April 2014

TELEVISION

SUPREME COURT HEARS ARGUMENTS IN AEREO CASE
[SOURCE: New York Times, AUTHOR: Adam Liptak]
The Supreme Court seemed to have conflicting impulses in considering a request from television broadcasters to shut down Aereo, an Internet start-up that the broadcasters say threatens the economic viability of their businesses. On the one hand, most of the Justices seemed to think that the service was too clever by half. “Your technological model,” Chief Justice John Roberts Jr told Aereo’s lawyer, “is based solely on circumventing legal prohibitions that you don’t want to comply with.” But Justice Stephen Breyer, echoing sentiments of other members of the court, said “what disturbs me on the other side is, I don’t understand what a decision” against Aereo “should mean for other technologies,” notably cloud computing. The Justices seemed keenly aware that their ruling would have vast implications for the broadcast industry and for technical innovations involving cloud computing.
benton.org/node/180861 | New York Times | Washington Post | Wall Street Journal | The Verge | The Wrap | GigaOm | CNNMoney | Revere Digital | The Hill | USAToday | TVNewsCheck | Deadline | Recode
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CONTENT

AT&T CREATES $500M JOINT VENTURE FOR A NETFLIX-STYLE TV SERVICE
[SOURCE: GigaOm, AUTHOR: Stacey Higginbotham]
AT&T, the nation’s second largest broadband provider and wireless company, is getting into the streaming business with a $500 million joint venture created to acquire, invest in and launch a Netflix-style video streaming service. The deal marks the first time a big US ISP has decided to go over the top with a TV service. AT&T has joined forces with media and entertainment company the Chernin Group, and together the two companies have committed $500 million in funding to the venture. Chernin Group will bring assets to the venture, including the contribution of its majority stake in Crunchyroll, a subscription video on demand service.
benton.org/node/180842 | GigaOm | B&C | The Verge
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AT&T/ CHERNIN GROUP DEAL: ANOTHER TAKE ON OTT VIDEO MONETIZATION
[SOURCE: telecompetitor, AUTHOR: Joan Engebretson]
[Commentary] AT&T is trying a new approach toward the over-the-top video opportunity, announcing that it has created a joint venture with media company The Chernin Group to focus on over the top (OTT) video. The companies said they would jointly invest $500 million in the venture with the goal of “investing in advertising and subscription VOD channels as well as streaming services.” OTT is both an opportunity for and a threat to the nation’s largest pay TV providers -- including AT&T, Verizon and cable companies such as Comcast and Time Warner Cable. OTT video offerings such as Netflix and Amazon Prime threaten the pay TV providers’ subscription and VOD revenues. But Netflix and Amazon Prime don’t have their own networks -- and those networks could become increasingly important as TV Everywhere gains in popularity, giving consumers the ability to watch video on a variety of devices. And as that happens, companies such as AT&T and Verizon that have mobile as well as landline broadband networks may have an edge. Based on the press release announcing the AT&T/ Chernin Group venture, the venture partners appear set on capitalizing on that edge.
benton.org/node/180855 | telecompetitor
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SENIORS

TEACHING SENIORS TO USE INTERNET CUTS DEPRESSION RISK
[SOURCE: Detroit Free Press, AUTHOR: Robin Erb]
According to new research by a Michigan State University professor published in the Journal of Gerontology: Social Sciences, computer use among retirees reduces the risk of depression by more than 30%. And don't worry that Grandpa doesn't yet understand this newfangled Internet-thing. It's never too late to learn, said Sheila Cotten, lead author and a professor of telecommunication, information studies and the media. Researchers wanted to focus on retirees -- those who no longer have jobs that force them to interact in person or online. With other factors held constant -- such as whether the seniors lived with other people -- the authors found that roughly 7 in 100 Internet users were estimated to have depression, whereas 10 in 100 non-computer users were estimated to have depression. In other words, Internet use led to a more than 30% reduction in the probability of depression. It's not clear what the participants were doing -- checking e-mail, shopping or searching for information. And that doesn't matter, Cotten said: "It's really about being able to connect and communicate and find information you need."
benton.org/node/180858 | Detroit Free Press
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WIRELESS/SPECTRUM

WILL BIDDER EXCLUSION RULES LEAD TO HIGHER AUCTION REVENUE?
[SOURCE: Phoenix Center, AUTHOR: George Ford, Lawrence Spiwak]
As the Federal Communications Commission begins to formalize rules for the upcoming voluntary incentive auctions for broadcast spectrum, questions regarding participation limits on the largest domestic wireless carriers remain open. Proponents of bidder restrictions on AT&T and Verizon appeal to a “revenue- enhancement hypothesis,” under which the participation by the more successful carriers will allegedly discourage bidding by smaller firms and thus reduce total auction revenues. In this bulletin, we analyze data from a recent large-scale spectrum auction to shed light on the validity of the revenue-enhancement hypothesis, and our findings are significant. Among other things, we find no evidence that AT&T and Verizon reduced the number of bidders for licenses. Moreover, we find no evidence to support the claim that lower auction revenues resulted from large firm participation. As participants, the two increased overall auction revenues, both by winning licenses and by helping to reveal the valuations of other bidders. AT&T’s efforts (win or not) added a 21% premium to final auction prices above and beyond the revenue effects of the typical bidder. AT&T alone accounted for nearly half of all auction proceeds, even though its winning bids were only about 10% of the total. Verizon’s impact was consistent with that of the average bidder. Accordingly, our findings contradict almost every key aspect of the revenue- enhancement hypothesis -- not only did AT&T’s and Verizon’s participation not deter smaller firms from entering the auction, but their participation substantially raised total auction proceeds. Empirical evidence supporting bidder exclusions or restrictions in the forthcoming voluntary incentive spectrum auctions therefore remains weak.
benton.org/node/180833 | Phoenix Center
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OWNERSHIP

COMCAST-TWC PROMISES BETTER TV
[SOURCE: San Francisco Chronicle, AUTHOR: David Cohen]
[Commentary] Comcast and Time Warner Cable agreed to combine operations in order to create a stronger national competitor that can invest to offer better and faster Internet service, a richer and more diverse television experience, and more innovation and advanced services for residential and business customers alike. Consumers will get:
Faster broadband. Internet speed is tied to investment in broadband networks. Our investment in a faster all-digital network was completed nearly two years ago, while Time Warner Cable lags behind. As a result, the vast majority of our customers receive 25 Mbps or more, while the majority of Time Warner Cable's receive 15 Mbps or less.
Better television and video services. With over 50,000 on-demand and 300,000 streaming choices, our Xfinity platform gives customers more programming options than anyone in the business. Our new X1 operating system and user interface enable viewers to control their TVs via mobile devices and search for favorite actors or directors across live and on-demand viewing options with just the sound of their voice.
The transaction will:
Advance Network Neutrality. Comcast supported the FCC's 2010 Open Internet rules and remains legally bound by them even after the court decision striking them down for everyone else. The transaction will now extend the geographic reach of these network neutrality rules to millions of Americans in Time Warner Cable territories.
Make the Internet more accessible. Our Internet Essentials program has provided low-cost home Internet to over 1.2 million low-income Americans, making what one civil rights leader called the "biggest experiment ever" on the digital divide even bigger.
Enhance programming diversity. Comcast carries over 160 independent networks , and we've helped launch diverse networks such as TV One, Revolt TV, ASPiRE, BabyFirst Americas, El Rey, and Crossings TV.
Help businesses reduce Internet and telephone service costs. Combining our companies will drive prices down while enhancing quality and service for small, medium and large businesses - especially regional firms that we can't sell to without the expanded reach of the combined company.
[Cohen is executive vice president and chief diversity officer of Comcast]
benton.org/node/180944 | San Francisco Chronicle
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COMCAST-CHARTER DEAL?
[SOURCE: Wall Street Journal, AUTHOR: Shalini Ramachandran]
Charter Communications could acquire nearly four million extra subscribers in a two-stage deal under discussion with Comcast, in what would represent a consolation prize for Charter's nearly yearlong pursuit of Time Warner Cable. In the first part of the deal now being discussed, Charter would likely acquire between 1 million and 1.5 million subscribers through a straight out sale, said people familiar with the situation. Separately, Comcast plans to spin off a company holding a few million more subscribers. Under the plan, Charter would take an equity stake in that company and could buy the entity over time. If that happened, Charter would end up with nearly four million in additional subscribers, nearly doubling its size to around eight million video customers. That would make it the second-largest cable operator, helping advance the growth strategy set out by Charter and its biggest shareholder, Liberty Media, to consolidate the fragmented cable industry. For Charter, the total cost is likely to be more than the $18 billion Comcast had said it hoped to receive for the sale of three million subscribers. The deal under discussion would also involve system swaps affecting nearly one million other subscribers. Such swaps could help both Comcast and Charter boost their presence in key markets.
benton.org/node/180945 | Wall Street Journal
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CRITICS: CABLE MERGER COULD SIDELINE SPORTS
[SOURCE: The Hill, AUTHOR: Julian Hattem]
A pending mega-merger between Comcast and Time Warner Cable could affect some sports fans' ability to watch their favorite teams, critics are saying. Opponents of the proposed $45 billion deal are warning it could lead Comcast to squeeze out competition and force leagues to show games exclusively to the company's subscribers. "What [Comcast] can do is it can favor its own content in a lot of ways on its own platform, and then it can also deny its own content to other platforms, meaning typically the satellite guys," said Matt Wood, policy director for Free Press. Comcast owns a handful of regional sports networks, as well as NBC and its slate of channels. That could give it an incentive to make sure games are shown only on its stations, not others, and give the company more leverage over teams when it comes to broadcasting rights. That potential exists for a variety of types of programming, critics say, but would be especially egregious for sports, which are often supported by local tax dollars. "Because sports are publicly subsidized, our belief is that everything should be viewed through the lens of what makes them more available," said David Goodfriend, the chairman of the National Sports Fan Coalition and former deputy staff secretary in President Clinton's White House. Lawmakers have expressed similar concerns. In a hearing in April, Sen Richard Blumenthal (D-CT) said Comcast would own 16 regional sports networks after the merger, which amounts to "a very formidable amount of local sports programming in the largest media markets in the country."
benton.org/node/180854 | Hill, The
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WHY THE FEDS SHOULD BLOCK COMCAST'S MERGER WITH TIME WARNER CABLE
[SOURCE: Fortune, AUTHOR: Sanjay Sanghoee]
[Commentary] It's a good time to delve into a development that could forever reshape the future of television: the possible merger between two of the nation's biggest cable companies, Comcast and Time Warner Cable. A merger between these giants would threaten an open and fair market for cable television as well as Internet access. To understand this, consider that Comcast could gain 11 million subscribers if it buys Time Warner Cable. Even if it winds up divesting 3 million subscribers to Charter Communications to gain approval from the Federal Communications Commission, the combined company will still have 30 million subscribers nationwide. Some would say the companies don't directly compete -- Comcast has its own markets, such as in Philadelphia and Washington (DC), and Time Warner Cable has its own, such as in New York and North Carolina. The lack of overlap may temper antitrust concerns, but even geographically divergent markets can create an anticompetitive environment. Another factor to consider is how the scarcity of a necessary resource like broadband will inevitably increase the power of monopolistic distributors while hurting content providers and consumers. So while the merger may not be anti-competitive in terms of eliminating existing competition, it does obviate the need for both Comcast and Time Warner Cable to expand their services and aggressively compete with each other on price, quality of service, and capacity, which amounts to the same thing. The Federal Communications Commission should consider all this before approving a deal and recognize the long-term ramifications of allowing cable juggernauts to expand their footprint artificially instead of through investment and competition. [Sanghoee is a political and business commentator]
benton.org/node/180848 | Fortune
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COMCAST-NETFLIX DEBATE ILLUSTRATES IMPLICATIONS OF COMCAST-TWC MERGER
[SOURCE: telecompetitor, AUTHOR: Bernie Arnason]
[Commentary] Netflix appears to be positioning itself as a major voice against the Comcast-Time Warner Cable merger. Sen Al Franken (D-MN) has indicated he intends to invite Netflix’s participation in the regulatory approval debate and Netflix confirmed they intend to take him up on his offer. Needless to say, Comcast isn’t pleased. This high profile spat demonstrates the significant implications of the Comcast-TWC merger, which include not only broadband access, but how content gets distributed. I suspect we’ll see more entrants into this debate with increasing fireworks.
benton.org/node/180850 | telecompetitor
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A FIX FOR SILICON VALLEY
[SOURCE: Financial Times, AUTHOR: Stephen Foley, Tim Bradshaw]
One of the West Coast’s leading activist investors has added to the growing criticism of corporate governance in Silicon Valley, and of Google in particular, amid fresh warnings of a bubble in tech valuations. Jeff Ubben, whose hedge fund ValueAct is an investor in Microsoft, eBay and Adobe Systems, singled out what he said was excessive compensation for Eric Schmidt, Google’s chairman. “Jamie Dimon [chairman of JPMorgan Chase] gets hauled over the coals in New York for his $20 million, but Eric Schmidt presides over four board meetings and gets paid $100 million,” he said, referring to the Google chairman’s 2011 package. David Einhorn, the activist investor behind Greenlight Capital who has taken on Silicon Valley companies such as Apple in recent years, warned that excessive enthusiasm about “cool kid companies” had created a new bubble in tech valuations to rival the late 1990s.
benton.org/node/180943 | Financial Times
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INTERNET/BROADBAND

WON’T SOMEONE THINK OF THE CLOUD SERVICES?
[SOURCE: Public Knowledge, AUTHOR: John Bergmayer]
Public Knowledge has been filing briefs in Aereo's lawsuits (and in related cases like Film On) since the beginning, but the beginning was only 2012. The litigation has made it to the Supreme Court very quickly, and it's going to take some time to digest exactly how the Justices react to the various arguments that are presented (such as the arguments in our joint brief). But it's worth thinking about what the implications of Aereo might be for various industries, now that the purely legal arguments have all been made. It's hard to believe the broadcasters when they say that Aereo will somehow take away their retransmission fees, and destroy their business model. How did they manage for so long -- from the middle of the 20th Century until just a few years ago --without those fees? But even more to the point, the idea that Aereo will give cable systems a magic ticket that will enable them to stop paying the fees is a bit far-fetched. After all, a cable system doesn't just need to carry ABC, but ESPN as well, which is under the same corporate umbrella. An Aereo win might give cable a bit more leverage against broadcast but they're still going to need to pay. The dollar totals around different line items might switch around but without much net effect. Instead, the consequence of an Aereo win will likely be more subtle: Aereo (and maybe services like it) that do not offer the complete cable package and are available online will continue growing, making it easier (when combined with content from other services like Amazon Instant Video) for people to "cut the cord" and do without a traditional pay TV subscription at all. Online services will find it easier to offer viewers the more flexible programming choices the marketplace has repeatedly demonstrated they want.
benton.org/node/180881 | Public Knowledge
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AMAZON SALES TAKE A HIT IN STATES WITH ONLINE TAX
[SOURCE: Bloomberg, AUTHOR: Adam Satariano]
Amazon is taking a hit in states that are collecting an online sales tax. In one of the first efforts to quantify the impact of states accruing more tax revenue from web purchases, researchers at Ohio State University published a paper that found sales dropped for Amazon when the online charge was introduced. In states that have the tax, households reduced their spending on Amazon by about 10 percent compared to those in states that don’t have the levy. For online purchases of more than $300, sales fell by 24 percent, according to the report titled “The Amazon Tax.” The findings add to concerns about how much the world’s largest online retailer can expand. The company has been grappling with decelerating revenue growth amid heavy spending by Chief Executive Officer Jeff Bezos on new initiatives. Amazon has enjoyed an edge against brick-and-mortar retailers because consumers didn’t have to pay a sales tax for purchases from the e-commerce site, yet that has eroded as states including California and Texas have unveiled the levies.
benton.org/node/180883 | Bloomberg | National Public Radio
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EDUCATION

VAST DIGITAL DIVIDE EXISTS IN K-12 SCHOOLS, E-RATE ANALYSIS SHOWS
[SOURCE: Education Week, AUTHOR: Sean Cavanagh]
Applications for federal E-rate money show broad gaps between wealthy and poor school systems' access to high-quality technologies, and varying abilities among districts to purchase connectivity at affordable rates, a new analysis reveals. The research, released by Education SuperHighway, a San Francisco-based nonprofit that advocates for improved school connections, is based on data the organization says it collected and analyzed from more than 1,000 school districts in 45 states, which had collectively made $350 million in requests for E-rate funding. Among Education SuperHighway's findings:
School districts that are already meeting the ConnectED goals pay on average only one-third the price for broadband as schools that don't meet that standard. That could be because they're buying more broadband, with economies of scale, or because they're in geographic locations where it's cheaper, Marwell said. But it also could be driven by other factors, he said, such as they could have greater resources and competition from providers;
School districts that already have fiber optic cable connections have nine times the bandwidth, and 75 percent lower costs, per megabit per second, than districts without fiber;
School districts with access to "competitive options" pay two to three times less for wide-area-network connections compared with those served by "incumbent" telephone and cable companies. Ideally, those incumbents should be challenged for school district business by local utilities, municipal networks, and competitive local exchange carriers, Marwell argues.
School districts already meeting the ConnectED goals have budgets for accessing the Internet that are, on average, 450 times larger than those that don't meet those goals, and they invest $7.16 per student, compared with just $1.59 for schools falling short of the mark;
While just 20 percent of all school districts surveyed are meeting the ConnectED goals, the number is lower, 14 percent, among districts with at least three-quarters of students on free or reduced price lunches. By contrast, a much higher portion, 39 percent, of schools with less than 1 percent of free or reduced price lunch students are meeting the ConnectED goals.
benton.org/node/180882 | Education Week | Education Superhighway
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ADVERTISING

LOOK AT YOUR PHONE DURING TV ADS? EXPECT TO SEE THE SAME MESSAGES THERE
[SOURCE: AdAge, AUTHOR: Alex Kantrowitz]
Instead of going to the bathroom or grabbing a beer during commercial breaks, TV watchers are increasingly turning to a new ritual: checking their phones until the show resumes. For advertisers paying top dollar for TV ads, the trend is frustrating, presenting yet another challenge in their quest to gain a share of consumers' fragmented attention. But Xaxis, the WPP-owned programmatic platform, believes it's found a way to reach these distracted consumers. The company is introducing a product called "Sync," which will give advertisers the ability to serve ads on TV watchers' mobile devices while their TV screens air the corresponding commercials. Sync takes an educated guess as to which households are watching the TV show its clients' commercials are running on. To figure this out, it combines TV watching behavioral data from Kantar Media with geographic data and other signals, including whether a consumer's device is logged into a home Wi-Fi network and stationary. When Sync thinks a person is likely watching a show, it will serve ads targeted to their mobile devices as its client's TV commercial airs. Sync connects to satellite data, getting a two-second heads-up on which commercials will run as the TV show goes to break. When a client's ad is set to play, Sync will turn on its ad campaign and keep it live for a few minutes.
benton.org/node/180844 | AdAge
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PRIVACY/SECURITY

CDD TAKES ISSUE WITH IKEEPSAFE
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
The Center for Digital Democracy has asked the Federal Trade Commission to reject the application of iKeepSafe to run a safe harbor program for companies that want to demonstrate their compliance with Children's Online Privacy Protection Act restrictions on collecting and sharing personal info via child-directed Web sites. CDD says iKeepSafe fails to provide the same or greater protections as the COPPA rule, using permissive language - "should" -- -rather than mandatory language --"must," "required." It also says the proposal does not clearly define child-directed sites. CDD also takes issue with ikeepSafe's plan to have a third party, PlayWell, assess compliance with the voluntary guidelines, saying it has provided no evidence that either it or PlayWell has the skill or technical expertise, and in PlayWell’s case the staff, to enforce the safe harbor. The COPPA Rule allows companies that want to be considered de facto in compliance to do so through a safe harbor program that monitors that compliance. "[T]he FTC should reject iKeepSafe’s application, or require amendments and clarifying submissions from the company," said CDD, which is a leading voice for protecting kids privacy online," CDD told the FTC.
benton.org/node/180843 | Broadcasting&Cable | CDD
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AGENDA

TAMING THE DIGITAL WILD WEST
[SOURCE: New York Times, AUTHOR: Eric Schneiderman]
[Commentary] Many companies claim that the fact that their goods and services are provided online somehow makes them immune from regulation. This isn’t smart, or sustainable. Just because a company has an app instead of a storefront doesn’t mean consumer protection laws don’t apply. The cold shoulder that regulators like me get from self-proclaimed cyberlibertarians deprives us of powerful partners in protecting the public interest online. While this may shield companies in the short run, authorities will ultimately be forced to use the blunt tools of traditional law enforcement. Cooperation is a better path. Regulators should not be deterred and, as a practical matter, they can’t and won’t be -- we are now living in an online world, one that offers great promise but is also becoming one of the primary crime scenes of the 21st century. Major service providers cannot be allowed to treat it as a digital Wild West. The only question is how long it will take for these cybercowboys to realize that working with the sheriffs is both good business and the right thing to do.
[Schneiderman is the New York State attorney general]
benton.org/node/180949 | New York Times
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April 2014

Diplomatic fallout thwarts Gaza telecoms rollout

Arab entrepreneurs face digital divide in Israel's start-up tech scene

April 23, 2014 (Aereo Hearing)

Taming the Digital Wild West

At Stake in the Aereo Case Is How We Watch TV

An Aereo Court Victory Could Be More Noise Than Signal

A 'kill switch' to deter smartphone theft: It's the right call

Comcast Close to Subscriber Deal With Charter Communications

Comcast and Time Warner Cable merger promises better TV