December 2011

Steering Telecom Italia With a Steady Hand

In April 2007, as the global economy was beginning to unravel, Telefónica, the Spanish telecommunications company, led a group of Italian investors who bought a 22.4 percent stake in Telecom Italia, one of the pioneering mobile operators in Europe. The purchase was sanctioned by the Italian government, which wanted to preserve a modicum of Italian influence over its former monopoly, a big employer saddled with a load of major problems.

The biggest was Telecom Italia’s €37 billion, or $49 billion, debt, a legacy of the operator’s two leveraged buyouts in 1999 and 2001. But in a sense, the European deal was sealed in America. Thirty-seven years earlier, the Telefónica executive chairman and chief executive, César Alierta, and Telecom Italia’s then-chairman, Gabriele Galateri di Genola, met while getting master’s degrees in business at Columbia University in New York. Their friendship made the tricky cross-border deal possible, said Franco Bernabè, who has been Telecom Italia’s chief executive since 2007 and who, in April, also became its executive chairman, succeeding Galateri di Genola.

Verizon Wireless Allies With Cable in $3.6 Billion Deal

Verizon Wireless, the largest U.S. mobile-phone carrier, struck an alliance with cable companies that will change how customers buy Internet, mobile and pay-TV services and present new challenges for rivals such as AT&T. Verizon Wireless will pay the group $3.6 billion for wireless spectrum: Comcast, the country’s largest cable provider, will receive $2.3 billion, while Time Warner Cable gets $1.1 billion and Bright House Networks LLC gets $189 million.

The deal would allow Verizon to double-up on its LTE network – in some regions triple up – creating huge overhead for future mobile broadband growth. With that spectrum, Verizon can build what amounts to another LTE network parallel to its current 4G network at 700 MHZ. In areas where its current AWS holdings overlap with SpecrtumCo’s, Verizon will have a total of 60 MHz of spectrum, which would be enough to build mobile broadband networks with three times the capacity it has on LTE today. If it can get this deal by regulators, Verizon will seal its mobile broadband future for years to come.
Verizon Wireless and the cable companies will also market and sell each other’s services under the agreement. Verizon will offer cable-TV products in its retail stores and receive a percentage of revenue for every cable customer it signs up, while cable companies will receive fees for each wireless customer they sign up. “This is a strategic masterstroke for Verizon,” said Craig Moffett, an analyst at Sanford C. Bernstein & Co. The agreement will lead to “a complete reordering of the competitive universe as we know it today.” The partnership may make Verizon and cable operators more cooperative “frienemies,” said David Joyce, an analyst at Miller Tabak. “This might slow the competitive push from FiOS to drive down prices, which could help the cable companies,” said Joyce.

The partnership still needs approval from regulators. The Federal Communications Commission will “undertake a thorough, fair and fact-based review of the proposed transaction,” according to FCC spokesman Neil Grace. The FCC and Justice Department are likely to approve the deal, though they may require the sale of assets in certain markets, said Jeff Silva, senior policy director for telecommunications, media and technology at Medley Global Advisors LLC in Washington. “This deal is likely to eventually get approved with possible divestitures in any markets that the FCC and Justice Department find that Verizon would have excessive spectrum concentration,” he said. The companies said that they do not think federal regulators can review their marketing agreement. They noted that AT&T has a similar cross-promotional deal with satellite company DirecTV. But antitrust experts said that either Justice or the FCC could expand its review and question how the marketing partnership would affect consumer choice. “It’s fair to say this is going to get a hard and thorough review,” said the person familiar with the concerns of federal antitrust officials, who spoke on condition of anonymity because the review process is not publicly disclosed. “If not in the review, in an investigation.”

DC Reacts to Verizon Spectrum Sale

Washington reaction varied to the news that cable operators were selling the spectrum they won at the Federal Communications Commission's Advanced Wireless Services auction in the 2006.

Mark Cooper of the Consumer Federation of America said it would be a good deal for Verizon and a bad deal for consumers. He said the deal would result in higher prices and less choices. "The auctioning of spectrum has totally failed to promote competition in wireless," he said. Cooper said it was ironic that the announced deal came a day after House Republicans voted to foreclose the development of unlicensed spectrum that would give the public alternatives to paying Verizon -- or AT&T -- for cellular service. "With this purchase, almost 75 percent of the spectrum auctioned in the last decade has ended up in the hands of the top two wireless firms (AT&T and Verizon) and 90 percent with the top four firms," said Cooper.

Public Knowledge saw some upside to the deal. "It is good news that Verizon is paying $3.6 billion to buy useful spectrum from the cable company consortium. Spectrum is better held in the hands of those who will use it, as opposed to those who don't," PK legal director Harold Feld said in a statement. "The transaction also shows how relatively cheaply more spectrum can be acquired by those who need it. The purchase price is about one-tenth of the amount AT&T wants to pay for T-Mobile to theoretically solve AT&T's spectrum shortage." But he shared with Cooper concerns about reducing competition, in the video as well as broadband space.

Verizon to AT&T: Want more spectrum? Here’s how you get it.

Unlike AT&T, which is attempting to acquire T-Mobile for $39 billion and hitting roadblocks at the Federal Communications Commission and the Department of Justice, Verizon is likely to work a deal that gives it up to 20 MHz more of unused spectrum to deploy for LTE in all major U.S. markets. This is no small feat, as one of the suspected lures of T-Mobile’s AWS spectrum for AT&T was that it allowed AT&T to deploy an LTE network without having to worry about phasing out customers using its existing spectrum for 2G and 3G devices.

Now Verizon stands to get pristine spectrum in the AWS band that it can combine with its 700 MHz airwaves it won at auction for LTE. The key for FCC approval lies in the fact that this spectrum is unused, according to sources in Washington DC. Because there are no customers on it right now, it’s an asset, and Verizon’s acquisition of it doesn’t affect actual customers or an existing market. Thus, a competitive market analysis like what the DoJ and the FCC evaluated in the AT&T and T-Mobile deal doesn’t make sense. Plus, coming immediately after the FCC all but quashed the AT&T attempt to purchase T-Mobile, while also releasing a report that essentially accused Ma Bell of lying, it’s unlikely to react so boldly a second time, especially as we head into an election year. When I asked the FCC for comment, a spokesman replied, “When the applications come before us, the FCC will undertake a thorough, fair and fact-based review of the proposed transaction.” The FCC, however, can evaluate the deal against its spectrum screen as opposed to looking at how the deal would affect individual markets. The FCC has the ability to evaluate transactions that allow one player to hold a large amount of megahertz in a given market, and Public Knowledge, a consumer lobbying group has called on the FCC to do exactly that.

Spectrum Deal Helps Dish Shares

Comcast and Time Warner Cable may make a hefty profit in their plan to sell 122 wireless communications licenses to Verizon Communications, but the agreement may have another unintended beneficiary -- Dish Network.

Wells Fargo cable and satellite analyst Marci Ryvicker said that the SpectrumCo deal means that Dish's spectrum is worth about $10 billion, or $22 per share. That, she noted, is clearly not included in Dish's current trading price. Dish Network has been on a spectrum acquisition tear in the past year, spending nearly $3 billion to acquire 40 Megahertz of wireless spectrum from two bankrupt providers. In light of SpectrumCo deal, those assets have substantially increased in value.

Verizon’s spectrum deal with cable is the end of broadband competition

The Verizon Wireless-cable companies spectrum deal signals the moment that the consumer benefits of the convergence of voice, video and data hit the wall. It’s a deal that’s great for Verizon, an acknowledgment of reality for the cable folks and a bummer for AT&T and consumers. The deal has a huge potential impact on wireless broadband competition.

Verizon had hinted it might resell its FiOS TV service over-the-top to folks outside the FiOS service area. Since TV can be a collection of bits delivered over the Internet, the traditional cable packages could become obsolete if the content companies and channels could figure out ways to license their content in new ways. Given that Verizon has both a broadband and a pay TV business, it had one of the best chances to push such a radical change in the pay TV business model. But now that it has some mysterious “agreements” with the cable guys, it’s unlikely that Verizon would try to infringe on their content businesses with its own over-the-top offering. That’s a bummer for consumers who might prefer a Verizon package over one from their local cable provider, but it’s also indicative of Verizon ceding the wireline market to cable companies.

Susan Crawford, an influential policy wonk and a professor at Cardozo Law School said: “This is the crystalline moment when the division of the marketplace becomes completely clear, even to people who haven’t been paying attention. VZ and ATT get wireless; cable gets wires; consumers are stuck. Wireless, like wired high-speed access already wholly dominated by the cable companies, is a natural monopoly service at this point, with incredibly high barriers to entry – so high that even current players, like T-Mo, are having trouble making it. Clearwire has nowhere to go at this point. So we have the worst of all worlds: no competition, and no regulatory oversight.”

Even without AT&T-Mo, we still have no competition

[Commentary] With AT&T’s proposed deal to purchase T-Mobile now effectively dead, consumers have won, right? T-Mobile customers that enjoy lower rates have no cause to worry a new owner will raise their monthly bill. AT&T still has plenty of spectrum to roll out its LTE network, so most of the country will have speedy mobile broadband access. And existing T-Mobile subscribers won’t have to buy new phones that work on AT&T’s network. However, consumers are no better off than before. I realize that’s a bit of an obvious statement, but the end of the AT&T-Mo situation looks like a potential missed opportunity for consumers to benefit from more carrier competition. Let’s face it: We have four major networks in the U.S. providing voice and data — plus a number of smaller, regional carriers — but unlike most other consumers around the world, we can’t move our phones amongst these networks.

Department of Justice OKs Google’s Acquisition of Admeld

The Department of Justice’s Antitrust Division closed its investigation into the proposed acquisition of Admeld, an online display advertising service provider, by Google.

After a thorough review of the evidence, the division concluded that the transaction is not likely to substantially lessen competition in the sale of display advertising. Although the Antitrust Division concluded that this particular transaction was unlikely to cause consumer harm, the division will continue to be vigilant in the enforcement of the antitrust laws to protect competition in display and other forms of online advertising. The division’s investigation focused on the potential effect of the proposed transaction on competition in the display advertising industry. Both Google and Admeld provide services and technology to web publishers that facilitate the sale of those publishers’ display advertising space. Google is a diversified software company whose offerings for publishers include an advertising exchange, an advertising network and an ad server. Admeld operates a supply-side platform (SSP) that helps publishers optimize the yield from their display advertising inventory. The investigation determined that web publishers often rely on multiple display advertising platforms and can move business among them in response to changes in price or the quality of ad placements. This use of multiple display advertising platforms, commonly called “multi-homing,” lessens the risk that the market will tip to a single dominant platform. In addition, there have been recent SSP and advertising exchange entrants in the display advertising industry. These were significant considerations in the division’s decision to close the investigation.

The New Digital Divide

[Commentary] Increasingly, we are a country in which only the urban and suburban well-off have truly high-speed Internet access, while the rest — the poor and the working class — either cannot afford access or use restricted wireless access as their only connection to the Internet.

As our jobs, entertainment, politics and even health care move online, millions are at risk of being left behind. While we still talk about “the” Internet, we increasingly have two separate access marketplaces: high-speed wired and second-class wireless. High-speed access is a superhighway for those who can afford it, while racial minorities and poorer and rural Americans must make do with a bike path. The new digital divide raises important questions about social equity in an information-driven world. But it is also a matter of protecting our economic future. Thirty years from now, African-Americans and Latinos, who are at the greatest risk of being left behind in the Internet revolution, will be more than half of our work force. If we want to be competitive in the global economy, we need to make sure every American has truly high-speed wired access to the Internet for a reasonable cost.

[Crawford is a professor at the Benjamin N. Cardozo School of Law and a former special assistant to President Obama for science, technology and innovation policy.]

Screen Time Higher Than Ever for Children

Despite the American Academy of Pediatrics’ longstanding recommendations to the contrary, children under 8 are spending more time than ever in front of screens. A new study documents for the first time an emerging “app gap” in which affluent children are likely to use mobile educational games while those in low-income families are the most likely to have televisions in their bedrooms.

The study, by Common Sense Media, a San Francisco nonprofit group, is the first of its kind since apps became widespread, and the first to look at screen time from birth. It found that almost half the families with incomes above $75,000 had downloaded apps specifically for their young children, compared with one in eight of the families earning less than $30,000. More than a third of those low-income parents said they did not know what an “app” — short for application — was. The study found that fully half of children under 8 had access to a mobile device like a smartphone, a video iPod, or an iPad or other tablet. Of course, television is still the elephant in the children’s media room, accounting for the largest share of their screen time: about half of children under 2 watch TV or DVDs on a typical day, according to the study, and those who do spend an average of almost two hours in front of the screen. Among all children under 2, the average is 53 minutes a day of television or DVDs — more than twice the 23 minutes a day the survey found children are read to. And almost a third of children under 2 have televisions in their bedrooms, a substantial increase from 2005, when the Kaiser Foundation found that 19 percent of children ages 6 months to 23 months had them. In families with annual incomes under $30,000, the new study found, 64 percent of children under 8 had televisions in their rooms, compared with 20 percent in families with incomes above $75,000. Computers are common as well: about 12 percent of children 2 to 4 use them every day, and 24 percent at least once a week, the study found; among those 5 to 8, 22 percent use a computer daily, 46 percent more than once a week. On average, the children who use computers started doing so at age 3 ½. The report found that despite more than a decade of warnings from the American Academy of Pediatrics that screen time offers no benefits for children under 2, “only 14 percent of the parents surveyed said their doctor had ever discussed media use with them,” said Vicky Rideout, its author.

Benton

Search