December 2011

Few Options for Lagging T-Mobile

T-Mobile USA, the weaker partner in the now-collapsed proposed deal with AT&T, has few good options to thrive in the competitive wireless market in the United States.

Industry analysts also could not predict a course for the company. “T-Mobile is probably going to be profoundly damaged by this,” said Tero Kuittinen, a senior analyst at M.G.I. Research. “They should have done some strategic rethinking instead of chasing this mirage, this dream of a merger. Now they’ve lost a lot of time.” Some analysts thought that T-Mobile might pursue a partnership with another wireless carrier, or even the satellite TV operator Dish, which had expressed interest if the deal with AT&T did not go through. T-Mobile does not have a lot of attractive options, analysts said. “Both companies will have to go back and lick their respective wounds and consider their options,” said Craig Moffett, a research analyst with Sanford C. Bernstein & Company. T-Mobile is in a precarious position because it has not yet begun to significantly deploy its infrastructure for a speedy fourth-generation, or 4G, network. That tardiness could cause it to slide even further behind the three larger competitors.

Even without a strong 4G network, T-Mobile’s spectrum is still a valuable asset. The company could negotiate with Sprint to share its 4G infrastructure. In the United States, carriers have historically not done that, but it is a common practice in other countries, like China, where AT&T recently agreed to share a cell network with China Telecom. Recent upgrades to Sprint’s network, which is not compatible with T-Mobile’s infrastructure, have been designed to help Sprint’s towers host other spectrum bands. That could help bridge the technical incompatibility issues between Sprint and T-Mobile.

Deutsche Telekom Dividend Pressured After AT&T Deal Collapse

Deutsche Telekom AG’s failure to sell its T-Mobile USA unit to AT&T Inc. for $39 billion may put pressure on the German company to reduce shareholder payouts after next year, investors said.

With the collapse of the deal, stakeholders will miss out on the Bonn-based company’s plan to use the proceeds to repurchase 5 billion euros ($6.5 billion) in stock, cut debt, and receive an 8 percent stake in AT&T. Spending on improving T- Mobile’s network and acquiring spectrum may cost as much as $9 billion, said RBC Capital Markets analyst Jonathan Atkin. That may detract from Chief Executive Officer Rene Obermann’s efforts to contain damage from the European debt crisis on consumer and corporate spending and to return the region to growth. Spanish rival Telefonica SA last week became the first former phone monopoly in Europe to cut a dividend forecast, sparking similar cuts at Telekom Austria AG. Obermann wouldn’t commit to dividend levels beyond 2012.

Online piracy needs a better solution

[Commentary] The only thing worse than members of Congress deciding how to regulate the Internet would be passing the buck to the courts. That is precisely the problem with the Stop Online Privacy Act.

Some members of Congress barely know how to call up a browser on their laptops, much less what IP addresses are and how they work. Never mind. The entertainment industry needs a solution to the very real problem of online piracy, so, ready or not, the House Judiciary Committee will resume the debate early in the new year.

The tech industry has legitimate concerns about the legislation as proposed, but getting Congress to pay attention to the industry has been an uphill battle. The entertainment industry reportedly has given about $1.5 million in campaign funding -- four times as much as tech companies -- to members of the House Judiciary Committee. But some of the valley's biggest Internet companies, including Google, Yahoo, Facebook, Twitter and eBay, are working with the Bay Area's congressional delegation to convince Congress that there are alternatives. Finally, they seem to be making progress. The Stop Online Privacy Act would give the Justice Department additional powers to go after websites that engage in pirated movies, designer ripoffs and counterfeit goods. Attorneys would be able to ask judges for authorization to force Internet companies to shut down offending websites. This could mean it would be up to judges throughout the country to decide what constitutes an inappropriate website. And companies surely would look for judges most likely to favor their cause.

Piracy act debate getting ridiculous

[Commentary] As Congress debates nothing less important than the future of the Internet, our nation's leaders are applying all the intellectual rigor you'd expect from a tween selecting a smart phone. Her primary philosophical considerations are, of course, what will her friends think and what will her parents pay for? And so it goes for the House Judiciary Committee. A markup session for the controversial Stop Online Piracy Act last week devolved into high school drama, replete with name calling and a stubborn refusal to let the nerds talk. The debate, if you want to call it that, could resume today. This column has repeatedly pointed out how the bipartisan bill designed to battle Internet piracy undermines critical legal protections that foster online innovation. Even after some recent improvements, it still grants copyright holders enormous power to cut off access or funds to sites they determine are infringing, with too little judicial oversight or due process.

Guilty Plea in Web-Poker Crackdown

One of the founders of poker website Absolute Poker pleaded guilty to criminal charges after he was accused earlier this year in a crackdown by the U.S. on Internet gambling.

Brent Beckley was charged in April, along with the founders of PokerStars and Full Tilt Poker, of breaking a variety of U.S. laws, including money laundering and illegal-gambling offenses. Those three websites were the largest poker sites operating in the U.S. at the time. The criminal charges against 11 people, including Mr. Beckley, marked a long-anticipated showdown between federal authorities and the offshore websites over billions of dollars in revenue from American players. The government claims their operations, by serving U.S. residents, violated U.S. law.

Comcast treated Tennis Channel unfairly, FCC judge rules

A Federal Communications Commission administrative judge ruled that cable giant Comcast discriminated against the small, independently owned Tennis Channel by putting it at a competitive disadvantage.

The ruling marked the first time that an FCC judge has found that a cable operator violated the program carriage anti-discrimination rules, which were established in 1993. Richard L. Sippel, the FCC's chief administrative law judge, ruled that Comcast, the nation's largest cable TV operator, treated the Santa Monica-based Tennis Channel unfairly by positioning it in a more expensive package of cable channels with fewer subscribers. At the same time, the judge said, Comcast favored two of its own TV sports networks — the Golf Channel and Versus — by offering them as part of the basic programming package, received by nearly all of Comcast's 22 million video subscribers. That provided the Comcast-owned channels with more viewers, which helped lure advertising dollars.

Anti-Drug Campaign Takes Funding Hit

How do you support an advertising campaign designed to steer adolescents away from drugs without additional media dollars? Such is the daunting challenge facing the Office of National Drug Control Policy, whose media budget for the “Above the Influence” effort has been eliminated. Accordingly, the campaign, which was developed by lead creative agency Draftfcb, now will require donated media time and private funding. ONDCP didn’t spend all of the $35 million that the federal government allotted last year. It’s only a few million dollars, however, and that will only last until the spring.

Romney-Gingrich Battle Fuels Campaign Coverage

Coverage of the 2012 presidential race reached its second highest level of the year last week and the campaign narrative increasingly focused on the battle between Newt Gingrich and Mitt Romney, fueled in part by conservative commentators beginning to weigh in on the choice between them.

From December 12-18, the campaign accounted for 27% of the newshole, according to the Pew Research Center’s Project for Excellence in Journalism, up from 24% the previous week. That marks the fifth time in seven weeks that that the campaign has been the top story in the U.S. news media as measured by PEJ’s News Coverage Index, which tracks the media agenda by monitoring 52 different news outlets from newspapers, online, cable news, broadcast news and on radio. The race for president was the No. 1 story last week in three of the five media sectors studied, network news, radio news and particularly cable news, where it accounted for a little more than half (51%) of the airtime studied.

China Hackers Hit U.S. Chamber

A group of hackers in China breached the computer defenses of America's top business-lobbying group and gained access to everything stored on its systems, including information about its three million members, according to several people familiar with the matter.

The break-in at the U.S. Chamber of Commerce is one of the boldest known infiltrations in what has become a regular confrontation between U.S. companies and Chinese hackers. The complex operation, which involved at least 300 Internet addresses, was discovered and quietly shut down in May 2010. It isn't clear how much of the compromised data was viewed by the hackers. Chamber officials say internal investigators found evidence that hackers had focused on four Chamber employees who worked on Asia policy, and that six weeks of their email had been stolen. It is possible the hackers had access to the network for more than a year before the breach was uncovered, according to two people familiar with the Chamber's internal investigation. One of these people said the group behind the break-in is one that U.S. officials suspect of having ties to the Chinese government. The Chamber learned of the break-in when the Federal Bureau of Investigation told the group that servers in China were stealing its information, this person said.

Turkey Arrests Journalists It Ties to Outlawed Group

Twenty-six journalists were among the suspects arrested in a crackdown on an organization tied to Turkey's outlawed Kurdistan Workers' Party, or PKK, a media watchdog said, heightening criticism of the country's record on press freedom.

If the number is confirmed, the arrests would bring the number of journalists in Turkish jails to more than 90, one of the highest detention numbers for journalists in the world, the Bianet media-rights monitoring group said. The journalists, most of them working for Kurdish newspapers and agencies, were arrested as part of an operation against the Kurdistan Communities Union, or KCK, an umbrella organization for Kurdish nationalist groups that the government says acts as the urban wing of the PKK.

Benton

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