June 2011

AT&T, Verizon Push FCC to Resolve Complaints in Wake of Court Decision

AT&T and Verizon have called on the Federal Communications Commission to deal with their long-standing program access complaints now that a federal court has upheld most of the FCC's decision to start applying program access rules to terrestrially delivered networks.

In a statement, AT&T's Bob Quinn said that the decision should ensure that cable companies "cannot withhold popular programming, including HD sports programming, from their competitors." Which means, he said, that the FCC should get moving on its program access complaint against Cablevision in Connecticut. AT&T refiled its complaint in July 2010 in the wake of the FCC's January 2011 ruling that there was now a rebuttable presumption that withholding co-owned terrestrially-delivered programming was unfair. AT&T in its initial complaint had sought access to HD feeds for MSG and MSG Plus regional sports networks. While the court generally upheld the FCC, it rejected the commission's contention that what was considered unfair in satellite delivery was necessarily unfair when it came to terrestrial. Cablevision suggested the opera was not quite over.

Amazon Cancels Connecticut Website Sales Agreements, Citing New State Tax

Amazon.com sent notices June 10 to the owners of Connecticut websites saying the online retailer was ending cooperative sales agreements, effective immediately, because the newly enacted state budget would require the online retailer to collect sales taxes.

Amazon's move follows a similar action by overstock.com. Both online retailers, along with others, have called the tax rule unconstitutional and said they will fight it in court. The change means hundreds, perhaps thousands, of Connecticut residents who own websites will no longer be eligible to receive sales commissions under the "Amazon Associates Program" if customers make purchases after clicking through to Amazon from ads on the host websites. Amazon was clear that Connecticut residents will still be able to buy goods through its website. But by severing ties with its Connecticut partners, Amazon intensified a standoff over how and whether states can collect sales taxes for online purchases. At issue is a change in the state tax rules that takes effect July 1. Online retailers with operations or a "nexus" in the state must collect the sales tax, which rises next month from 6 percent to 6.35 percent. And under the rules, agreements with locally owned websites are considered to be operations.

Divide, buy and conquer

What does advocating for gay rights or the environment or civil rights have to do with AT&T's proposed $39 billion merger with T-Mobile USA Inc.? As letters praising the deal poured into the Federal Communications Commission from groups having nothing to do with telecommunications or antitrust, more and more of their members have begun asking that question. Though both sides usually deny it, corporations frequently ask recipients of their philanthropic largess to weigh in on pet issues or mergers. The trend intensified last year during Comcast Corp.'s successful acquisition of NBC Universal Inc., and it's reaching new heights as hundreds of organizations answered the call for AT&T. Now the members of these groups are becoming more unhappy about it.

When the Gay & Lesbian Alliance Against Defamation, or GLAAD, submitted its letter of support to the FCC, critics pounced almost immediately. "What is a gay rights organization doing weighing in on a phone company merger?" John Aravosis of Washington wrote on AmericaBlog Gay one day after GLAAD's letter became public. "My sexual orientation has exactly zero to do with my phone service. Well, that's not entirely true ..." The rest of the post, which more than 200 people "recommended" via Facebook, gets to the heart of critics' complaints: that GLAAD and others are engaging in quid pro quo. "There's a lot of talk already that this is happening because AT&T underwrites the GLAAD awards, because the company has made monetary grants to GLAAD and has a member on GLAAD's board," he continued. "It certainly looks that way." GLAAD did not respond to a request seeking comment.

The monetary connection between most of these groups and AT&T -- like Comcast before it -- is strong. Almost all of the groups' websites bear AT&T's logo and list AT&T as a funder or have an AT&T executive on the board. But how companies use these ties has become more sophisticated, say nonprofit leaders and lobbyists. Known as third-party outreach, companies have forged partnerships with organizations advocating for minorities, the disabled, the poor or other disadvantaged communities for decades. The interaction helps build brands with specific demographics, bolsters their philanthropic bona fides and fulfills their civic engagement principles. But until five or six years ago, it ended there, according to one former nonprofit executive.

Banality of Capitulation: Why Silicon Valley Supports AT&T

[Commentary] At first glance, the news earlier this week from Silicon Valley had all the makings of a political bombshell — some of the biggest names in a region supposedly known for backing competition and innovation sent a letter to the Federal Communications Commission (FCC) backing AT&T’s takeover of T-Mobile, a transaction that would reduce competition and stifle innovation. When patriots all over the world are risking their lives, how in the U.S. corporate world, could companies like Facebook and Oracle and leading venture capitalists like Kleiner Perkins or Sequoia Capital simply walk away from those guiding principles that have come to symbolize the technology sector? One letter, organized by Microsoft, was signed (with corporate logos only) by Microsoft, Avaya, Brocade, Facebook, Oracle, Qualcomm, RIM and Yahoo. The VCs sent separate letters.

At second glance, however, the view is much different. Call it the banality of capitulation. There is no stirring defense of competition or innovation which made Silicon Valley what it is today. There is only the reality of interlocking financial relationships controlled by AT&T. It's about the money. Perhaps this headline from a story last fall will shed some light on things: “AT&T will provide tens of millions to app developers; working with Kleiner and Sequoia”. AT&T is prepared to spend its millions finding and developing mobile apps. And guess who will be its guide to the app world? “AT&T is partnering with venture-capital firms Sequoia Capital and Kleiner Perkins Caufield & Byers, early backers of Google, for its app-development venture. The firms will help AT&T identify promising application developers and may invest in companies that emerge through the process,” the story said. So having a nice working relationship with AT&T and the possibility of getting involved with millions in investments – not such a bad deal. These are investors, after all. Of course, if AT&T succeeds in getting rid of T-Mobile, then AT&T will have a tighter control over mobile apps, and then the investors would make more money. In that light, it makes perfect sense.

Trade a merger for broadband?

AT&T Minnesota President Bob Bass says that 1.2 million additional people in Minnesota will get broadband the company's plan to buy T-Mobile and a push to cover 97 percent of the population nationally. But critics of the proposed merger, including cellphone competitor Sprint, say the promise of increased rural broadband is being offered as a mirage to entice regulators into allowing the megamerger to proceed.

They say that nothing is stopping AT&T from expanding now if it was willing to put the effort -- and money -- into rural broadband. Like other telecom services, high-speed Internet and strong cell coverage have been slowest to reach rural communities. The proposed merger between AT&T and T-Mobile owner Deutsche Telekom leaves some of Minnesota's rural residents wondering if it could fix their dropped calls and Internet issues, or if they'll still be left out of range as prices rise.

M-Lab Tool, Shaperprobe, Reveals Traffic Shaping Among Major ISPs

Developed by Georgia Institute of Technology researchers Partha Kanuparthy and Constantine Dovrolis, a new measurement program called ShaperProbe is the first of its kind to detect traffic shaping over end user connections to the Internet.

Through a large sample test deployment on the Measurement Lab (“M-Lab”) platform, the researchers found that several major ISPs are actively shaping end user traffic over their Internet connections. The research conducted by Kanuparthy and Dovrolis achieved three objectives: 1) the development of an active end-to-end mechanism for detecting traffic shaping, 2) the deployment of ShaperProbe technology over the M-Lab platform and resulting analysis, and 3) the subsequent modification of the ShaperProbe detection algorithm for passive deployment on the traffic of any TCP-based application. Viewed in the context of recent debates surrounding truth-in-labeling requirements and network capacity, the findings raise concerns about the reliability of ISP advertised speeds and statements about network congestion.

The ShaperProbe research primarily underscores the need for better transparency among ISPs. Although the research does not indicate that traffic shaping practices of many of the providers are nefarious, they have the effect of substantially obscuring what actual data rates consumers can expect on their broadband service. The research found for example that in at least one instance, a company was actively shaping in 80% of the tests conducted without any explicit mention or explanation of traffic shaping to consumers in its Service-Level Agreement (“SLA”).

FCC's slow pace on Internet rules puzzles some

The Federal Communications Commission has been oddly slow in unleashing new powers to police the Internet, six months after finalizing network neutrality rules. The delay has kept the rules in a glass box, both preventing the FCC from cracking down on unwarranted blocking of Internet content and keeping legal challenges at bay.

Analysts could not pinpoint a reason for the delay in unleashing the new powers, but did not rule out the idea the FCC was stalling court and congressional challenges. "If to a degree the order is vulnerable from a judicial standpoint, it'll push out that much into the future any decision on whether the rules are going to be upheld or not," said Stifel Nicolaus analyst Rebecca Arbogast. The order cannot be challenged in the courts until it is published in the Federal Register. Lawmakers eager to overturn the rules are also held at bay as the Senate cannot expedite consideration of a measure passed in the House to throw out the regulations.

Court affirms rules on cable access to sports

The Court of Appeals for the District of Columbia Circuit upheld the Federal Communications Commission's decision to bar cable operators from blocking access to some sports programming.

The FCC closed a loophole last year that allowed cable companies to deny access to channels delivered via terrestrial ground lines and not satellite feeds. The court denied Cablevision Systems' challenge that the FCC lacked the statutory authority to regulate the withholding of such programming. "We see nothing in the statute that unambiguously precludes the Commission from extending its program access rules to terrestrially delivered programming," the court said. But the court did vacate one part of the order, which the FCC will have to reexamine before any program access complaints can be addressed. The DC Circuit said the agency "acted arbitrarily and capriciously" by concluding that exclusive terrestrial programming contracts are categorically unfair.

AT&T Loses at U.S. Supreme Court on Price for Sharing Lines

Established local telephone companies including AT&T must share parts of their networks with competitors at cost, the Supreme Court ruled. The unanimous ruling backs the position taken by the Federal Communications Commission in a fight stemming from the Telecommunications Act of 1996, the law that injected competition into the local telephone business. The law requires incumbent local carriers to share their facilities with rivals.

Former FCC Commissioner Launches Free-Market Think Tank

Former Federal Communications Commissioner Harold Furchtgott-Roth is heading up a new think tank dedicated to free-market Internet policies.

The Center for Economics of the Internet was launched by the Hudson Institute. As founder and director, Furchtgott-Roth will oversee production of analysis and research at the Center. Before heading to the FCC, Furchtgott-Roth helped oversee passage of the Telecommunications Act of 1996 as chief economist for the House Commerce Committee. He has since worked as a visiting fellow at the American Enterprise Institute, and founder of Furchtgott-Roth Economic Enterprises.

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