July 2013

State attorneys general blast Google for allegedly monetizing illicit YouTube videos

Two state attorneys general lambasted Google for allegedly making money off of online ads placed next to YouTube videos that promote illicit activities to viewers.

In a letter sent to Google's top attorney Kent Walker, Nebraska Attorney General Jon Bruning and Oklahoma Attorney General Scott Pruitt asked the search company to answer a set of four questions about how much money it generated from these ads and to describe what measures it has in place to clamp down on paid ads for these illicit video clips. While attending the National Association of Attorneys General summer meeting last month, Bruning and Pruitt said they were "disappointed" by a panel that showed how videos on Google-owned YouTube "depict or even promote dangerous or illegal activities," such as how to buy drugs without a prescription.

How the Internet Drives Cable Companies' Consolidation

Media mogul John Malone appears ready to get the U.S. cable industry into mergers and acquisitions mode.

Three months after Malone’s Liberty Media acquired a 27 percent stake in Charter Communications, the fourth-biggest U.S. cable operator, Malone is angling to merge the company with Time Warner Cable, a company that is much larger and more profitable. Time Warner Cable has about 15 million customers, nearly three times as many as Charter. The potential dealing comes as Charter and other cable operators are facing a future in which their subscribers—millions of Americans who loathe them with a passion—are increasingly turning to the Internet to watch video, and content providers are inexorably seeking higher payments for sports and popular shows. Already the cable companies have seen millions of people defect, or “cut the cord,” on video service, turning to Netflix, Hulu, Amazon, and other online venues. But it has been a radically different story for cable companies’ high-speed Internet revenues, which continue to grow. At Time Warner Cable, for example, Internet revenue per customer rose to $42.60 in the first quarter, up from $38.96 a year prior, Barrington Research analyst James Goss wrote in a client note last month.

Into that void comes Malone’s new acquisition vehicle, Connecticut-based Charter, which reportedly wants to cobble together some parts of a fragmented industry.

Rural Telco Consolidation is Goal of USConnect

At least five rural telcos are embracing the idea that companies such as theirs need to consolidate.

Those companies back in March created a new entity known as USConnect Holdings that aims to acquire other rural and independent communications providers. “USConnect is an industry-rooted effort committed to sustaining the financial and operational viability of rural and independent communications providers,” said a USConnect press release to announce the organization’s first acquisition – Livingston Telephone Company of Livingston, TX. Five rural telcos are the “majority investors” in USConnect, a USConnect spokeswoman told Telecompetitor this morning. The spokeswoman declined to reveal the names of minority investors.

The five rural telco majority investors are:

Golden West Telecommunications of Wall, SD
Horry Telephone Cooperative of Conway, SC
Telephone Cooperative of Kingstree, SC
Brazoria Telephone Company of Brazoria, TX
Dickey Rural Networks of Ellendale, ND

With Political Ad Profits, Swing-State TV Stations Are Hot Properties

The increasingly expensive elections that play out across the country every two years are making broadcast television stations look like a smart investment, with the revenue piling up each time a candidate says “I approve this message.”

Despite an array of digital alternatives and a rapidly transforming television business, 30-second commercials remain one of the most valuable tools of campaigns and political action committees. As Leslie Moonves, the chief executive of the CBS Corporation, which owns 29 stations, memorably said last year, “Super PACs may be bad for America, but they’re very good for CBS.” Next year’s midterm elections will be a boon to stations as well, and “2016 could be amazing,” said Mark Fratrik, the chief economist for BIA/Kelsey, a media research firm and consultancy. Station owners have come to dread what they call “odd years,” like 2013, when there is little political spending. For stations blessed to be in swing states, political ads routinely represent a third of their overall ad revenue in election years.

Tribune re-enters valley of debt

[Commentary] The last time Tribune Co. borrowed billions of dollars to finance a big acquisition, it didn't work out very well.

Real estate mogul Sam Zell’s ill-fated 2007 leveraged buyout cashed out existing shareholders and took the media company private in a deal that loaded Tribune with $8 billion in debt. That turned out to be too much for Tribune, which landed in bankruptcy after advertising revenues plummeted during the recession. Apparently the experience left Tribune executives with no fear of debt. Barely six months after emerging from bankruptcy, the Chicago-based media company is borrowing about $2.7 billion to buy 19 local television stations from Local TV Holdings LLC.

Debt-rating companies are alarmed. Standard & Poor's Ratings Services put Tribune on credit watch with “negative implications,” because the deal would boost debt to about 4.3 times earnings before interest, taxes, depreciation and amortization, a big jump from 2.3 before the acquisition but still within the range debt markets consider reasonable. Moody's Investors Service put Tribune credit on “review for downgrade,” citing increased debt levels resulting from the deal. Tribune predicts about $100 million in acquisition synergies, mostly from squeezing higher prices out of advertisers and boosting fees on cable TV companies that carry Tribune programming. The latter, known as “retransmission fees,” seem to be a driving force behind the recent spate of local television station buyouts. Industry experts predict broadcasters like Tribune will be able to boost retransmission fees substantially over the next few years. Tribune posted a 32 percent increase in retransmission fees during the first quarter.

The logic holds up — as far as it goes. Bigger broadcasting companies will have more clout with advertisers and cable operators. But even scale has limits.

Court: No class-action status in Google book case

The 2nd U.S. Circuit Court of Appeals said it is too early for authors to be considered as a group in litigation challenging Google's plan to create the world's largest digital library. The court ruled a judge must consider fair use issues before deciding whether to consider authors as a class. The court says neither side will be harmed by a delay in deciding whether the Authors Guild can represent all writers.

Six percent of online adults use reddit

Six percent of online adults are reddit users, according to a nationally representative survey by the Pew Research Center’s Internet & American Life Project. This is our first survey that specifically examines reddit as a standalone platform, and it finds that young men are especially likely to visit the site. Some 15% of male internet users ages 18-29 say that they use reddit, compared with 5% of women in the same age range and 8% of men ages 30-49.

These tech companies are spending millions on high-priced lobbyists

Google and Facebook have dramatically boosted their lobbying in recent years.

In just a decade, Google has gone from having no DC presence at all to spending more than $16 million last year. That was more than double any other tech company’s spending that year. Facebook only arrived in DC in 2009, but by last year it had racked up a $4 million lobbying bill, placing it fifth behind Microsoft, HP, and the Entertainment Software Association.

Connecting America’s Schools to Next-Generation Broadband

The White House recently set an ambitious goal to connect 99 percent of American students to ultra-fast broadband within five years. President Obama’s ConnectED initiative would bring Internet speeds of at least 100 megabits per second and high-speed wireless to K-12 schools across the nation. At NTIA, we are already making these types of connections a reality in K-12 schools through our Broadband Technology Opportunities Program, which has invested about $4 billion in roughly 230 projects nationwide to expand broadband availability and use. Of our 116 network infrastructure projects, about 75 percent are linking or supplying additional bandwidth to schools. Overall, roughly 10,000 schools in 44 states are being connected or upgraded, and almost 70 percent are getting access to speeds of at least 100 megabits.

Seattle Mayor Mike McGinn’s failed broadband promise

[Commentary] Two decades ago, Seattle and a consortium of public agencies began building a network of superfast fiber cable. It was intended to lower municipal telecom costs and anticipated the upcoming digital century. Speed brings innovation; the future demanded both. Every public school, the University of Washington, city offices and other public agencies are now connected to the 530-mile network. But the network stops short of most homes and businesses, a gap known in the industry as the difficult and expensive “last mile.” As a candidate four years ago, Seattle Mayor Mike McGinn led voters to believe he would finish that last mile. It was a core campaign pledge. He waxed eloquently about the value of a citywide broadband network, and criticized then-Mayor Greg Nickels for “a lack of vision and political will” to make it happen. Fast forward to 42 months into McGinn’s term. His proposal to create city broadband utility department has evaporated. So has his talk of asking voters to finance a citywide network.

Benton

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