February 2014

INTERNET/BROADBAND

FCC’S NET NEUTRALITY DECISION
[SOURCE: San Francisco Chronicle, AUTHOR: James Tuthill]
[Commentary] The Federal Communications Commission will not appeal a court decision issued in January overturning the FCC's network neutrality rules, Verizon vs. Federal Communications Commission. FCC Chairman Tom Wheeler said that the FCC supports an open Internet and will develop new rules to replace those thrown out by the court. But for practical purposes, he threw in the towel. And the just-announced deal between Comcast and Netflix for preferential delivery shows how quickly the industry will move to capitalize on its now-unrestrained power. Verizon is a horrible legal precedent for the FCC and the Internet user and entrepreneurial communities because it severely restricts, if not eliminates, the FCC's power to prohibit discrimination and anticompetitive acts by service providers. It seems obvious that the FCC would want the case overturned. The failure of the chairman to seek review raises legitimate questions about the reasons for declining to appeal. Previously, he was the president of the National Cable Television Association and president of the Cellular Telecommunications and Internet Association. Cable television and wireless providers strongly opposed the net neutrality rules, and they must be secretly congratulating themselves over Wheeler's decision not to appeal. The chairman owes the American people a better explanation for his course of action. The FCC is not a private company that can hide the reasons for its decisions. It's a public agency obligated to serve the public. He needs to tell us why he decided not to appeal the case to the Supreme Court, and his reasons need to be persuasive.
[Tuthill teaches telecommunications, broadcast and Internet law at the UC Berkeley School of Law]
benton.org/node/175496 | San Francisco Chronicle
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INTRODUCING THE COMCAST TAX
[SOURCE: Bloomberg, AUTHOR: Susan Crawford]
[Commentary] The Comcast-Netflix arrangement to deliver streaming video directly into Comcast's physical network is a game-changer: America's largest cable network is building a moat around its system and can now charge connecting networks for the privilege of sending traffic to its users. The Federal Communications Commission needs to get on the case. Otherwise, high-capacity innovative uses of the Internet in US will be subject to an arbitrary Comcast tax. That's the cable model, the walled garden. And that's great for Comcast and its shareholders. But it's not great for the future of US innovation. [Crawford is John A. Reilly Visiting Professor in Intellectual Property at Harvard Law School and a fellow at the Roosevelt Institute]
benton.org/node/175475 | Bloomberg
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CONSUMERS UNION WANTS GOVT TO VET COMCAST/NETFLIX DEAL
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
The Consumers Union wants the Federal Communications Commission and Department of Justice to vet the deal between Comcast and Netflix, in which the latter paid for a direct connection to the former's network. Comcast has said the deal does not mean Netflix is paying for preferential treatment, but instead that the direct linkup is providing a better user experience and opportunity for Netflix traffic to grow. In letters to FCC Chairman Tom Wheeler and Attorney General Eric Holder, Consumers Union points to recent Netflix-related declines in speeds and service interruptions and says it wants the FCC and Justice to look into whether Comcast selectively degraded service so that Netflix would seek faster and more expensive service from Comcast. The group wants the government to investigate the speed issue, given that Comcast agreed to abide by no-blocking or hindering of content providers conditions as part of the NBCU deal. “We believe it raises serious concerns about the clout of Comcast, its ability to affect the prices and quality of service it offers consumers, and the alarming precedent it sets for the entire marketplace,” Delara Derakhshani, policy counsel for Consumers Union, said of the Netflix deal.
benton.org/node/175474 | Broadcasting&Cable
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COMCAST AND NETFLIX -- WHAT’S THE BIG DEAL?
[SOURCE: Technology Policy Institute, AUTHOR: Tom Lenard]
[Commentary] While some commentators think the Netflix and Comcast deal is problematic, the reality is that the agreement reflects a common market transaction that yields an outcome more efficient and more quickly than any regulatory intervention could have. When Netflix pays Comcast, the cost is passed through to Netflix subscribers. This is both efficient and fair, because the consumer of Netflix services is paying for the cost of that service. In the absence of such an agreement, quality would suffer or the ISP would bear the cost. The ISP might recover these costs by increasing prices to subscribers generally. This would involve a cross-subsidy of Netflix subscribers by non-subscribers, which would be neither efficient nor fair. Alternatively, Comcast could increase prices for those subscribers who consume a lot of bandwidth, which might have similar effects to the just-announced deal, but would probably lose some efficiencies. In any event, it is difficult to see how such an arrangement would be better for consumers than the announced agreement.
benton.org/node/175453 | Technology Policy Institute
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GOOGLE FEARS FCC'S NEW INTERNET POWERS
[SOURCE: Government Executive, AUTHOR: Brendan Sasso]
A recent court decision that endorsed a broad view of the Federal Communications Commission's authority over the Internet has Google and other web companies nervous. In closed-door meetings with regulators and Capitol Hill staff, Google's lawyers have said they're worried how the FCC may use its newfound powers, according to multiple people familiar with the meetings. The extent of the FCC's authority over Google and other Web services remains unclear, and the current FCC has given no indication that it is interested in pushing aggressive new regulations. But the possibility that the commission could begin telling Google how to organize its search results or handle its users' data is enough to spook the company's army of Washington lobbyists.
benton.org/node/175451 | Government Executive
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SIX MYTHS ABOUT THE COMCAST-TIME WARNER CABLE MERGER
[SOURCE: Free Press, AUTHOR: ]
[Commentary] Comcast’s proposed merger with Time Warner Cable would create the most powerful cable company and Internet service provider this country has ever known. And as Comcast has demonstrated in its new agreement with Netflix, the company has the power to force content providers to enter into secret and anti-competitive pricing deals that hurt consumers. What does this mean for you and me? Fewer choices, higher prices and less diversity in our media. Here’s the biggest myths and misconceptions about the deal.
Myth: Cord cutters have nothing to worry about. Fact: Online video and innovation will suffer most.
Myth: Comcast and Time Warner Cable don’t compete anyway, so this deal doesn’t change anything. Fact: This is all about competition and market power.
Myth: The Comcast merger is a boon for Net Neutrality. Fact: Comcast has to obey the FCC’s Open Internet Order but only until 2018.
Myth: Time Warner Cable will improve with Comcast’s help. Fact: Comcast is routinely at the bottom of customer-satisfaction lists.
Myth: There are plenty of sources for content and information. Fact: Comcast already has too much control over content.
Myth: I don’t subscribe to Comcast or Time Warner Cable, so this deal has no impact on me. Fact: This deal isn’t just about dollars. It’s about democracy.
benton.org/node/175495 | Free Press
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THE WEB AT 25
[SOURCE: Pew Research Center, AUTHOR: Susannah Fox, Lee Rainie]
This report is the first part of a sustained effort through 2014 by the Pew Research Center to mark the 25th anniversary of the creation of the World Wide Web by Sir Tim Berners-Lee. The report looks back at the rapid change in Internet penetration over the last quarter century, and covers new survey findings about Americans’ generally positive evaluations of the Internet’s impact on their lives and personal relationships. 87% of American adults now use the internet, with near-saturation usage among those living in households earning $75,000 or more (99%), young adults ages 18-29 (97%), and those with college degrees (97%). Fully 68% of adults connect to the internet with mobile devices like smartphones or tablet computers. The adoption of related technologies has also been extraordinary: Over the course of Pew Research Center polling, adult ownership of cell phones has risen from 53% in our first survey in 2000 to 90% now. Ownership of smartphones has grown from 35% when we first asked in 2011 to 58% now. Asked for their overall judgment about the impact of the internet, toting up all the pluses and minuses of connected life, the public’s verdict is overwhelmingly positive:
90% of internet users say the internet has been a good thing for them personally and only 6% say it has been a bad thing, while 3% volunteer that it has been some of both.
76% of internet users say the internet has been a good thing for society, while 15% say it has been a bad thing and 8% say it has been equally good and bad.
benton.org/node/175488 | Pew Research Center
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WORKING TO CLOSE THE DIGITAL DIVIDE IN SILICON VALLEY
[SOURCE: National Telecommunications and Information Administration, AUTHOR: Lawrence Strickling]
I joined Commerce Secretary Penny Pritzker and other Commerce Department leaders in travelling to Silicon Valley to promote the Department’s initiatives to spur US economic growth, innovation, and competitiveness. We’re meeting with leaders of technology powerhouses, fledgling start-ups, and venture capitalists funding the next big idea. Yet, we recognize that not everyone in the region has shared in the wealth created in Silicon Valley. Yesterday I had the privilege of meeting with a number of groups including the California Emerging Technology Fund (CETF), the Chicana/Latina Foundation, the Latino Community Foundation, and others that are working tirelessly across the state to close the digital divide. Even as Silicon Valley is experiencing economic growth on the whole, income inequality in the region continues to rise. For instance, African American and Latino residents earn 70 percent less on average than the region’s top earners, the biggest gap ever recorded by the Silicon Valley Index. Computer and Internet training provided by our broadband grant projects offers users 21st century skills that can lead to better employment. While high-speed Internet is widely available throughout Silicon Valley, not everyone has the means or the skills to access it.
benton.org/node/175471 | National Telecommunications and Information Administration
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INSIDE THE TINY KANSAS TOWN BATTLING CABLE LOBBYISTS OVER MUNICIPAL BROADBAND
[SOURCE: Network World, AUTHOR: Colin Neagle]
When the Kansas state senate proposed legislation barring local governments from providing high-speed Internet to their citizens, one small community, which was effectively exempt from the legislation, spoke out the loudest. The proposed legislation, Senate Bill 304, prohibited the creation of municipal broadband networks for areas in the state that were deemed “unserved.” This meant that, in the event that an Internet service provider declined to invest in small Kansas communities that were unlikely to provide a return on their investments, the local governments were legally barred from providing broadband to their citizens themselves. Larry Gates, utilities director for the city of Chanute (KS), played a big role in the effort that ultimately persuaded State Sen Julia Lynn (R-KS) to withdraw SB 304 so her committee could “tweak” its language. Chanute launched a webpage on its city website urging Kansans to sign a petition against the bill, issued press releases denouncing the bill and the cable lobbyists who were behind it, and posted YouTube videos detailing what was at stake. Moving ahead, Gates wants to put the vitriol that resulted from the bill aside -- he’s apologized for calling out Senator Lynn and KCTA President and cable industry lobbyist John Federico by name -- and work to find a way to improve services in the state without the legal battles and confrontation.
benton.org/node/175469 | Network World
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WIRELESS/SPECTRUM

T-MOBILE TURNS AN INDUSTRY ON ITS EAR IN A FIGHT FOR ITS LIFE
[SOURCE: New York Times, AUTHOR: Farhad Manjoo]
[Commentary] A rash of consumer-friendliness has broken out across the mobile data industry. In 2013, the four major carriers -- AT&T, Verizon, Sprint and T-Mobile -- cut prices and offered greater flexibility in how they sell their voice, text and broadband services. The industry could be on the verge of an all-out price war. Who is responsible for this blessed state of affairs? Credit must go to the United States government. T-Mobile’s resurgence, and the effect it has had on the larger market for cellular service, may hold important lessons for regulators who will soon sit in judgment over the latest enormous broadband proposal, Comcast’s deal to gobble up Time Warner Cable.
benton.org/node/175473 | New York Times
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WIRELESS COMPETITION HEARING
[SOURCE: Kansas City Business Journal, AUTHOR: Bobby Burch]
As speculation of a merger between Sprint and T-Mobile US ambiguously lingers, the companies' largest competitor testified that the telecom industry is a model for vibrant competition. Randal Milch, Verizon Wireless' executive vice president and general counsel, asserted during a congressional antitrust hearing that the industry's dynamism is in part a result of regulators' light touch. The unobtrusive approach, he said, encourages robust rivalries that offer Americans more options. "The beneficiaries of this remarkable marketplace are US wireless consumers, who have a wide range of choices in networks," Milch said during the Senate Judiciary Committee's Antitrust Subcommittee hearing on competitiveness in the wireless market. "Our US wireless market stands as a global leader in innovation and choice, and is a key driver for national economic growth and maintaining America's competitive edge in the global economy." Although Verizon maintained that the industry's status quo is generally good, Sprint has argued that the industry and consumers would benefit from greater consolidation. Kathleen O'Brien Ham, T-Mobile's vice president of federal regulatory affairs, said market domination by Verizon and AT&T is bad for consumers.
benton.org/node/175493 | Kansas City Business Journal | Multichannel News
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CHANNEL SHARING
[SOURCE: Wall Street Journal, AUTHOR: Eric Dodson Greenberg, Sherrese Smith]
[Commentary] If you want to see the future of both the broadcast television and wireless industries, look to two TV channels in Los Angeles. That's where KJLA and KLCS are launching a pilot project to put both broadcast stations on a single channel, thereby freeing up spectrum for wireless broadband use. Channel sharing is crucial to the success of the Federal Communications Commission’s incentive spectrum auction. It shifts the auction dynamic from a binary choice for broadcasters in which participating in the auction equals closing a station and sitting it out means staying in business. By contrast, channel sharing would create a middle path that allows broadcasters to partially monetize spectrum, thereby freeing up spectrum for new uses, while also providing a mechanism for stations to continue to operate -- delivering programming and serving the public -- with new efficiencies on a shared swath of spectrum. This middle path best serves the FCC's dual interests: ensuring the most efficient use of spectrum while also preserving stations and promoting programming choices in the market. Neither the FCC nor the public are served by an auction that becomes a zero-sum game.
[Dodson Greenberg and Smith are partners in the media transactions practice at Paul Hastings]
benton.org/node/175492 | Wall Street Journal
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TELEVISION

NEW FCC RULES
[SOURCE: Wall Street Journal, AUTHOR: William Launder]
Television broadcasters could find ways of offsetting the financial impact of a potential regulatory crackdown on joint ad-sales efforts, industry executives and analysts say. The bigger worry is whether a crackdown will be extended into other service-sharing efforts between TV station owners, they say. Federal Communications Commission Chairman Tom Wheeler's proposal would treat broadcasters as the owners of any station for which they handle more than 15% of the advertising sales. It would also require stations to unwind joint sales agreements within two years or else be potentially found in violation of the FCC's rules on media ownership. Analysts played down the immediate impact of the potential move. "Nobody is really afraid [immediately] because there are workarounds" for any crackdown on joint sales agreements, said David Bank, an analyst at RBC Capital Markets. "A big fear," though, is that the FCC might take action in the future to restrict other shared services agreements. Many of the financial benefits of joint sales and services agreements are realized when the two are combined together, broadcasters say. Furthermore, Bank said tighter scrutiny on joint sales agreements will pose an additional hurdle for broadcast companies looking to buy other stations in an ongoing round of industry consolidation.
benton.org/node/175494 | Wall Street Journal
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ELECTIONS AND MEDIA

TECH CHECKS GROW
[SOURCE: Politico, AUTHOR: Tony Romm]
The Internet’s most familiar names long scoffed at big oil, big banks and big defense contractors for their large campaign contributions to lawmakers every election year. But with the 2014 midterms on the horizon, the likes of Google and Facebook are tearing a page -- or, rather, a check -- from the same political playbook. The ongoing debate over National Security Agency surveillance, a brewing interest in consumer privacy and security protections and the broader battles over patents and taxes have spurred Internet giants to donate more money than ever in a bid to secure new congressional allies. Entering the 2014 election, Google already has doubled the amount it spent and raised in the 2010 midterm cycle. Facebook’s fast-growing campaign contribution machine didn’t even exist four years ago. Yahoo similarly is doling out cash at a faster rate than the past two elections, and companies like Twitter and Salesforce.com are just beginning to come into their own as political players.
benton.org/node/175490 | Politico
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MOVIE INDUSTRY SWITCHING TO GOP
[SOURCE: Wall Street Journal, AUTHOR: Brody Mullins, Ben Fritz]
Hit by legislative setbacks in Washington, the Motion Picture Association of America is producing a Hollywood-style remake. The movie industry's main lobbying group has ramped up its budget and donations to political groups in the past few years, and, in a switch for an industry long associated with Democrats, has quietly reached out to Republicans and conservative-leaning organizations in an effort to rebuild its clout. The MPAA replaced its longtime lead lobbying firm, considered to be close with Democrats, with a lobbyist with ties to key GOP lawmakers. Its political action committee now gives more donations to Republicans than Democrats. And it has sent money to a GOP super PAC, a conservative antitax entity and a business lobby helping Republicans in the 2014 elections.
benton.org/node/175489 | Wall Street Journal
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GOVERNMENT & COMMUNICATIONS

FCC COMMISSIONER CLYBURN DEFENDS FCC'S CRITICAL NEEDS STUDY
[SOURCE: Multichannel News, AUTHOR: John Eggerton]
Federal Communications Commissioner and former acting chairwoman Mignon Clyburn defended the commission's Critical Information Needs study, saying she would never try to chill speech or influence journalists and that the study was an effort to gauge the market, not shape it. Commissioner Clyburn said that the intent of the study, which was put out for public notice last May when Commissioner Clyburn was heading the agency, was to "gather data and other information about whether there are any market entry barriers, preventing local communities from receiving important information." "As a person who spent 14 years running a small weekly, I would never be a part of any effort to chill speech, shape the news or influence news gatherers," she told her audience of media execs, lawyers and others. "I am about facilitating ownership and opportunities and making sound decisions about our most critical industries based on solid research and not rhetoric."
benton.org/node/175459 | Multichannel News
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STATEMENT ON CIN STUDY
[SOURCE: Federal Communications Commission, AUTHOR: FCC Commissioner Michael O’Rielly]
House and Senate Republicans, along with Commissioner Ajit Pai, have voiced their serious concerns about the Commission’s Critical Information Needs (CIN) study. While I was not at the Commission when the study was authorized, I share those concerns. I appreciate the Chairman’s willingness to make revisions, but I am afraid that tweaking it is just not enough. If any value was ever to come from this particular exercise, that ship has sailed. It is probably time to cancel the CIN study for good.
benton.org/node/175479 | Federal Communications Commission
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WHY DID THE FCC WANT TO INTERVIEW JOURNALISTS IN THE FIRST PLACE?
[SOURCE: Columbia Journalism Review, AUTHOR: Corey Hutchin]
[Commentary] The Federal Communications Commission publicly backed off part of a controversial research study in the face of mounting criticism that the research included interviewing local journalists about how they choose what to cover. The backlash to the Multi-Market Study of Critical Information Needs (CIN), which is set for a test run this spring in Columbia (SC) included Republicans in Congress invoking the (defunct) Fairness Doctrine, and one of the FCC’s own commissioners accusing the agency of taking “a first step” toward “newsroom policing.” At the heart of criticism of the CIN is why the FCC-commissioned study would include interviews with local journalists about their “news philosophy.” However, Lewis Friedland, who directs the Center for Democracy and Communication at the University of Wisconsin-Madison, said that no part of the CIN was ever meant to intrude on the prerogatives of local news managers. Friedland thinks dropping the journalist interviews is probably the right move -- but he says the questions were never intended to be a centerpiece for this study, and “they were never intended to be a form of critical review by the FCC of the output of the content of broadcasters.”
benton.org/node/175478 | Columbia Journalism Review
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JUSTICE OFFICIALS SEEK TO HOLD NSA PHONE RECORDS LONGER
[SOURCE: Wall Street Journal, AUTHOR: Devlin Barrett]
The Justice Department has asked the Foreign Intelligence Surveillance Court for approval to hold on to National Security Agency phone records for a longer period -- an unintended consequence of lawsuits seeking to stop the data-surveillance program. Under the proposal made to court, the older data would continue to be held, but NSA analysts would not be allowed to search it. "The United States must ensure that all potentially relevant evidence is retained which includes the [business records] metadata obtained in bulk from certain telecommunications service providers pursuant to this court's production orders,'' according to the filing made by senior Justice Department officials.
benton.org/node/175477 | Wall Street Journal | Associated Press
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Analysis

February 2014

Europe invites Apple, Google to discuss 'in-app' purchases

It's Official: Camp's Tax Proposal Would Limit Expensing of Ad Costs

February 27, 2014 (Net Neutrality; Comcast; Wireless)

FCC throws in the towel, but public has right to know why

Six Myths About the Comcast-Time Warner Cable Merger

TV Stations Face New FCC Rules

Verizon touts telecom competitiveness; Sprint, T-Mobile disagree

Channel Sharing Can Break the Wireless Logjam

Google ordered to take down YouTube anti-Muslim video

Tech checks grow larger for 2014 elections