Daily Digest 6/14/2018 (After AT&T, Then Came Comcast)

Democratic Reps used a House Communications Subcommittee markup of a pirate radio bill to express their opposition to the Federal Communications Commission's rollback of network neutrality rules. Subcommittee Ranking Member Mike Doyle (D-PA) introduced an amendment to the Preventing Illegal Radio Abuse Through Enforcement (PIRATE) Act (HR 5709) that would have replaced the base bill with one that would restore the net neutrality rules just jettisoned. He also put in a plug for supporting his Congressional Review Act (CRA) resolution that would nullify the rollback and restore the rules. Several Democratic Reps then weighed in with their criticisms of the FCC rule rollback, including full committee Ranking Member Frank Pallone (D-NJ), as well as their support for the amendment and the CRA. Ranking Member Doyle then immediately withdrew the amendment. After the various proposed amendments were withdrawn, the PIRATE Act was approved unanimously by voice vote. 

The Subcommittee on Digital Commerce and Consumer Protection, chaired by Rep. Bob Latta (R-OH), advanced by voice vote H.R. 6032, the SMART IoT Act, to the full committee for consideration. The SMART IoT Act, authored by Subcommittee Chairman Latta and Rep. Peter Welch (D-VT), will direct the Secretary of Commerce to conduct a study on the state of the internet-connected devices industry.

In a speech to the Media Institute, USTelecom President Jonathan Spalter said it is time to establish "consistent safeguards" across the entire internet. The key to those consistent safeguards, he suggested, were their broad application, echoing the growing chorus of internet service providers and legislators from both parties that believe mammoth edge players like Facebook and others need minding. "[T]he reality today is the companies making headlines for privacy missteps or blocking content aren’t the ISPs," Spalter said. "Just witness the back-and-forth between Google and Amazon blocking the sale of each other’s products and services on their respective platforms. This was a fatal flaw of Title II: It is no longer acceptable to write rules either here in Washington or in any state that omit the most powerful and valuable — at least in terms of market cap — players of the digital age. We all have a stake in getting modern rules right because if we don’t, then others will continue to fill the void."

Comcast has disabled a throttling system that it deployed in 2008 in order to slow down heavy Internet users. Comcast's network is now strong enough that a congestion management system isn't needed, the company says. The system has been "essentially inactive for more than a year," and is now disabled entirely. Yet the nation's largest cable operator still imposes data caps and overage fees in 27 states, claiming that it limits the amount of data customers use each month "based on a principle of fairness." Comcast initially deployed its congestion management system after it was caught throttling BitTorrent traffic over a decade ago. The system deployed in 2008 was application-agnostic. Instead of targeting specific online services, Comcast used the system to slow down heavy Internet users regardless of which applications they were using. 

Comcast announced an offer worth $65 billion for the bulk of 21st Century Fox’s businesses, setting up a showdown with the Walt Disney Company for Rupert Murdoch’s media empire. The all-cash bid by Comcast, the largest cable company in the United States, came a day after a federal judge approved a merger between AT&T and Time Warner. Comcast executives had awaited the decision in that case before mounting their bid for 21st Century Fox. In December, Disney struck a $52.4 billion, all-stock deal for Fox’s assets. Comcast, whose roughly $60 billion offer for the Fox assets was rebuffed in 2017, is now including contractual assurances such as a reverse breakup fee — worth about $2.5 billion — in the event a transaction is blocked by the government. Comcast’s new offer is about 19 percent higher than Disney’s proposal, according to its statement. Murdoch and his company’s board had rejected Comcast’s earlier offer partly on concerns the government would block the deal. But the AT&T-Time Warner decision also allayed many concerns that a Comcast takeover of 21st Century Fox’s businesses would be denied by regulators.

Judge Richard Leon issued a stinging rebuke to the Justice Department's attempt to block AT&T's $85 billion bid to acquire Time Warner. But that doesn't mean the case is over. The Justice Department can appeal the ruling, and the department's antitrust chief, Makan Delrahim, is considering that option.  "I think the constitution and the statues allow for due process for all litigants and we will take a look at what the next steps are," Delrahim said. The Justice Department could seek a stay of his decision, essentially freezing the combination of the two companies while the case works its way through the appeals process. But the Justice Department would have to go through Judge Leon first, and at the June 12 hearing, he used unusually strong language to discourage the department from asking him for an injunction. He said such a request would be "manifestly unjust" because it would have the effect of killing the acquisition, since AT&T and Time Warner's agreement expires on June 21. "I hope and trust that the government will have the good judgment, the wisdom, and the courage to avoid such a manifest injustice," he said in court. "To do otherwise, I fear, would undermine the faith in our system of justice of not only the defendants but their millions of shareholders and the business community at large." The government's attorneys could go to the D.C. Circuit Court of Appeals to request an injunction. Another option for the government is to skip a stay, and just appeal the case. But AT&T and Time Warner have said they will begin to merge the companies as soon as possible. A ruling from an appeals court would arrive after the deal is completed, making it difficult to untangle the newly merged company. "The reason you'd get a stay is because the process of an appeals process can takes six months to a year," said Jeffrey Blumenfeld, a former senior Justice Department antitrust attorney who is now a partner at the law firm Lowenstein Sandler. "The risk in a merger situation is once the companies combine operations it can be difficult to take the company apart again, though it has been done."

[Commentary] The government's insistence on bringing such a weak lawsuit [AT&T/Time Warner] does not bode well for the immediate future of antitrust. There are going to be plenty of mergers over the next few years that will have far more serious consequences than the AT&T-Time Warner deal. Having been slapped down in this lawsuit, the Justice Department is unlikely to be willing to go after those worthier targets, even when they raise important issues of innovation and consumer choice. I've previously argued that we need an evolving theory of antitrust that can deal with the dominance of the big tech companies. But this requires the government to be able and willing to bring aggressive suits, and to make innovative arguments. If that doesn't happen, Big Tech is going to become so powerful it will snuff out any company that even thinks about trying to compete. That's not good for the tech industry, and more important, it's not good for the country. I had hoped that [DOJ antitrust chief Mark] Delrahim, as a longtime antitrust expert, would be the person to lead such a charge. But that hope is now lost. In the short term, the government's willingness to bring this dumb case means that AT&T and Time Warner's merger was delayed a bit, but the combined company can soon start competing with the likes of Netflix and Amazon. In the long term, it means that antitrust enforcement has been significantly weakened. That's the true tragedy of the government's suit.

[Joe Nocera is a Bloomberg Opinion columnist covering business.]

[Commentary] The AT&T/Time Waner deal is not unique. Its template was laid out in 2011 by what was then the biggest such “vertical” merger in the information and entertainment sectors: Comcast’s $30-billion takeover of NBCUniversal.  That earlier deal united a big Internet service provider with a big purveyor of content. It was pitched as bringing huge benefits to the public — improved cable TV and internet technology, more innovative TV programming, lower prices. Have you seen any of that since 2011? Me neither. The FCC thought it could keep Comcast on the straight and narrow by imposing more than a dozen conditions on its merger in 2011. It was wrong. Instead it was forced into countless battles with the ever-more-powerful company, and lots of litigation. Thanks to Judge Leon, the AT&T-Time Warner merger will be completed without any such conditions. The smart money says that further mergers along the same lines will shortly be proposed, with Verizon, Comcast, Walt Disney, and 21st Century Fox among the future brides and grooms. Open season on consumers’ pocketbooks, and on their access to the content they wish to watch, starts now.

Ion, Univision and Trinity Broadcasting say the Federal Communications Commission should not only grandfather their TV station holdings' discounted audience reach if the FCC adjusts the UHF discount or 39% audience reach cap, but should also allow them to transfer that grandfathered status to a new owner. That came in comments on the FCC's inquiry into whether that 39% cap needs to be raised or scrapped (or conceivably lowered, though that is highly unlikely). All three have station groups that would exceed the 39% cap on a group's national audience without the UHF discount that allows them to count only half of a UHF station's audience toward the cap. They say full and transferable grandfathering should be the policy regardless of what the FCC does to the cap or the discount. Among the possible outcomes are eliminating the discount, but raising the cap to, say, 50%. The commenters point out that their groups were built in reliance on the discount and serve important populations--minorities, the elderly--so there is a public interest in not breaking them up. They also point out that they have used the scale the discount allowed them to build to launch multicast nets serving various populations, a public service scale that should be transferable to a new owner so they could carry on that public service mission.

Apple has long positioned the iPhone as a secure device that only its owner can open. That has led to battles with law enforcement officials who want to get information off them, including a well-publicized showdown with the FBI in 2016 after Apple refused to help open the locked iPhone of a mass killer. The FBI eventually paid a third party to get into the phone, circumventing the need for Apple’s help. Since then, law enforcement agencies across the country have increasingly employed that strategy to get into locked iPhones they hope will hold the key to cracking cases. Now Apple is closing the technological loophole that let authorities hack into iPhones, angering police and other officials and reigniting a debate over whether the government has a right to get into the personal devices that are at the center of modern life. Apple said it was planning an iPhone software update that would effectively disable the phone’s charging and data port — the opening where users plug in headphones, power cables and adapters — an hour after the phone is locked. While a phone can still be charged, a person would first need to enter the phone’s password to transfer data to or from the device using the port. Such a change would hinder law enforcement officials, who have typically been opening locked iPhones by connecting another device running special software to the port, often days or even months after the smartphone was last unlocked.

The White House pushed back on legislative efforts to reverse President Donald Trump’s deal with China that eases penalties on Chinese telecommunications giant ZTE, helping to revive the company. White House deputy press secretary Hogan Gidley defended the administration's agreement to impose lessened penalties on the company, maintaining that the punishment was "massive" and "historic." “This will ensure ZTE pays for its violations and gives our government complete oversight of their future activity without undue harm to American suppliers and their workers," Gidley said. “The Administration will work with Congress to ensure the final [National Defense Authorization Act] conference report respects the separation of powers," he added.

Recognizing the importance of innovative communications technology designed for people with disabilities, Federal Communications Commission Chairman Ajit Pai announced the winners of the seventh annual Chairman’s Awards for Advancement in Accessibility (Chairman's AAA). Winners of 2018 Chairman’s AAA:

• Orbit Reader 20: This refreshable braille display and notetaker significantly reduces the price point for this type of accessible technology, which has been prohibitively expensive for many blind and low vision persons. 
• Captioning and Description Editing Tool (CADET): WGBH in Boston and the National Center on Accessible Media have developed a free program for closed captioning and video descriptions. 
• Content Clarifier: The IBM AbilityLab Content Clarifier is an innovative accessible technology that uses artificial intelligence (AI) algorithms, machine learning models, and natural language processing to simplify, summarize, and augment digital content to increase comprehension for people with cognitive disabilities, the aging population, or those learning English as a second language. 
• Seeing AI: This free Microsoft app narrates the visual world to improve accessibility and independence for blind and low vision persons. 

President Donald Trump declared that the nation's "biggest enemy is the Fake News," particularly NBC and CNN for their coverage of the North Korea summit. "So funny to watch the Fake News, especially NBC and CNN," President Trump tweeted. "They are fighting hard to downplay the deal with North Korea. 500 days ago they would have 'begged' for this deal-looked like war would break out. Our Country’s biggest enemy is the Fake News so easily promulgated by fools!"

[Commentary] Although every legitimate news organization made efforts, some better than others, to bring context and even a measure of skepticism into their mix of stories [on the Singapore summit], the event overall was a triumph of Trumpian stagecraft. And the media played its accustomed role.  Because of wall-to-wall media coverage, carefully choreographed visuals and the usual Trumpian bluster, the Singapore summit largely came across as a triumph of personal diplomacy by the president. Meanwhile, the problems with the summit — the legitimacy given to a regime with human rights abuses, the concessions given that can never be given again for greater gain, and the disrespect shown to longtime ally South Korea — weren’t exactly ignored. But they were largely lost.

[Margaret Sullivan is The Washington Post’s media columnist]