November 2011

Sen Grassley Unsatisfied With FCC LightSquared Document Drop

Sen. Chuck Grassley (R-Iowa) was feeling none too thankful Nov 23 after the Federal Communications Commission put documents about its LightSquard waiver online.

The FCC created a Web site to host the documents to honor various FOIA requests from private parties. The FCC did not provide the information directly to Sen Grassley, and a source familiar with the FOIA requests said the FCC had not received one from Grassley's office. Sen Grassley has for months been seeking information from the agency on the waiver it issued the company to launch a 4G wholesale terrestrial wireless broadband network using spectrum reserved for satellite. But he was not satisfied with the FCC's response-a source said the FCC gave him a heads-up that the info was online. Grassley's disaffection could translate to delays in confirming new FCC commissioners.

Verizon Ordered To Stop Using ActiveVideo Patents

A federal judge ruled Nov 23 that Verizon Communications must stop using two patents owned by interactive TV firm ActiveVideo Networks, issuing a permanent injunction effective May 23, 2012, and ordering the telco to pay ActiveVideo $2.74 per FiOS TV subscriber per month starting Dec. 1.

Verizon as of Sept. 30 had 3.98 million FiOS TV subscribers. That means the telco will owe at least $10.9 million per month to ActiveVideo -- whose largest customer is Cablevision Systems -- until the permanent injunction is in effect. In August, a jury in the U.S. District Court for the Eastern District of Virginia found Verizon's FiOS TV violated four of five patents asserted by ActiveVideo and awarded ActiveVideo $115 million in damages. ActiveVideo filed a motion for an injunction barring Verizon from using two patents in August 2011, after originally suing the telco in May 2010. Last month, Judge Raymond Jackson for the Eastern District of Virginia added at least $24.1 million in supplemental damages and interest to the amount Verizon must pay to ActiveVideo. While Verizon had argued against ActiveVideo's claim of "irreparable harm" because the two companies are not direct competitors, "There is no doubt that ActiveVideo suffers indirect losses when Cablevision suffers direct losses from Verizon's infringement," Judge Jackson wrote in the order. Verizon said it would appeal the decision.

PBS Introduces New Television Channel in Britain

As Britain takes its news media to task, an American import, the Public Broadcasting Service, hopes to make a name for itself by offering a sober antidote to the tales of tabloid newspaper excesses that have been leading the news bulletins of late.

This month, as a public inquiry delves into the intrusive Fleet Street reporting techniques that have shocked many Britons, PBS introduced a new channel in Britain, its first international television venture. Does Britain, home to the BBC, one of the most respected broadcasters in the world, really need to import serious television from the United States? When many Britons think of American television, they imagine silly sitcoms or the “fair and balanced” output of Fox News — owned by the same company, News Corporation, whose newspapers are first in the firing line in the investigation into the hacking of celebrities’ mobile phones. “It’s very different from people’s perception of what an American TV channel is like,” said Richard Kingsbury, general manager of the new channel, called PBS UK.

AT&T Merger With T-Mobile Faces Setbacks

AT&T and T-Mobile USA edged closer to scrapping their proposed merger, saying on November 24 (yes, Thanksgiving day) that they had withdrawn their application to the Federal Communications Commission to join their cellular phone operations.

The FCC is not obligated to grant the request, however. It could deny the request, going ahead with its consideration and judicial hearing, or it could grant the request with prejudice, meaning that AT&T could not later refile the application. That would essentially kill the deal. Deutsche Telekom, the parent of T-Mobile, and AT&T said in a joint statement that they still intended to pursue the $39 billion merger and would prepare for a federal antitrust lawsuit that is seeking to block the deal. But the companies also said that AT&T planned to take a $4 billion charge against earnings to reflect the potential breakup fees that AT&T would have to pay Deutsche Telekom if the deal failed to go through. The application withdrawal appears in part meant to prevent the FCC from making public AT&T and T-Mobile records about the potential effects of the merger, records that could then be used by the Justice Department in its antitrust suit to block the deal. Deutsche Telekom, based in Germany, said in a statement that the withdrawal “is being undertaken by both companies to consolidate their strength and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice. As soon as practical, Deutsche Telekom and AT&T intend to seek necessary FCC approval.” AT&T issued its own statement saying that the companies were taking this step “to facilitate the consideration of all options at the FCC,” as well as to consider other options. (Nov 24)

AT&T Threatens to Sue FCC If Agency Ignores T-Mobile Pullout

AT&T said it plans to sue the Federal Communications Commission if the agency doesn’t let the company withdraw its application to buy T-Mobile for $39 billion.

The FCC is obligated by its own rules to honor AT&T’s move to rescind its application to acquire T-Mobile, Wayne Watts, general counsel for AT&T, said November 25 in a blog entry. “We have every right to withdraw our merger from the FCC, and the FCC has no right to stop us,” Watts said in the entry on the company’s public policy blog. “Any suggestion the agency might do otherwise would be an abuse of procedure which we would immediately challenge in court.” AT&T’s move is “a request” that the FCC “will consider,” agency spokeswoman Tammy Sun said November 24. The FCC should publish the order that would send the merger to a hearing, said Harold Feld, legal director Public Knowledge. “It is sure to contain conclusions that AT&T would like to keep quiet,” Feld said. (Nov 26)

AT&T Faces New Hurdle

The Federal Communications Commission made clear how deep its opposition runs to AT&T's proposed $39 billion deal to acquire T-Mobile USA, saying AT&T must face an extra review next year that could eat up months even if the company wins an antitrust trial. AT&T called the action disappointing.

The unusual decision by the FCC to call the extra hearing -- its first such move in nine years -- adds a new roadblock and forces AT&T to consider an unpalatable range of options. Giving up on the deal isn't an easy choice, because AT&T is on the hook to pay T-Mobile parent Deutsche Telekom AG a breakup fee of $3 billion plus airwaves and other rights worth an additional $3 billion or so. The merger agreement requires AT&T to secure all necessary approvals to close the deal by Sept. 20 -- a timeline that is now at risk, though the companies could agree to extend the deadline. AT&T can still opt to fight it out in Washington, but the Nov 22 move by the FCC showed that the company would have to overcome deep skepticism about the merits of allowing the second- and fourth-largest U.S. cellphone providers to combine. An FCC official said the agency has reached a conclusion similar to that of the Justice Department, finding that the combination would "significantly diminish competition." FCC officials questioned AT&T's statements that the merger would benefit consumers and allow the company to expand high-speed fourth-generation wireless service across the country faster. They also said confidential documents filed at the agency didn't support AT&T's contention that the deal would create nearly 100,000 jobs. An FCC official said the combination would instead "lead to massive job losses." FCC Chairman Julius Genachowski is preparing a formal request for the administrative hearing, officials said, and the request is expected to get the approval of FCC commissioners. The hearing would happen after the antitrust trial, assuming AT&T won the trial. An FCC administrative law judge would hear evidence from both sides. The administrative judge would then make a recommendation on the deal, which would then go to the FCC's commissioners for approval. (Nov 23)

Moffett: Time For AT&T To Concede Defeat in T-Mobile Merger Proposal

In a memo to clients, top media analyst Craig Moffett of Bernstein Research, advised that it was time for AT&T to wave the white flag: "We believe that it is now time for AT&T to concede defeat and withdraw the merger," he wrote.

Moffett said that given that the Department of Justice has sued to block the deal, and there would not be a second trial at the Federal Communications Commission that AT&T would have to win as well, he says the likelihood of success on both fronts is de minimis. He noted that AT&T could drag the process out given that it will have to pay a break-up fee if it does scrap the deal, but he also pointed out that the telecommunications giant will have to continue to do business with the FCC and DOJ. In fact, at the same time FCC Chairman Julius Genachowski circulated the order to block the deal, he also circulated one approving AT&T's purchase of Qualcomm spectrum. Moffitt said that the question for the company going forward was whether it will "pursue another deal to acquire spectrum; whether they instead will be forced to increase capital spending to sustain network quality as usage scales; or whether they will simply more aggressively ration consumption." (Nov 23)

AT&T-Mo what happens next?

[Commentary] The question becomes whether in spite of almost unified opposition AT&T stays true to T-Mobile through the court trial scheduled for February 2012, or if T-Mobile’s parent company decides to cut its losses, renegotiates a smaller breakup fee and attempts to find another suitor. The last time the Federal Communications Commission sent a merger to administrative review in 2002, the two parties gave up. So far, AT&T may have cut back on its toughest language, but it hasn’t thrown in the towel. (Nov 22)

Why Verizon needs AT&T/T-Mobile to just disappear

[Commentary] Sprint may have popped open champagne on Nov 22 after the Federal Communications Commission denounced AT&T’s proposed merger with T-Mobile USA and recommended it go to administrative hearings, but Verizon Wireless executives uttered a few sighs of relief as well.

Of all the possible outcomes in the AT&T-Mo fallout, the FCC approving the merger with a laundry list of new regulations would have been the worst-case scenario for Verizon. It appears to have dodged a bullet. The FCC could have required AT&T to divest spectrum and networks in numerous markets; FCC staffers had competitive concerns in 99 of the top 100 markets. It could have imposed deadlines for deployments and stricter requirements on the population and geographic areas those networks covered. It might even have dictated commercial terms on how it used that spectrum, spelling out the terms of data roaming agreements and maybe even imposing restrictions on what AT&T could charge for data service. All of these would have been anathema to Verizon. Why? Because whatever restrictions and stipulations AT&T is forced to abide by if this merger goes through would return to haunt Verizon down the road. Verizon may be sitting pretty on a big fat LTE network today, but it readily admits it must go back to the market for more spectrum at some point. That means acquiring another operator, buying spectrum from a competitor or picking up new licenses at auction. Verizon may even weighing a bid on Sprint. Given the current regulatory environment, such a purchase would be out of the question today. But there are plenty of smaller players Verizon likely is eyeballing. Any future bid Verizon makes on a competitor or spectrum would be clouded by whatever requirements the FCC and Department of Justice would impose on AT&T/T-Mobile today. (Nov 23)

Don't Count Out AT&T --The Takeover Isn't Dead Yet

[Commentary] With any other company, in any other merger, the action the Federal Communications Commission announced on Nov 22 would be the signal that a deal is dead. But when one of the parties involved is AT&T, the rules don't apply.

AT&T isn't any other company. It has unlimited resources to continue the case for as long as it wants, which will have the effect of freezing T-Mobile's deployment and marketing. That was the point of the takeover to begin with. AT&T wanted to eliminate a competitor. Now they are almost doing the same thing. Meanwhile, AT&T can claim a victory of sorts. Even while fighting the Justice Department and the FCC, it will get something it really wants -- some high-value spectrum for its wireless services. As the consolation prize, the FCC said it would approve, with some as-yet-unknown conditions, AT&T's $1.9 billion purchase of spectrum from Qualcomm. The bottom line: AT&T can continue to hamstring a competitor and will get more spectrum to gain advantage over the rest of the market, even if it has to spend a few million more to keep the takeover going long past its expiration date. AT&T knows when to hold 'em and knows when to fold 'em. But not before it is ready to do so and not until after it has achieved its objectives. (Nov 23)

Benton

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