Tag Archives: monopoly

Partisan shift in Congress could influence anti-trust reviews of T-Mobile’s takeover of Sprint

by Steve Blum • , , , ,

The flip from a republican majority to a democratic one in the federal house of representatives has opened a window of opportunity for, among others, those opposed to T-Mobile’s planned takeover of Sprint. A coalition of fourteen labor organisations and a wide range of advocacy are urging the presumed incoming chairmen of the house judiciary, and energy and commerce committees to investigate the “likely effects” of the deal.

In a letter sent yesterday (h/t to a story by Harper Neidig in the Hill for the pointer), the groups reminded representatives Jerry Nadler (D – New York) and Frank Pallone (D – New Jersey) that they spoke out against the merger when democrats were the minority party, that they should follow through now that they’re in the majority…

Representative Pallone, on April 30th you and Representative Doyle wrote to Chairman Walden and Chairman Blackburn requesting a hearing on the proposed Sprint/T-Mobile merger. You correctly pointed out that due to its “primary jurisdiction over the wireless industry, [the Energy and Commerce Committee has] a responsibility to understand the potential effect of this merger on consumers, workers, and the communications market.” You added that “the merger would create a new wireless behemoth by shrinking the number of nationwide wireless providers from four to three.” You went on to say that the Committee should explore the merged entity’s foreign ownership; whether 5G deployment is helped by the proposed merger, despite the fact that both T-Mobile and Sprint have invested in 5G already; and the state of wireless competition.

We agree. We hope you will now announce your intent to schedule exactly this kind of hearing.

The groups include the Greenlining Institute and the Communications Workers of America, which are also opposing the merger at the California Public Utilities Commission.

Congress has no direct role when it comes to reviewing mergers. At the federal level, that job falls to the justice department and the Federal Communications Commission. But they do have to answer to congress, at one level or another.

Investor-owned electric utilities won’t be California’s competitive broadband hope

by Steve Blum • , , , ,

The door has officially closed on expansions of Pacific Gas and Electric’s and Southern California Edison’s telecommunications businesses. It’s a small issue compared to the wildfire disasters that both companies are grappling with, but it could have a significant and ongoing effect on California’s uncompetitive broadband services market.

At its last meeting, the California Public Utilities Commission voted to allow PG&E to withdraw its application to become a certified telecommunications company. It applied last year, hoping to make better use of the 2,600 miles of fiber optic routes it owns in northern California. It ran into the same knee-jerk reaction from so called consumer advocates, who don’t seem to realise that electric customers and broadband subscribers are the same people, as SCE did when it unsuccessfully asked for permission to streamline telecoms business requirements placed on it by the CPUC.

The CPUC’s decision rewards the efforts of the consumer groups and industry lobbyists who intervened in its review of PG&E request. The decision specifically allows them to apply for “intervenor compensation”, which has to be paid by PG&E, even though no decision was reached on the merits of the case. The decision calls their efforts a “substantial contribution” that expanded “the scope of this proceeding from the usual scope of applications for [telecom company certification]”.

They certainly did that. By making a grab for any likely profits PG&E (and SCE) might make from putting valuable dark fiber on the market and from offering other telecoms services that would offer competition to monopoly model telephone and cable companies, the intervenors and the commissioners who accepted their arguments killed the business case. It’s a victory for the lawyers and lobbyists who can now send their bills to PG&E, and for companies like AT&T, Comcast, Charter and Frontier, who would prefer to keep California’s telecoms market under their control.

It’s a defeat for everyone else.

FCC’s broadband market share data shows urban/rural technology divide and decline of DSL

by Steve Blum • , , , ,

There’s a lot to chew over in the Federal Communications Commission’s latest report on broadband subscribers in the U.S. Just one of the many charts (pictured above) tells an interesting story about how people in the U.S. get fixed broadband service in their homes. Two conclusions jump out immediately: cable companies are winning the fight for broadband market share, but the availability of cable modem, fiber to the premise or other wireline service depends population density.

In other words, high density urban areas, and medium to high density suburbs are likelier to have high speed service via direct fiber or coaxial cable service, while people in rural areas are likelier to have to depend on fixed wireless or satellite providers.

DSL service, of whatever generation of technology, is fading into irrelevance. It is significantly less popular than cable modem service. Nationally, 62% of all fixed residential broadband service (defined as better than 200 Kbps in at least one direction) is delivered via cable modem, while telco style DSL accounts for 24%, and FTTP for 12%. But when usable service levels are examined, telco DSL craters, accounting for 13% of connections at 10 Mbps download and 1 Mbps upload speeds or better, and only 4% at speeds of at least 25 Mbps down and 3 Mbps up. The former is the FCC’s minimum for its $3 billion broadband subsidy program – the Connect America Fund – while the latter is the FCC’s and federal agriculture department’s minimum benchmark for what they call “advanced services” and what everyone else considers to be run of the mill Internet use in 2018.

The overall trend in California is the same, according to the study, which is based on reports filed by service providers as of 30 June 2017. It doesn’t break out residential and business connections, but market share figures for total connections tell a similar story: cable accounts for 64% of all broadband connections, telco DSL is at 28%, FTTP is at 8% and fixed wireless has about 1%.

T-Mobile not worried about speed or result of CPUC review of Sprint deal

by Steve Blum • , , , ,

T-Mobile doesn’t seem to be too worried about getting approval from the California Public Utilities Commission for its proposed takeover of Sprint. The company’s chief financial officer, Braxton Carter, spoke at an investment conference in Barcelona last week, and offered an optimistic timeline to complete the transaction…

The goal, we believe, is still to close this transaction…in the first half, probably in the second quarter of ’19. You look at the shot clock with the FCC, it’s really implying a very early April end of that shot clock at this point, and that’s why I’m more pointing to the second quarter is more probable. It can still be first quarter, but it’s going, we think, exceedingly well. But I think by the end of the year, we’ll be in a much better position.

Braxton’s focus is on regulatory approval from the federal justice department and the Federal Communications Commission – he didn’t mention state-level reviews at all – so he might or might not be factoring the CPUC’s process into his estimate. The timeline for the CPUC’s review calls for a decision to be reached in the second quarter of next year, too, but earlier indications were that means sometime in the summer of 2019, perhaps June.

The CPUC’s review potentially includes a wide range of issue – no particular limits were set on the extent of the inquiry – but big question is the impact the merger will have on competition in California’s mobile marketplace. Overall, U.S. consumers already pay the highest prices for mobile bandwidth in the developed world. Going from four national competitors down to three would mean a significantly less competitive environment for mobile customers. T-Mobile’s counter argument, according to Braxton, is that it’s really about “two going to three, the creation of a third, more-scaled national player to compete against a predatory duopoly that controls 85% of the cash flows in the marketplace”.

CPUC opens investigation into consumer broadband prices and other utility rates

by Steve Blum • , , , ,

The cost burden of consumer broadband service will be evaluated by the California Public Utilities Commission, as part of a larger inquiry into the affordability of all types of utility services. A “scoping memo”, released by commissioner Clifford Rechtschaffen on Monday, outlines the issues on the table as the CPUC tries to develop common metrics and methods for evaluating the affordability of all utility services under its jurisdiction.

The idea was floated in July, and utilities had a chance to offer their opinions on what should be considered and how it should be done. Not surprisingly, big telecommunications companies wanted to be left alone completely, because the CPUC does not directly regulate the prices they charge, unlike water, electric and gas rates (for privately owned utilities) and for small, rural telephone companies.

Rechtschaffen rejected their recommendations…

Affordability issues across Commission-jurisdictional utility services, including water, energy, and telecommunications services, will be considered. The stated intent of the [investigation] is to develop affordability metrics across utility industries to reflect the cumulative bill impacts since a customer often pays for electricity, gas, water, and telecommunications services under a single household budget. Although the Commission does not regulate rates for all telecommunications services, the Commission oversees a number of low-income and universal access programs for telecommunications services and also imposes surcharges for these programs…

The affordability considerations for telecommunications services may be different than for energy or water services but it is worth considering whether common definitions and metrics can be developed and it is within the Commission’s jurisdiction to consider these affordability issues.

Broadband isn’t specifically mentioned in the scoping memo, but the initial notice published in July points the investigation directly at telephone, cable and mobile companies “providing voice over Internet protocol (VoIP), wireless, or broadband internet access service in California”. The CPUC doesn’t regulate prices for any of those services, but Rechtschaffen clearly considers them to be within its jurisdiction. The low-income and universal access programs run by the CPUC include several – e.g. the California Advanced Services Fund, the High Cost fund and the California Teleconnect Fund – that subsidise broadband service and infrastructure.

No date was set for finishing the inquiry, except a vague reference to a statutory 18 month limit for such things. It’s a deadline that the commission routinely misses and extends for itself.

U.S. mobile bandwidth is rich world’s most expensive, and it could get worse

by Steve Blum • , , , ,

Mobile broadband prices in the U.S. are the highest in the developed world, according to a report just published by a Finnish research company. A study by Rewheel concluded that even though there are four seemingly competitive mobile operators in the U.S., “gigabyte prices are not competitive”, and “the US has the 5th highest gigabyte prices in smartphone plans and is the most expensive market in mobile broadband among the 41” European Union and other developed countries (i.e. those that belong to the Organisation for Economic Cooperation and Development).

One gigabyte of mobile data in the U.S. costs $6.77 on average. That’s higher than any other country, although perhaps there’s some comfort in knowing that Canada is second highest, at $6.18 per gigabyte. The European Union average is $2.33 per gigabyte, and the overall OECD average is $3.03 per gigabyte. (I’ve converted Rewheel’s cost figures from euros to dollars, using its benchmark rate of €30 equals approximately $35).

The story gets even bleaker when competition is factored in. Like many developed countries, the U.S. has four competing mobile operators, but that doesn’t translate into competitive prices. The average mobile broadband price in countries with four carriers is $2.97 per gigabyte, less than half the cost in the U.S. Countries with only three mobile operators have an average per gigabyte price of $3.73, which is still three bucks cheaper than in the U.S. market, which is theoretically more competitive.

Theoretically. And maybe not for long.

T-Mobile is trying to get permission from federal authorities and the California Public Utilities Commission to buy Sprint. Rewheel concludes that “the 4 to 3 US merger, if approved without the upfront entry of a new 4th [mobile network operator] will lessen the already weak competition”.

Despite the Alice in Wonderland claims made by the two companies, competition will not intensify if there are fewer mobile carriers in the U.S. market. Fewer competitors equals less competition. If that wasn’t obvious to the Federal Communications Commission, the federal justice department and the CPUC before Rewheel’s report came out, it should be now.

T-Mobile Sprint merger will eliminate thousands of California jobs, union says

by Steve Blum • , , , ,

The Communications Workers of America (CWA), which is the largest telecoms union in California, asked to join the California Public Utilities Commission’s inquiry into T-Mobile’s proposed takeover of Sprint yesterday. In its “motion for party status”, CWA said it represents wireless industry workers at AT&T and “as members of T-Mobile Workers United, an organisation of T-Mobile and MetroPCS employees”.

Many could lose their jobs, according to the union’s motion…

The T-Mobile/Sprint merger will have a significant impact on CWA members, both as workers in the industry and as consumers of wireless services. CWA’s research shows that the merger will result in the loss of 3,185 retail jobs in California due to store closures and consolidation. In addition, the proposed transaction could increase concentration in the wireless industry labor market with negative impact on industry-wide wages…

CWA District 9 intends to actively participate in this proceeding.

It’ll be up to the CPUC administrative law judge handling the case to decide whether CWA can jump into the proceeding at this point, but such requests are typically granted. The commissioner in charge, Clifford Rechtschaffen, didn’t call out employment issues as a particular focus of the inquiry in the “scoping memo” he issued a couple of weeks ago, but he also stated that the list was “non-exhaustive”.

Reviewing labor implications would be completely consistent with past practice and California’s public utility law, which directs that utility mergers must “be fair and reasonable to affected public utility employees, including both union and nonunion employees”. It’s not 100% clear whether the T-Mobile Sprint transaction is big enough to require that kind of review, but there’s little doubt the CPUC can choose to do so.

Two other groups that are protesting the merger – TURN and the Greenlining Institute – also filed paperwork, saying they expect to ask to be compensated by the companies for their efforts, as California law also allows. They estimate that they’ll run up a combined bill of $152,000.

T-Mobile, Sprint merger review widens in California

by Steve Blum • , , , ,

It seems someone jumped the gun at the California Public Utilities Commission, and prematurely sent out a ruling defining the scope of California’s regulatory review of T-Mobile’s proposed purchase of Sprint. On Thursday, the commissioner in charge of the inquiry, Clifford Rechtschaffen, issued an amended version of the “scoping memo” he released the week before, saying the first one “was mailed in error”.

There are several wordsmithing changes in the updated version, and a few that are more substantive. One big change is a broad, up front statement making it clear that there are no particular limits to what the review will cover…

The scope of this proceeding includes all issues that are relevant to evaluating the proposed merger’s impacts on California consumers and determining whether any conditions should be placed upon the merged entity.

Additions to the specific, but “non-exhaustive” list of items that will be covered include consideration of potential new services the combined company might offer and – for both new and existing services – the impact on communities and regions, as well as California a whole.

The net result is that the focus (if you want to call it that) of Rechtschaffen’s investigation is even wider than before. It won’t be limited to a few specific and largely technical issues, as T-Mobile and Sprint had hoped.

The original schedule called for a final decision by next June. The core of the new schedule tracks with the original one, but the beginning of public hearings over the next two or three months, and the final wrap up next spring (or maybe summer?) are more indeterminate. Instead of the CPUC voting on a final decision in “June 2019”, the schedule calls for that to happen in “2nd Quarter 2019”. Given the way decisions are drafted, reviewed and then put on the commission’s agenda, June is still a reasonable bet. But it might happen sooner. Or later – CPUC timelines have been known to slip.

Broadband speeds are the first casualty of truth

by Steve Blum • , ,

Internet service offerings slow down when service providers are forced to advertise accurate speed levels. In particular, the speed of teaser packages, designed to lure in price conscious subscribers, fall by 41%. That’s the conclusion of a British consumer group, following a study of how ISP advertising practices changed in the wake of a new U.K. regulation that forces them to make accurate service claims.

The Consumers’ Association says the down shift was sudden, coming soon after the new rules took effect…

The majority of broadband providers have been forced to cut the headline speeds they advertise when selling deals, following recent changes to advertising rules, according to new [Consumers’ Association] research.

An analysis of the biggest broadband providers found that, since new rules were introduced by the Committees of Advertising Practice in May, 11 major suppliers have had to cut the advertised speed of some of their deals, with the cheapest deals dropping by 41%…

Previously, suppliers were able to advertise broadband deals which claimed ‘up-to’ speeds that only one in 10 customers would ever reach.

But the new advertising rules mean that at least half of customers must now be able to get an advertised average speed, even during peak times (8-10pm).

There’s no equivalent requirement in the U.S.

The Federal Communications Commission punted the consumer protection ball to the Federal Trade Commission. Even when it subsidises incumbent telcos, like AT&T and Frontier Communications, to provide 10 Mbps download and 1 Mbps upload service in rural areas, it only expects them to hit 80% of that speed 80% of the time.

The California legislature passed a generic online truth in advertising law last year, but didn’t specifically call out Internet service or ISPs. Enforcement is up to California attorney general Xavier Becerra, who hasn’t done anything with it yet.

In practice, ISPs on this side of the Atlantic can advertise any speed they want, regardless of actual performance, so long as they qualify it with “up to” and back it with a long list of exceptions and conditions, buried somewhere on their websites.

Shouldn’t we expect the truth too?

California’s regulatory review of T-Mobile-Sprint deal has light years left to run

by Steve Blum • , , , ,

The proposed purchase of Sprint by T-Mobile will get a thorough workover by the California Public Utilities Commission, and a final decision on whether or not to allow it won’t come until next summer. The commissioner running the review, Clifford Rechtschaffen, laid out the issues that he’ll investigate in a ruling on Friday.

Rechtschaffen had to decide how wide ranging his inquiry will be. Sprint and T-Mobile wanted it to be very narrow, and focus on two particular issues: could a relatively small Sprint subsidiary that does some wireline business in California be sold to T-Mobile, and could T-Mobile take over Sprint’s California mobile carrier registration. Technically, that’s just a simple notice that it has a federal license, but transferring it requires CPUC sign-off. As they tried to argue, both were matters of minor paperwork. These aren’t the droids you’re looking for, move along, move along.

Protests came from the usual suspects. TURN (aka The Utility Reform Network), the Greenlining Institute and Media Alliance – non-profit advocacy groups that rely heavily on “intervenor compensation” handed out by the CPUC – objected. So did the CPUC’s internal advocacy unit, the office of ratepayer advocates. They wanted the commission to review the whole merger, and all its potential impacts on Californians.

Rechtschaffen resisted the Jedi mind trick and sided with the protestors. He listed fourteen questions that have to be answered before the CPUC makes a final decision. The timeline he laid out says that will happen in June 2019.

The topics of those questions range from the merger’s competitive impact on mobile service and the fiber backhaul markets in California, whether or not innovation will be helped or harmed, and what, exactly, are the wonderful “efficiencies” that Sprint and T-Mobile promise will come our way if they’re allowed to combine. He’ll also consider the need for and the nature of “conditions or mitigation measures to prevent significant adverse consequences” that the CPUC might impose.

The public will be involved. Rechtschaffen plans to hold a series of public hearings in November and December, which will presumably be held in several locations around California. After that, both sides will file position papers, present evidence at a formal hearing, and submit their arguments and counter-arguments. Once that’s done – by mid-March – it’ll take about three months to produce, review and vote on a final decision. That’s the planned schedule, anyway. Much can happen that might speed up or, particularly, slow down the proceeding.