Tag Archives: time-warner

Justice department picks up free market ball as FCC drops it

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Cable and phone companies may soon be free of any obligation to meet common carrier standards of behavior, but that doesn’t necessarily mean they can exert their monopoly muscle on the broadband market without fear of consequences.

Last week’s other big broadband story offers hope of an even more effective counterweight to broadband monopolies: anti-trust law. When the federal justice department sued to block AT&T’s takeover of Time Warner, it made a clean break from recent practice and went after the root cause of the problem – pursued a structural remedy – instead of nibbling around the edges with temporary and often tangential behavioral restrictions on the companies. It’s a strategy – and philosophy – outlined in a recent speech to the American Bar Association by Makan Delrahim, the new assistant attorney general in charge of anti-trust enforcement…

Like any regulatory scheme, behavioral remedies require centralized decisions instead of a free market process. They also set static rules devoid of the dynamic realities of the market. With limited information, how can antitrust lawyers hope to write rules that distort competitive incentives just enough to undo the damage done by a merger, for years to come? I don’t think I’m smart enough to do that.

Behavioral remedies often require companies to make daily decisions contrary to their profit-maximizing incentives, and they demand ongoing monitoring and enforcement to do that effectively. It is the wolf of regulation dressed in the sheep’s clothing of a behavioral decree. And like most regulation, it can be overly intrusive and unduly burdensome for both businesses and government.

The justice department’s complaint called out the problem. When Comcast bought NBC-Universal – a similar deal – the justice department and the Federal Communications Commission extracted promises of good behavior. Some targeted direct, anti-competitive problems, while others went after unrelated side benefits, like discounted broadband rates for low income households. But it won’t matter much longer whether those promises did any good: they all expire next year. Comcast will be free to be, well, Comcast.

The justice department is taking a better approach with AT&T and Time Warner. It’s trying to avoid damage, rather than ineptly mopping up around the edges. The same thing happened with CenturyLink’s takeover of Level 3 Communications. The combined company is giving up dark fiber strands on 30 key long haul routes. It’s arguable whether that’s sufficient, but it is a structural cure aimed at preventing a monopoly from forming. The contrast with the weak and irrelevant behavioral conditions imposed by the California Public Utilities Commission is stark.

The broadband market in the U.S. is mostly a mix of outright monopolies and cozy duopolies, which are themselves collapsing into monopolies as cable companies outstrip telcos’ ability to deliver broadband at the federal advanced services standard of 25 Mbps download and 3 Mbps upload speeds. The Federal Communications Commission is determined to let that happen. With its new found zeal for trust busting, the justice department is the unexpected last line of defence.

Feds flex anti-trust muscle and sue to block AT&T-Time Warner deal

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The federal justice department challenged the proposed merger of AT&T and Time Warner in court yesterday, on anti-trust grounds. The problem, according to the justice department’s complaint (h/t to Brian Fung at the Washington Post for the pointer) is that if it owns the entire content creation-ownership-distribution chain, AT&T will use that market power to muscle out its competitors, – traditional linear distribution companies and emerging over-the-top players alike…

If allowed to proceed, this merger will harm consumers by substantially lessening competition among traditional video distributors and slowing emerging online competition. After the merger, the merged company would have the power to make its video distributor rivals less competitive by raising their costs, resulting in even higher monthly bills for American families. The merger also would enable the merged firm to hinder the growth of online distributors that it views as a threat to the traditional pay-TV model…

AT&T/DirecTV perceives online video distribution as an attack on its business that could, in its own words, “deteriorate the value of the bundle.” Accordingly, AT&T/DirecTV intends to “work to make [online video services] less attractive.” AT&T/DirecTV executives have concluded that the “runway” for the decline of traditional pay-TV “may be longer than some think given the economics of the space,” and that it is “upon us to utilize our assets to extend that runway.” This merger would give the merged firm key, valuable assets, empowering it to do just that.

The core problem, according to yesterday’s filing is the proposed combination of DirecTv, which, when combined with AT&T’s Uverse service, is the nation’s largest television distributor, and Time Warner’s Turner networks. That lends credence to reports over the past couple of weeks that federal anti-trust lawyers wanted AT&T to give up one or the other in order to avoid going to court.

AT&T isn’t backing down. It’s immediate response was to call the lawsuit “a radical and inexplicable departure from decades of antitrust precedent”.

Charter is ripping off Internet subscribers, says NY attorney general

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Time Warner Cable executives deliberately under provisioned and over promised Internet service to its subscribers in the State of New York and Charter Communications is allowing the practice to continue, claims New York attorney general Eric Schneiderman in a lawsuit filed earlier this week. It’s a follow on to an investigation kicked off in 2015.

Charter purchased TWC in May 2016. It took over operation of systems and customer equipment that couldn’t delivered speeds that were advertised or that customers purchased and “even now, [Charter] continues to offer Internet speeds that we found they cannot reliably deliver”, Schneiderman alleges. TWC went so far as to rig speed tests run by the Federal Communications Commission, according to the lawsuit

[Time Warner Cable] leased older-generation modems to over 900,000 subscribers in New York State…However, [Time Warner Cable] knew that, in practice, these older-generation modems were incapable of achieving the Internet speeds its subscribers were led to believe they were paying for…

[Time Warner Cable] managed its cable network in a way that did not deliver the promised Internet speeds over any type of connection. It cut corners by packing too many subscribers in the same service group, which resulted in slower speeds for subscribers, especially during peak hours. It also failed to add more channels for each service group, which similarly resulted in slower speeds for subscribers…
[Time Warner Cable] further deceived the FCC by manipulating the average Internet speed results in the FCC’s speed tests. The company inflated the average speed results by providing increased Internet speeds when service groups were less utilized to offset (and conceal) test results showing slower speeds when the service groups had heavier usage. By gaming the FCC speed tests in this manner, [Time Warner Cable] concealed the fact that it failed to consistently deliver the promised speeds to its subscribers under actual network conditions.

Charter’s response to an enquiry from Ars Technica blamed TWC but stopped short of admitting there was actually a problem or promising that it would actually fix anything.

Haven’t seen the facts about AT&T, Time Warner merger, Trump says

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Translation: never mind.

Donald Trump is backing off from his stated opposition to the AT&T – Time Warner transaction. According to the Axios blog, Trump said in an interview

“I have been on the record in the past of saying it’s too big and we have to keep competition. So, but other than that, I haven’t, you know, I haven’t seen any of the facts, yet. I’m sure that will be presented to me and to the people within government.”

Wall Street’s optimism about a kinder attitude toward big mergers in Washington, DC appears to be a safer bet.

Don’t make U.S. telecoms market failure worse, says The Economist

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Land of the rent-seekers and home of high prices.

AT&T should not be allowed to purchase Time Warner, according to a pointed editorial in The Economist. AT&T’s monopoly power in some market segments and its cozy duopolies in others already gives it too much control over what people in the U.S. can see, how much they have to pay and how much money gets stuffed in the pockets of politicians, says the London-based newspaper and free market advocate

There are two reasons why trustbusters should now take a tougher line. First, the telecoms industry is already a rent-seekers’ paradise. Americans pay at least 50% more for mobile and broadband service than people in other rich countries. For each dollar invested in infrastructure and spectrum, American operators make 28 cents of operating profit a year, compared with 18 cents for European firms. That reflects the lack of competition. AT&T and Verizon control 70% of the mobile market, and are the only firms that reach 90% or more of Americans with high-speed services. Half of the population has no choice of fixed-broadband supplier. The lack of downstream competition in pipes could distort competition in upstream content…

A second concern is that AT&T-Time Warner would have vast political and lobbying power, allowing it to bend rules over time, including any antitrust remedies that it agreed with regulators. It would capture 28% of the media-and-telecoms industry’s pre-tax profits and 2% of all corporate profits, making it America’s third-biggest domestic firm. Media and telecoms regulation is already intensely political, and AT&T today is no shrinking violet, being a vocal opponent of net neutrality, the rules that ensure that all online traffic is treated equally.

I’d argue that CenturyLink’s purchase of Level 3’s fiber network – particularly the extensive overlapping routes the two companies share – is a more direct and immediate threat to what little remains of telecoms competition in the U.S. But from the big picture point of view, The Economist has it right.

Only one regulatory hurdle looms for AT&T-Time Warner deal

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Clearing it is not a given, though.

AT&T’s bid to acquire Time Warner has little direct effect on the broadband industry, but the indirect effects have set off anti-competitive alarm bells. Compared to other recent mega-deals, though, there will be relatively little regulatory review of the transaction.

Time Warner already spun off its cable systems into an independent company, which was snapped up by Charter Communications earlier this year. That followed a similar, unsuccessful attempt by Comcast. Both deals triggered reviews by the California Public Utilities Commission, the Federal Communications Commission, and the federal justice department’s anti-trust team. Comcast’s purchase of Time Warner was scuppered by the FCC and the federal justice department; Charter successfully ran that gauntlet. As did Comcast when it took control of NBC Universal, at least at the federal level.

But AT&T is in much different position. Time Warner is a content company. It doesn’t own any regulated telephone subsidiaries, which is what caused the California Public Utilities Commission to become involved in the Charter and Comcast transactions. It does own one television station, WPCH-TV (formerly WTBS-TV) in Atlanta, and the FCC would have to approve any change in ownership, but that might be finessed. According to the joint statement issued by the two companies on Saturday

AT&T and Time Warner are currently determining which FCC licenses, if any, will be transferred to AT&T in connection with the transaction. To the extent that one or more licenses are to be transferred, those transfers are subject to FCC review.

Translation: we don’t want the FCC coming anywhere near this deal, so we will try like hell to figure out some other way to get rid of the television station.

The justice department will do a standard, anti-trust review and, likely, impose conditions that’ll be limited to direct, competitive issues like exclusivity of its programming or zero rating the bandwidth that mobile subscribers consume to watch it. Or it could simply kill the deal on the grounds that the anti-competitive harm is beyond mitigation. But at this point, that’s not the way to bet.

Charter gets CPUC okay to buy Time Warner, Bright House

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It’s all Charter territory now.

Charter Communications will own Time Warner cable systems in southern California and Bright House systems in the San Joaquin Valley and become the state’s largest cable company, following yesterday’s unanimous approval of the deal by the California Public Utilities Commission.

Commission president Michael Picker – technically, the commissioner responsible for the decision text – made one change to the revised draft prepared by an administrative law judge. He added a three year limit on Charter’s obligation to “comply with all the terms and conditions of the Federal Communications Commission’s Open Internet Order, regardless of the outcome of any legal challenge”. The amendment corrected what appeared to be a drafting error – as originally written, Charter would have to abide by those rules forever and ever, at least in California, regardless of what courts or the FCC might decide in the future.

Enforceability of the decision was a key point of debate. Commissioner Catherine Sandoval suggested modifying the decision to allow a longer list of organisations to monitor compliance and bring action against Charter at the CPUC if commitments aren’t kept. It’s an important point because Charter signed agreements with a number of organisations – including my client, the City of Gonzales – detailing obligations over and above what the CPUC and the FCC imposed. After much discussion between commissioners and staff attorneys, everyone agreed that the draft language allowed ample opportunities for those involved to seek redress, and no changes were made.

The most telling point was made by commissioner Carla Peterman, who managed last year’s acrimonious review of this deal’s failed predecessor, the attempt by Comcast to likewise buy Time Warner and Bright House’s Californian systems and roll in Charter’s systems here. She compared Charter’s willingness to negotiate with Comcast’s nasty smash mouth tactics and refusal to deal with anyone, least of all the CPUC. Okay, I said that, she didn’t. But she did tactfully contrast the two proceedings to Charter’s advantage, and I’ll just write – if not read – between the lines.

With the CPUC’s vote, the regulatory path to closing the deal is clear. Then, the work begins.

CPUC approves Charter purchase of Time Warner, Bright House

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In a unanimous vote a few minutes ago, the California Public Utilities Commission approved Charter Communications’ purchase of Time Warner and Bright House cable systems in California. It’s the final regulatory hurdle for the transaction. CPUC president Michael Picker made one change to the text of the decision that was on the table, adding a time limit of three years to Charter’s obligation to abide by the FCC’s common carrier rules. As written, the text left that commitment open ended, which was apparently a drafting oversight.

Commissioners also affirmed the agreements reached by Charter with a number of parties to the proceeding, including the City of Gonzales and Monterey County, and engaged in lengthy discussion about how those deals can be enforced.

I’m assisting the City of Gonzales with its efforts at the CPUC and its negotiations with Charter. I am not a disinterested commentator. Take it for what it’s worth.

Game on for Charter deal as CPUC meets in Sacramento

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The decision should come later this morning, and it’s looking increasingly like the California Public Utilities Commission will approve Charter Communication’s purchase of Time Warner and Bright House cable systems in California.

It won’t skate through on the consent agenda – the long list of non-controversial decisions the CPUC (and most other public agencies) take with a single, usually unanimous vote. It was originally placed there, but was officially pulled off yesterday afternoon, when last minute revisions to today’s agenda were posted. Not a surprise. Even if the commissioners are singing in five part harmony on it, a decision this big calls for at least a pro forma discussion and a formal vote.

What didn’t happen yesterday is even more important. Individual commissioners can put a hold on items they’d like to either revise or explore further. They can also put alternative decisions on the table, if they think the call should go in the other direction. Neither happened yesterday. Although alternatives and hold requests can be rolled out at the beginning of the meeting – scheduled for 9:30 a.m. – that’s not the sort of chaos that you’d think commissioners would want to put on display in Sacramento, where they’re meeting today. With bills aimed at abolishing the CPUC and allowing AT&T to escape from meaningful regulatory oversight creeping through the California assembly, now would be good time to look buttoned down.

The absence of procedural maneuvers and the relatively minor revisions made to the proposed yes decision released yesterday doesn’t necessarily mean all five commissioners agree. But it does point to the likelihood that at least three do, and that’s all it takes.

I’m assisting the City of Gonzales with its efforts at the CPUC and its negotiations with Charter. I am not a disinterested commentator. Take it for what it’s worth.

California’s blessing for Charter-Time Warner on track for tomorrow

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Holy orders or holy hand grenade?

Charter Communications is inching closer to gaining the California Public Utilities Commission’s okay to buy cable systems owned by Time Warner and Bright House. The CPUC administrative law judge handling the case published a revised version of his original draft decision approving the deal late yesterday, and there were no major changes.

The revised draft reviewed objections raised by a number of organisations that continue to oppose the deal, as well as responses from Charter offering additional concessions, such as promising to upgrade all customers to 300 Mbps capability by 2019. The revision rolled that and a few other points into the conditions attached to approval, and tightened up enforcement provisions – CPUC staff will be able to audit compliance with the terms of the decision and require Charter to hand over data regarding its business dealings in California upon request.

But on the whole, it’s pretty much the same yes that was written into the original draft.

The Federal Communications Commission released the full text of its decision approving the deal yesterday, too. It’s 300-plus pages and I haven’t pounded through it all yet, but the top line is that it appears to track with the press release put out last week. The seven year term of conditions imposed by the FCC might turn out to be just five years – Charter can apply for early release from the requirements – but compliance with common carrier rules and bans on data caps and other unpopular service terms are in there.

Later today, probably in the early afternoon, the CPUC will post the hold list for tomorrow’s meeting. That’ll be the next clue as to whether the Charter deal is still on track. If a commissioner has serious concerns about something on the agenda, he or she can put a hold on it and bump it to the next meeting. Uncertainty over the outcome of the vote might be such a concern, or it could be one commissioner wanting to revisit some of the language in the draft. We’ll have to wait and see, but at this point a vote tomorrow seems likely and the result appears to be yes.

I’m assisting the City of Gonzales with its efforts at the CPUC and its negotiations with Charter. I am not a disinterested commentator. Take it for what it’s worth.