information”.

The new rules go into effect the middle of next month, assuming a federal appeals court doesn’t put them on hold. The enforcement bureau does know it won’t be enforcing the particular consumer privacy rules established for telephone companies, because “the commission declined to apply its existing telephone-centric rules” to Internet service. And it knows that the commission might actually tell it exactly what it’s supposed to be enforcing, because the decision “indicated that in the future it may adopt implementing rules that are tailored to broadband providers”.

Until then, it’s up to ISPs to read section 222, figure out what it means for themselves, and then ask the people at the enforcement bureau what they think. And hope they’ll agree with themselves later. Whether or not the enforcement bureau knows what it’s supposed to be enforcing, it knows it has to enforce something, otherwise, why would it be called the enforcement bureau?

Rosenworcel gets a second term on the FCC

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Jessica Rosenworcel is heading toward five more years as a member of the Federal Communications Commission. U.S. president Barack Obama “announced his intent to nominate” her to a full term on the commission. Once he actually does that, the next step will be confirmation by the U.S. senate.

It’s a good move. Rosenworcel has a history of independent thinking, and voting, as an FCC commissioner. She provided the intellectual push back against chairman Tom Wheeler’s original no lobbyist left behind plan for ensuring network neutrality, and tried to include consideration of common carrier Internet regulation and other alternatives from the beginning.

The common carrier rules adopted by the commission in February bear a close resemblance to the points Rosenworcel was making a year earlier, before white house aides and, eventually, president Obama joined the chorus.

Rosenworcel took her seat on the commission in 2012, filling one of the slots allocated to democrats. Previously, she had served as an FCC and senate staffer, and practiced communications law as a private attorney. All four of her colleagues issued the obligatory press releases congratulating her on the appointment, and she released her own, saying she was honored by the nomination and thanking everyone…

During my tenure at the agency it has been a tremendous privilege to work with my colleagues, the talented staff of the Commission, and the American people to develop policies that expand access to modern communications and the opportunities of the digital age. I look forward to the United States Senate considering my nomination and the continuing opportunity to serve.

The first time around, the senate voted unanimously to confirm her. Although her votes and views generally rest comfortably within the norms of her party, she’s not overtly partisan. A second unanimous vote might be too much to hope for, but it seems a safe bet that she’ll get strong support from both sides of the aisle.

Another day, another cable deal in California

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Altice, a European cable company with roots in France and headquarters in business-friendly Luxembourg, is buying 70% of Suddenlink for $9.1 billion. The announcement follows news that Charter is still intent on acquiring Bright House Networks.

Both Charter and Altice are considered possible candidates to buy Time-Warner, which would be a much bigger play than either Suddenlink or Bright House. Comments released by Suddenlink’s CEO, Jerry Kent, made it pretty clear this latest agreement is just the beginning

While our strong performance has afforded Suddenlink ready access to growth capital, the backing of Altice will better position the company to gain critical scale as a major consolidator in the U.S. cable industry.

A New York Times article points to Altice’s reputation as a cost-cutter, and speculates that the prospect of a foreign owner taking over a big U.S. cable company and the potential for a cut back in either service levels or system upgrades will be issues for federal regulators as they review the deal.

The California Public Utilities Commission will almost certainly have to approve the deal, too. Although it’s delayed voting on a formal rejection of the Comcast-Time Warner-Charter mega merger, and thereby setting a precedent for using broadband service as a criterion for evaluating these sorts of transactions, the CPUC is likely to consider the Suddenlink deal’s impact on the Californian Internet access market.

Suddenlink has 1.4 million subscribers in 17 states, and claims to be the 7th largest cable operator in the U.S. In California (which it refers to as “elsewhere” on its website), it owns several, relatively small systems: along the eastern Sierra, the I-80 corridor, Humboldt County, Monterey County and near the Arizona border. Bandwidth is limited on some of those systems, partly because of old technology and partly because of limited backhaul capacity. The company has a good track record of increasing service levels as more capacity becomes available.

Charter pushes ahead with bid to expand California footprint via Bright House purchase

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Not dead yet.

Well, the deal lives. Charter Communications is still in the hunt to take over Bright House Networks. Reuters reported that the deal was off, following the crash of the Comcast-Time Warner-Charter mega-merger. But if anything was actually broken in the first place, it’s now been fixed, according to a press release from Charter

The companies remain committed to completing their previously announced transaction on the same economic and governance terms. The companies have extended their good faith negotiating period for an additional 30 days under the previously announced agreement for Charter to acquire Bright House Networks…for $10.4 billion. Bright House is the sixth largest cable operator in the United States, and serves approximately 2 million video customers in central Florida including Orlando and Tampa Bay, as well as Alabama, Indiana, Michigan, and California.

The Californian systems are in Kern County, not so far from Charter’s existing franchise areas in San Luis Obispo County. Assuming the companies get it all together in the next month, they’ll presumably have to ask the California Public Utilities Commission for permission to transfer control of Bright House’s regulated telephone business in the state, along with the associated certification.

I say “presumably” because you have to bet that Charter’s lawyers are trying to figure out if there’s a way to avoid getting tangled up in the CPUC’s review process again. Particularly if commissioners vote tomorrow to formally reject the defunct Comcast mega-merger and set a precedent for future reviews of cable and/or telco mergers on the basis of the effect on California’s broadband market. One way to do that might be to transfer the Bright House systems in states with more biddable regulators to Charter and leave the Californian rump to fend for itself.

On the other hand, if this transaction is just a prelude to a Charter bid to buy Time Warner, now that Comcast is out of the running, then there’s no avoiding a CPUC review – Time Warner’s southern California systems are among its crown jewels.