September 2010

Small cable networks could get pushed into deals

Small independent cable networks could be forced to sell themselves to larger media conglomerates in the next 12 months as their profits are squeezed by pay TV operators looking to cut programming costs.

The lifeblood of networks are the fees that cable, phone and satellite operators pay for the right to televise their programs. Such programming fees are often the largest costs to the operators. Programming costs are expected to rise 7 percent this year due to pressure from large media groups that own broadcast networks. These media titans -- Walt Disney Co, News Corp, NBC Universal -- are demanding cash for the right to carry the big broadcast networks, ABC, CBS, Fox and NBC. Standalone cable networks, such as Outdoor Channel, Hallmark Channel or even a mid-sized group like Scripps Networks, are likely to suffer because they lack the leverage of Walt Disney, which can negotiate higher fees for its cable networks in tandem with the threat that it will withhold its ABC network from an operator's subscribers.

Tribune strikes deal with Angelo Gordon, Oaktree to settle some bankruptcy claims

Bankrupt newspaper publisher Tribune Company has reached an agreement with two hedge funds that would settle some claims related to its 2007 leveraged buyout and clear the way for it to exit Chapter 11.

Tribune said it agreed with Oaktree Capital Management and Angelo, Gordon & Co LP to a plan of reorganization which would leave the two hedge funds with significant ownership stakes in the company. The plan also would allow the owner of the Chicago Tribune, Los Angeles Times and nearly two dozen television stations to exit bankruptcy before resolving a complex web of legal claims. The deal would need approval of Delaware's bankruptcy court. Under the settlement, Tribune senior bondholders would receive a total distribution of $300 million, or about 23 percent of their claim amount, in cash. In addition, Tribune said the bondholders would receive a portion of a trust that will be set up to pursue legal action over the second part of Zell's takeover deal.

Broadcasters sue Ivi for copyright infringement

News Corp's Fox, Walt Disney Co's ABC, CBS, General Electric Co's NBC and the Public Broadcasting Service sued tiny upstart online subscription service Ivi for offering TV shows on the Internet without permission.

The networks' suit follows a pre-emptive strike by Ivi, which brought a lawsuit against broadcasters on Sept 20 -- one week after opening for business -- that sought a ruling it was not infringing copyrights. Ivi, which received letters from various broadcasters, claims the U.S. Copyright Act authorizes secondary transmissions of copyrighted works embodied in primary transmissions and so its application that gives viewers access to more than 20 channels for just $4.99 a month is not infringing.

Opening the Door to E-Rate in Our Communities

[Commentary] For years, West Virginia was frustrated by restrictions in the E-rate program that kept school computer access cloistered for use solely by teachers, staff and students within the building.

Many opportunities for schools to partner with the community and collaborate with parents to enrich student learning could not be realized due to historical E-rate rules. Under the previous rules, if "ineligible users" accessed the network, schools were required to allocate the cost to non- E-rate funding sources, which could be a difficult and confusing task. Since no one wanted to jeopardize precious funding during times when budgets were already shrinking, schools opted not to participate. As more and more educators recognized the benefits that after-hours use of school Internet connections could provide, it became clear that changes were needed to eliminate barriers to broader parental and community involvement. At the same time, the FCC was making a number of logical and positive improvements in the E-rate program. The supportive atmosphere of the FCC encouraged us make the case for a waiver that would allow more community use of E-rate-funded networks. With the assistance of our E-rate contacts at the county level, we compiled a list of ways that a more flexible E-Rate program would better meet the educational needs of our communities and students.

[Julia Benincosa is the West Virginia E-Rate and Instructional Technology Coordinator]

Communications Technology and Health Care

Over a century ago, Alexander Graham Bell met with the President of the United States, Rutherford B. Hayes, to demonstrate a new invention: the telephone. After Bell finished his demonstration, the President turned to him and said, "That's an amazing invention, but who would ever want to use one of them?" As it turned out, the answer to the President's question was simple: doctors.

We're a long way from ubiquitous telemedicine today. When developing the National Broadband Plan, we realized that to maximize broadband availability and use, the United States not only needs bigger and faster networks, but it also needs innovation and investment throughout what we called the "broadband ecosystem" - the networks, the applications, and the devices that affect what Americans can do with broadband. More capable networks enable medical facilities to employ devices that run applications like electronic health records and image transfer applications. And more advanced applications can often mean saving more lives. But today, America has gaps in all three parts of the broadband ecosystem that are slowing progress through this "virtuous circle" of innovation, and preventing telemedicine from being adopted more widely. Connectivity via robust networks is a baseline requirement for telemedicine. But 3,600 small providers in the United States lack the connectivity they need to adopt even basic health IT, let alone high-definition video consultation. For example, nearly 30 percent of federally-funded Rural Health Clinics and a third of Indian Health Service locations do not have basic broadband connectivity. Furthermore, although Americans send over 4 billion text messages on a typical day, our 9-1-1 system still lacks the network deployment and equipment to support the transmission of text and images to emergency response centers.

Network Neutrality Bill Might Be More About Message Than Action

With precious little time left in the 111th Congress, House Commerce Chairman Henry Waxman's efforts to advance a network neutrality bill may be more of a messaging tool than anything else, observers say.

"A lot of legislation is introduced not because of its likelihood of enactment, but to send a message that will ricochet around the Hill and agencies," said Andrew Lipman, head of the telecommunications, media and technology group at the law firm Bingham. Against steep odds, Chairman Waxman (D-CA) has been leading an effort to shepherd a measure through Congress that would codify some principles to protect the openness of the Internet. With players from all sides of the issue agreeing that it will be very difficult, if not impossible, to move a network neutrality bill through the Senate, some say it calls into question Waxman's motives. "The Waxman endgame is to have the FCC's back here and to set forward a minimalist approach that the [commission] can move forward on," one source familiar with the situation said. Providing FCC Chairman Julius Genachowski a "graceful exit" to the broadband regulation conundrum is a priority for Chairman Waxman, a handful of insiders say.

Waxman could be "telegraphing to the FCC how a very important member of Congress would like to see this issue resolved," or setting a legislative "placeholder," Lipman noted. Other industry observers say that congressional action is needed after so many years of debate and nothing to show for it.

1 in 10 'Old Media' Will Survive

Fewer than one in 10 traditional media outlets are likely to survive, Clark Gilbert, president and CEO of a Salt Lake City digital media company, suggested to those gathered at the Local Mobile Advertising Conference.

Those that do, he said, will have to more completely embrace the digital age. Gilbert, a former Harvard Business School professor, moved from academia to journalism last year, taking over the Web presence for the "The Deseret News" and the television and radio stations owned by the same company. He later brought the print newspaper itself under his wing, overseeing a reorganization that slashed 43 percent of the paper's editorial staff and merged its reporters with those at the company's TV and radio stations. Gilbert told how he quickly molded Deseret's Web strategy into an entity with its own staff, recruiting employees with experience in the Internet world rather than in traditional journalism. And that, he said, is one of the keys to success -- and survival.

'Traditional' Local Media Revenue on Decline

BIA/Kelsey expects total local advertising to grow from $130.6 billion in 2009 to $145.2 billion in 2014. But within that group, BIA forecasts traditional local media declining from $115.1 billion in 2009 to $110 billion in 2014. BIA/Kelsey sees mobile local advertising revenues increasing from $213 million in 2009 to a whopping $2.02 billion in 2014, according to the research firm's U.S. Local Media Forecast (2009-2014). BIA/Kelsey defines mobile local advertising as advertising that is targeted based on a user's location and/or advertising that is "locally actionable."

Michigan and Utah Lead 50-State Report Card on Technology in Government

Michigan, Utah, Pennsylvania and Virginia received top grades in the 2010 Digital States Survey, a comprehensive examination of state government technology practices conducted by the Center for Digital Government, the research and advisory division of eRepublic, publisher of Government Technology. Those four states were the only recipients of "A" or "A-minus" grades in the survey, which is conducted every two years. Michigan and Utah received the highest scores. Conversely, only three states -- Idaho, Indiana and South Carolina -- received "C-minus" grades, the lowest given among the 50 states.

Public wants online privacy rules, US official says

Daniel Weitzner, associate administrator in the Office of Policy Analysis and Development at the National Telecommunications and Information Administration, says US Web users are increasingly asking for tougher online privacy protections, even as they give more of their personal data to Web sites -- and Internet-based companies are asking for certainty about privacy rules from US regulators even as they also ask for flexibility to create new products.

The US has "robust" privacy rules for some industries, but there's a growing call for baseline privacy rules, Weitzner said during an online privacy forum sponsored by the Information Technology and Innovation Foundation and the Technology Policy Institute. The NTIA and its parent agency, the Department of Commerce, began considering the policy options for online privacy about a year ago, but they haven't issued a formal position on whether additional rules are needed. The agency has heard from both consumers and online companies while it examines online privacy policy, he said. "People won't want to feel that they're out there completely unprotected," Weitzner said. "The fact that consumers are asking for a greater sense of urgency shouldn't come as a surprise." There's little agreement over what new privacy rules should look like, however, Weitzner said. There are examples of older privacy laws that have worked, including the Fair Credit Reporting Act, which encourages consumers to share their data but protects them from misuse, he said.

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