August 2012

Liquor Ads Win Airtime

Liquor ads have found a new home: network TV. ABC, CBS and NBC in recent months have begun airing spots for Captain Morgan rum, Grey Goose vodka, Jack Daniel's whiskey and other brands on late-night television programs such as "Jimmy Kimmel Live!," the "Late Show With David Letterman" and "Saturday Night Live."

The broadcasters are easing decades-old voluntary bans that limited their national alcohol advertising to beer and wine, which have less alcohol by volume than spirits. The move lets them tap a new stream of revenue as advertisers continue to shift their ad budgets to cable TV, the Internet and online videos. It also highlights the increased public acceptance of hard liquor. Previous attempts to relax the ban sparked protests. Many liquor companies are increasing their TV marketing budgets by double-digit percentages this year after becoming fixtures on cable networks over the past decade. The exposure from cable ads already has helped the companies lure consumers away from beer. Though brewing companies still spend more than five times as much as liquor companies on TV commercials, beer shipments have slipped in the past three years.

South Korea Court Says Samsung, Apple Infringed Each Other's Patents

A South Korea court delivered a split decision in its piece of the global legal battle between Apple and Samsung over mobile computing patents. A three-judge panel in Seoul Central District Court said Apple infringed two Samsung technology patents, while Samsung violated one of Apple's patents.

The court awarded small damages to both companies and said they must halt sales of the infringing products in South Korea. None of the banned products are the latest models of Samsung or Apple devices. The court also ruled that there was "no possibility" that consumers would confuse Samsung and Apple smartphones, and that Samsung's smartphone icons don't infringe Apple's patents. The ruling holds greater symbolic than practical impact as neither company gained an advantage in the broader dispute, which is playing out in trials in the U.S. and Australia this month and extends to nine countries in all.

Unlimited data plans are back. But are they needed?

The overwhelming majority of customers on AT&T, Sprint, T-Mobile and Verizon don't even use 2GB per month, which is below the data caps for all but the stingiest plans from all carriers for the common two-year contracts. And virtually no one uses over 3GB. T-Mobile, however, does have the most data-hungry users, according to NPD.

Eleven percent of customers use more than 3GB per month, versus 4 percent for AT&T and Sprint and 3 percent for Verizon. "T-Mobile consumers tend to be younger," said Hold. "Younger demographics are the ones we find hit the network harder by doing a little video and music streaming." And even when customers have had unlimited data at their fingertips, as on Sprint, most didn't take advantage of it. "In general, Sprint's usage is the same as the other networks and less than T-Mobile," Hold said. One reason people stay under their limits is that they often use their smartphones over Wi-Fi. And even if people use only the cellular network, they will probably be fine. For example, 2GB per month is enough to do all the basics, such as email, Web surfing and Facebook posting, as well as streaming music for 30 minutes per day.

FCC Concludes Review of Verizon Wireless-SpectrumCo Deal and Approves Related Spectrum Transactions

The Federal Communications Commission has concluded its review of the Verizon Wireless-SpectrumCo deal and approved four significant spectrum transfer applications involving Verizon Wireless, subject to a number of binding commitments and conditions.

The applications include, among other things, the assignment of AWS-1 licenses held by Cox and SpectrumCo (a joint venture among subsidiaries of Comcast, Time Warner Cable, and Bright House Networks) to Verizon Wireless; a spectrum “swap” between Verizon Wireless and Leap; and Verizon Wireless’s net assignment of AWS-1 licenses to T-Mobile. The Order imposes as conditions the following four voluntary commitments made by Verizon Wireless:

Divested Spectrum

Verizon Wireless must close its proposed spectrum transfer with T-Mobile within 45 days of its closing of the SpectrumCo, Cox, and Leap transactions.

Buildout

Within three years, Verizon Wireless will provide signal coverage and offer service to at least 30 percent of the total population in the Economic Areas or the portions of Economic Areas in which it is acquiring AWS-1 license authorizations (calculated by summing the population for each of these areas); and
Within seven years, Verizon Wireless will provide signal coverage and offer service to at least 70 percent of the population in each Economic Area in which it is acquiring AWS-1 license authorizations, or, where a portion of the Economic Area is acquired, to at least 70 percent of the population of the total acquired portion of the licensed Economic Area.

Roaming

In the event the current data roaming rule is not available to requesting providers, Verizon Wireless will continue to offer roaming arrangements for commercial mobile data services on any of its spectrum in the areas where it is acquiring AWS-1 spectrum to other commercial mobile data service providers on commercially reasonable terms and conditions, and providers may negotiate the terms of their arrangements on an individualized basis. This commitment will remain in place for five years following the date of the Commission’s order.

Reporting

Verizon must provide on a semi-annual basis, subject to an appropriate protective order, reports concerning trends in DSL subscribership following the implementation of the commercial agreements.

Comcast’s Executive Vice President and Chief Diversity Officer David Cohen writes that conditions on the transaction adopted by the Department of Justice and the FCC preserve “the most important goals of our agreements”:

Comcast will be able to market Verizon Wireless products and services across our entire footprint under a renewable agent agreement (for the first five years, we will be exclusive to Verizon Wireless, but Verizon Wireless will not be able to enforce the exclusivity provisions after five years).
Comcast and Verizon Wireless will be able to work together for at least five years in an R&D partnership to develop innovative technologies that integrate wireless and wireline products and services; after five years, we can continue that partnership with the agreement of the DOJ.
Comcast has the right to opt into an MVNO (or reseller) agreement with Verizon Wireless at any time after six months' notice.
Verizon Wireless will be able to market Comcast products and services throughout the vast majority of the Comcast footprint (everywhere outside the FiOS footprint) under a renewable agent agreement; after five years, Verizon Wireless can renew the agreement other than in the DSL footprint where DOJ approval is required.

FCC Establishes Docket for Monitoring the Recent Verizon Wireless Transaction

On August 22, 2012, the Federal Communications Commission approved with conditions the assignment of spectrum licenses to and from Verizon Wireless arising from several interrelated transactions.

These included the assignment of AWS-1 spectrum licenses from Leap to Verizon Wireless, the assignment of AWS-1 spectrum licenses from Verizon to T-Mobile, and the assignment of AWS-1 licenses from SpectrumCo and Cox (Cable Companies) to Verizon Wireless. The spectrum assignment from the Cable Companies to Verizon Wireless was part of a larger transaction between Verizon Wireless and the Cable Companies (“Verizon-Cable Transaction”), which also included commercial arrangements under which: (1) Verizon Wireless and the cable operators act as sales agents of one another’s services; (2) each of the cable operators may become resellers of Verizon Wireless’s services; and (3) the parties (other than Cox), through a joint venture, may seek to develop ways to integrate wireline and wireless services (collectively, “the Commercial Agreements”). As part of its approval, the FCC noted that Verizon Communications Inc. and Verizon Wireless agreed to comply with a number of conditions, including the assignment of spectrum licenses to T-Mobile, build-out requirements, roaming requirements, and monitoring and reporting requirements.

In addition, to assist in monitoring any effects the Commercial Agreements have on the marketplace and on the development of emerging product markets, the Order directed the Wireline Competition Bureau to open a docket “for the public to file complaints or petitions alleging that the parties are acting in violation of the conditions imposed by this order or engaging in anti-competitive conduct relating to this transaction that implicates the public interest or otherwise violates the Act or FCC rules.” By this Public Notice, the FCC is informing the public that WC Docket No. 12-234 has been established for this purpose.

CWA Slams Verizon/SpectrumCo Approval as Job (Loss) Creator

Critics of the Verizon/SpectrumCo deal were quick to register their disapproval after the Federal Communications Commission released the order approving Verizon Wireless' $3.9 billion purchase of spectrum from some major cable operators.

The Communications Workers of America, which had worked hard to block the spectrum sale, said it was a case of government serving the interests of business rather than consumers. FCC chairman Julius Genachowski has repeatedly said he sees the FCC as a consumer-focused agency, and indicated he thought the deal, with its modifications from Justice and the FCC, was consumer friendly. CWA did not, using the terms "kill" (jobs) and "harm" (consumers) to describe the deal. "The FCC's decision allowing Big Cable to virtually monopolize wireline and video connections to millions of homes will lead to job loss and hit consumers with higher prices," said the group. "It will slam the door on our country's high speed future because it has destroyed any incentive for Verizon to continue the build out of its high speed FiOS network." CWA said the FCC and Justice appeared content with an anticompetitive deal that cost jobs and raised prices. Among the conditions were time, and other limits on cross marketing agreements between Verizon Wireless and cable operators, but CWA said they were weak and added it was unclear how they would be enforced.

DOJ Releases Confidential Information; Verizon/Cable Deal As Bad As We Thought

[Commentary] The Department of Justice released details of Verizon’s and cable companies’ commercial agreements. The DoJ’s Competitive Impact Settlement includes previously confidential details about the deals, which is disappointing to read given the DOJ’s approval and lackluster conditions.

Everything the DOJ mentions in this Statement further emphasizes Public Knowledge’s position that this deal is bad for consumers and potentially crippling for innovation in the broadband and wireless marketplaces. Here are some of the DOJ Statement’s observations about the most anticompetitive consequences of the Verizon/Cable deal. The commercial agreements:

Harm competition in the video, broadband, and wireless markets because they impair the ability and incentives for Verizon and the cable companies to compete aggressively against each other.
Contractually require Verizon to have a financial incentive to market and sell the cable companies’ products through Verizon Wireless channels in the same local geographic markets where Verizon also sells FiOS.
Unreasonably diminish competition between Verizon and the cable companies—competition that is critical to maintaining low prices, high quality, and continued innovation.
Unreasonably diminish future incentives to compete for product and feature development pertaining to the integration of broadband, video, and wireless services.
Unreasonably restrain the ability of the cable companies to offer wireless services on a resale basis.
Unreasonably restrain competition due to ambiguities in certain terms regarding what Verizon can and cannot do to compete in the marketplace.
The aspects of the JOE unreasonably reduce the companies’ incentives and ability to compete on product and feature development, and create an enhanced potential for anticompetitive coordination.

3 things we still don’t know about U.S. broadband

While the Federal Communications Commission provides a substantial amount of data in the latest Broadband Progress Report, it also acknowledges what it doesn’t know. Even as the FCC works to accelerate U.S. broadband deployment through a number of new initiatives, here is some of the information we still don’t have.

Comprehensive data on broadband access in elementary and secondary schools
Well-documented information on mobile broadband access
A complete understanding of how broadband requirements will change

TV stations love super PACs

For all the talk about super PACs and nonprofit groups spending millions of dollars on campaign ads, the traditional campaigns still have one advantage: Their money goes farther.

To the viewer, an ad is an ad, but to TV stations, not all ads are created equal. Stations have to provide discounted rates to all qualifying candidates running for public offices. But they don’t have to give those same breaks to the super PACs and nonprofit groups like American Crossroads, Restore Our Future and Priorities USA, which are spending millions of dollars on the election. So that means President Barack Obama and Mitt Romney can stretch their dollar more than Karl Rove or Bill Burton. And the influx of political ad spending from super PACs and outside groups is serving as a boon to broadcasters and their corporate owners.

HHS announces next steps to promote use of electronic health records and health information exchange

Health and Human Services (HHS) Secretary Kathleen Sebelius announced the next steps in the Obama administration’s work to help doctors and hospitals use electronic health records.

Under the Health Information Technology for Economic and Clinical Health (HITECH) Act, doctors, health care professionals and hospitals can qualify for Medicare and Medicaid incentive payments when they adopt and meaningfully use certified electronic health record (EHR) technology. The program is divided into three stages:

Stage 1 sets the basic functionalities electronic health records must include such as capturing data electronically and providing patients with electronic copies of health information.
Stage 2 (which will begin as early as 2014) increases health information exchange between providers and promotes patient engagement by giving patients secure online access to their health information.
Stage 3 will continue to expand meaningful use objectives to improve health care outcomes.

HHS’ Centers for Medicare & Medicaid Services and HHS’ Office of the National Coordinator for Health IT released final requirements for stage 2 that hospitals and health care providers must meet in order to qualify for incentives during the second stage of the program, and criteria that electronic health records must meet to achieve certification.

The requirements announced August 23:

Make clear that stage two of the program will begin as early as 2014. No providers will be required to follow the Stage 2 requirements outlined today before 2014.
Outline the certification criteria for the certification of EHR technology, so eligible professionals and hospitals may be assured that the systems they use will work, help them meaningfully use health information technology, and qualify for incentive payments.
Modify the certification program to cut red tape and make the certification process more efficient.
Allow current “2011 Edition Certified EHR Technology” to be used until 2014.

Benton

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