August 2012

The Universal Music Group’s proposed $1.9 billion takeover of EMI Music, already under close scrutiny by regulators in the United States and Europe, is facing additional pressure from a subcommittee in the House of Representatives.

The top Republican and Democrat on the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet sent a letter to executives at Universal and two other major labels, asking pointed questions about how the merger would affect competition in the music industry. The House letter, signed by Rep Robert W. Goodlatte (R-VA), chairman of the subcommittee, and Rep Melvin L. Watt (D-CA), the ranking minority member, takes a tack similar to one taken at a Senate subcommittee hearing in June, asking whether the music industry “has unique characteristics that may increase or reduce concerns” about the merger; how competition and innovation in digital music would be affected by the deal; and whether piracy and “powerful buyers, like Apple” would constrain Universal’s added power.

Sirius XM Radio shareholders lost a bid to stop Liberty Media officials from seeking to acquire a controlling stake in the satellite-radio provider after a judge denied their request to block further purchases of Sirius shares.

Delaware Chancery Court Judge Leo Strine refused to bar Liberty Media Chairman John C. Malone from adding to his 48 percent Sirius stake despite shareholders’ concerns that the billionaire had started what they called in court papers a “creeping takeover” of the U.S.’s largest satellite broadcaster. The shareholders’ request for an injunction to keep Malone from buying more Sirius shares “is a bit of a stretch,” the judge said at a hearing in Wilmington. “I’m not going to rule by the seat of my pants on this.” Sirius investors sued Malone and other Liberty Media executives who serve as Sirius directors, alleging they are improperly blocking other board members from erecting anti-takeover defenses for the company.

The Federal Communications Commission’s vote to suspend its deregulatory triggers for special access (broadband business service) prices continues to draw both fire and fans from industry.

"With this action, the FCC has done right by consumers, and it's taken a first step toward promoting competition in wired and wireless communications," said Public Knowledge senior staff attorney John Bergmayer. "While consumers don't pay high special access fees directly, they still bear their cost. When competitive carriers have to pay unreasonably high rates for connectivity they may have to pass the costs along to users, or slow down new deployment."

COMPTEL, whose independent telecom members have complained about price increases for access to major carriers' plant, were all for the moratorium, as well as for suspending the deregulation triggers before it has collected industry data on the competitiveness of the market, the latter which was roundly criticized by the major carriers, FCC and Hill Republicans and various industry groups.

Not so appreciative of that suspension was AT&T, among those whose petitions for deregulation are now in limbo. While the company said the mandatory data collection was necessary, to suspend the triggers before it determines the current state of competition for the services was putting the cart before the horse.

Walter McCormick Jr., president of USTelecom, which represents major telecom providers including AT&T, Verizon, and CenturyLink, shared those concerns. "We are disappointed that the Commission has chosen to take this action despite its recent repeated admissions that it does not have adequate information to evaluate the competitiveness of the high-capacity services marketplace." he said.

Ditto Verizon in its statement from Donna Epps, VP of federal regulator affairs. "While today's Order acknowledges that the current rules fail to capture the full extent of existing competition, the FCC, before taking any action, should have collected the data it repeatedly has said it needs to evaluate the marketplace. There are many providers - cable companies and CLECs - that compete vigorously with special access. Given this intense competition, any efforts to impose new pricing regulation are unjustified and will depress investment in these networks so critical to our economy."

House Commerce Committee Chairman Fred Upton (R-MI) and Communications and Technology Subcommittee Chairman Greg Walden (R-OR) released a statement saying, “The FCC has once again handed down a decision without providing sufficient evidence that action is needed. The decision violates good process and is difficult to square with Chairman Genachowski's previous statements about how this issue would be addressed. The FCC told the D.C. Circuit Court in an October 2011 filing that the commission lacked ‘an evidentiary record that is sufficient to evaluate current conditions in the special access market,’ in part because of ‘the failure of some parties to produce information clearly documenting their claims that special access rates are unreasonable.’ Further, the FCC Wireline Bureau Chief said in April that the FCC was still faced with ‘an incredible dearth of data.’”

With Congress looking unlikely to act anytime soon to fix vulnerabilities in the nation’s computer systems that leave them open to cyberattacks, President Barack Obama is weighing the pros and cons of using an executive order to do what Congress hasn’t. But President Obama needs to consider his options carefully, because any unilateral steps could invite accusations from his critics of overstepping his authority.

As the acrimonious debate over antipiracy legislation illustrated earlier this year, simmering Internet issues can easily explode. Backers of the White House’s proposals say an executive order could add clarity to the debate and prove to skeptics that the government can play a greater role in protecting American networks without violating privacy or burdening private businesses. “I think it’s hard to make things any messier than it was politically,” said James Lewis, an expert at the Center for Strategic and International Studies. “If done right, an executive order could help critics reconsider their arguments.” That’s an analysis echoed by University of California (Berkeley) professor Steven Weber who said many people seem to be “sleepwalking” when it comes to the threat of cyberattacks. An executive order, he said, could reform cybersecurity policies before a catastrophic attack galvanizes public opinion. An executive order could give Obama the chance to take a strong stand on a rising national-security concern while portraying Republicans in Congress as ditherers.