July 2011

The Louisiana Public Service Commission voted 4-1 to approve AT&T's proposed $39 billion acquisition of T-Mobile USA, making it the second state to approve the deal with three other reviews still ongoing.

A staff report from last week argues the opposition comments filed by Sprint are largely focused on national issues currently being weighed by the Federal Communications and Department of Justice, not Louisiana-specific issues that would justify the state blocking the merger.

"Staff is confident the FCC and DOJ, with their expansive resources and expertise on those matters, will perform a thorough review of Sprints (sic) concerns regarding the impact this acquisition may have on a national level," the report states. The Louisiana Commission is empowered to reject AT&T's filing if it is found to be against the public interest, but the staff report argues the deal will result in at least $8 billion in investments, some of which will be in Louisiana, along with increased rural broadband coverage and new jobs in the state thanks to AT&T's pledge to deploy next-generation wireless broadband nationwide.

"While Staff understands that Sprint disagrees with these contentions, the Joint Reply Comments contain a commitment to that affect," the report states. "Staff also notes that the proposed acquisition has received overriding support locally, as is evidence by the diverse number of groups and officials who are in support." Hawaii, California, and West Virginia are still conducting reviews of the merger.

The Federal Communications Commission plans to “quickly” issue a public notice requesting additional information related to Universal Service fund and inter-carrier compensation reform, FCC Wireline Competition Deputy Bureau Chief Carol Mattey told attendees at the OPASTCO convention in Minneapolis July 27.

“We’re talking days, not weeks,” said Mattey, who also noted that the FCC’s goal is to issue an order formalizing USF and ICC reforms this fall. Apparently some FCC staffers already have begun to draft portions of the order, which Mattey said she was reading on the plane to Minneapolis.

Mattey several times referenced a USF reform proposal expected this week from the United States Telecom Association with the endorsement of several large carriers, noting that she was looking forward to reading the proposal. Surprisingly, considering the OPASTCO audience, she didn't mention that several rural telco groups, including OPASTCO, also have jointly submitted a reform proposal. She did note, however, that “our job is not to rubber stamp any proposal . . . but to ask if it will benefit consumers.”

1. Mattey offered some broad comments about the direction toward which the FCC is leaning in its USF and ICC reform plans, including:
2. The FCC plans to provide a “stable framework” for inter-carrier compensation
3. The size of the high-cost fund needs to be controlled by putting it on a firm budget
4. Mobile broadband likely to be supported in a targeted manner, only in areas where it wouldn't be available without support
5. The identical support rule for competitive carriers is likely to be eliminated
6. A reverse auction for mobility is “very much on the table”—Mattey emphasized the word “mobility” here, implying that perhaps a reverse auction might not be used to award some other types of funding
7. Proposed reforms should generate savings to help fund broadband build-out and an access charge recovery mechanism
8. Changes to the high-cost fund likely to be implemented immediately
9. There may be ways to improve the rate of return system without ending it altogether- the FCC is “looking at suggestions,” Mattey said
10. The FCC is “committed to addressing arbitrage opportunities today” but will only address them as “part of comprehensive reform” (Mattey was likely talking about issues such as phantom traffic, traffic pumping and the like.
11. The FCC’s inter-carrier compensation reform plan is expected to provide a “recovery mechanism” for lost access revenues
12. While not making any specific predictions about targeting satellite broadband for the highest-cost areas, Mattey said the commission continues to consider the role of satellite service.

This study examines the effects of media market structure on consumer demand and welfare. A differentiated-product model is used to estimate demand for the local media environment, described by the offerings from newspapers, radio, television, the Internet and Smartphone. Results show that the representative consumer values more different viewpoints in the reporting of information on news and current affairs, more information on community news, and more information that reflects the interests of women and minorities.

Consumers have a distaste for advertising. Demand estimates are used to calculate the expected change in consumer welfare from a merger between two television stations that lowers the amount of diversity and advertising in local media environments. Welfare decreases following the merger, but these losses decrease with the number of television stations in the market. For example, the average consumer in a “small market” loses $0.11 per month, whereas the average consumer in a “large market” loses $0.04 per month. These losses are equivalent to $6 million annually for all small-market households in the U.S. and $1.4 million annually for large-market households. If the merger occurs in all markets, aggregate consumer welfare losses would be about $91 million.

In this study, we ask whether the structure of television markets has an impact on viewpoint diversity in local news. To answer this question, we develop a broad range of metrics for diversity which we then link to measures of competition and ownership as well as viewing tendencies.

From our research, two broad conclusions emerge. First, across all our results, we are struck by how little evidence we are able to find for a robust influence of specific elements of market structure on diversity. The available policy instruments, we conclude, turn out to be rather blunt. For instance, we find that local ownership is the ownership variable most often associated with greater diversity in issue coverage. However, even local ownership is significantly related to only a small subset of our diversity measures.

Second, by and large, changes in diversity have little impact on viewing tendencies. One view of policy interventions in media markets is that they are necessary to better match the available content to viewer preferences in an industry that is characterized by significant fixed cost and limited competition. In our data, we find little evidence in support of this view. Even if changes in diversity have little influence on the size of audiences, these changes can enhance welfare if the consumption of content has positive externalities. From this perspective, four findings seem particularly noteworthy:

• Local ownership increases diversity in the coverage of business, crime, defense policy, foreign affairs, as well as welfare. Variation in how much time local newscasts spend on covering these issues can be socially desirable if improved knowledge facilitates informed political decision-making among viewers.
• As in previous studies, we document that increases in ownership concentration often encourage diversity. Perhaps most notably from a welfare perspective, greater concentration increases the number of politicians that are covered in local news. If more extensive coverage leads to better-informed citizens, existing restrictions on ownership concentration are likely to be welfare-reducing.
• Minority-owned stations spend more time covering minority politicians. While this effect is certainly consistent with existing policy, it is worth keeping in mind that the effects of minority ownership are quite limited overall. For instance, we find little evidence that minority owners contribute to the diversity in the coverage of elected federal lawmakers, as well as broad range of issues and local concerns.
• The composition and diversity of local news broadcasts has the largest impact on Hispanic viewing. However the measures of political diversity associated with Hispanic viewership do not appear to be influenced by the policy variables relevant to FCC ownership rules.