June 2014

China’s State Media Urges “Severe Punishment” for US Tech Firms

Chinese state media lashed out at Google, Apple and other US technology companies, calling on Beijing “to punish severely the pawns” of the US government for monitoring China and stealing secrets. US companies such as Yahoo, Cisco Systems, Microsoft and Facebook threaten the cyber-security of China and its Internet users, said the People’s Daily on its microblog, in comments echoed on the front page of the English-language China Daily.

It is not clear what sparked this latest round of vitriol, nor what information the US firms are alleged to have stolen. But Chinese media have repeatedly attacked American tech companies for aiding the US government’s cyber espionage since US National Security Agency (NSA) contractor Edward Snowden revealed widespread spying programs including PRISM. Under PRISM, the NSA seized data from companies such as Google and Apple, according to revelations made by Snowden in 2013.

Chinese state-owned firms have since begun dispensing with the services of US companies such as IBM, Oracle and Cisco in flavor of domestic technology. As a result, Snowden’s revelations may cost US companies billions of dollars, analysts say. “US companies including Apple, Microsoft, Google, Facebook, etc. are all coordinating with the PRISM program to monitor China,” the People’s Daily wrote. “To resist the naked Internet hegemony, we will draw up international regulations, and strengthen technology safeguards, but we will also severely punish the pawns of the villain."

Comcast to Encrypt Email for Security

Google wants to make encryption hip -- and may have won a quick convert. Comcast, the nation's largest Internet provider by number of homes and businesses served, said it would begin scrambling customers' email to protect it from prying eyes.

The move came just hours after Google called out email providers, including Comcast, for not using encryption.

Comcast spokesman Charlie Douglas said the company is testing encryption and would begin using it more broadly on customers' email "within a matter of weeks." He said Comcast is "very aggressive about this."

The moves were an indication that some tech companies see privacy as a consumer issue after a year of leaks from Edward Snowden, the former National Security Agency contractor. Snowden's leaks prompted Facebook, Microsoft and Yahoo among others, to make it harder for government spies to read emails as they cross the Internet's backbone.

AT&T promises big fiber expansion -- but only if feds let it buy DirecTV

AT&T recently named 100 municipalities in 21 metropolitan areas where it might bring its fiber-to-the-home network, without actually saying how many customers would get the GigaPower service, which offers up to 1Gbps download speeds.

AT&T said the expansion "is not expected to impact AT&T’s capital investment plans for 2014," further muddying the picture.

That fiber announcement came a few weeks before AT&T announced a deal to buy satellite provider DirecTV for $48.5 billion. Yet it seems the two are intertwined: AT&T told the Securities and Exchange Commission that it needs approval of the DirecTV merger in order to bring fiber to 2 million locations.

"The economics of this transaction will allow the combined company to upgrade 2 million additional locations to high speed broadband with GigaPower FTTP (fiber to the premise) and expand our high speed broadband footprint to an additional 13 million locations where AT&T will be able to offer a pay TV and high speed broadband bundle," AT&T wrote in an SEC filing.

The expansions would happen within by 2018, AT&T said, as combining the companies will let AT&T gain "cost synergies" of more than $1.6 billion a year by 2017. The savings would largely be due to lower programming costs from increasing AT&T's size and bargaining power.

FTC/DOJ Have No Issues With Gannett/London Station Deal

Neither the Justice Department nor the Federal Trade Commission have any antitrust issues with Gannett's purchase of six London Broadcasting stations for $215 million.

Since the Federal Communications Commission and FTC/Justice usually coordinate their reviews, the FCC is likely not to have any issues either, though it looks beyond antitrust to public interest benefits.

The Gannett/London Broadcasting deal was on a list of mergers that were granted early termination of Hart-Scott-Rodino antitrust reviews, which are divvied up between the FTC and DOJ. They don't say who vets which, but DOJ usually handles TV station deals. Early termination means FTC/DOJ find no reason to block or condition the deal.

Yoo: US Broadband Model Tops Europe's Utility-Style Regulations

US broadband networks have generally topped their European counterparts thanks to the model of promoting facilities-based competition among private companies.

That is according to a just-released report from University of Pennsylvania Law School Professor Christopher Yoo, who says his comparative case studies show that utility-style (as in Title II-style) regulation of the Internet in Europe have been a hindrance to broadband speeds, access and innovation.

"Some claim the European model of service-based competition, induced by stiff telephone-style regulation, outperforms the facilities-based competition practiced in the US in promoting broadband," says Yoo in the executive summary. "Data analyzed for this report reveals, however, that the US led in many broadband metrics in 2011 and 2012."

The report did find that while US broadband was more expensive than Europe for tiers above 12 Mbps and US download speeds during peak times (weekday evenings) averaged 15 Mbps, below Europe's average 19 Mbps, the US was better at approaching advertised speed (96% of advertised vs. Europe's 74%) and also better in terms of latency and packet loss. Yoo attributed the disparity between networks to the differing regulator models.

Senators Push FCC Vote On Sports Blackout Rules

A pair of senior senators has asked Federal Communications Commission chairman Tom Wheeler to vote on a final order eliminating its sports blackout rules by the beginning of August.

In a letter to the chairman, Sens John McCain (R-AZ) and Richard Blumenthal (D-CT) said that given that the FCC gave notice back in December 2013 that it thought the rules should go, it was time to move expeditiously to follow through -- it voted unanimously for a Notice of Proposed Rulemaking eliminating them.

The National Football League prevents the TV broadcast of any game not sold out 72 hours before game time. The FCC blackout rules backstop the league by preventing cable or satellite operators from airing a game blacked out on broadcast TV.

In December, it proposed eliminating that rule and leaving blackouts to private negotiations among rightsholders and distributors. "We agree wholeheartedly with the Commission that 'the sports blackout rules have become obsolete,'" they wrote, "and we believe the record clearly supports the FCC's tentative conclusions in favor of eliminating this unnecessary rule...We ask that you commit to bringing the final order to a vote within the next 60 days [the letter was dated June 2]."

NAB: DC Circuit Will Hear JSA Challenge

According to the National Association of Broadcasters, the US Court of Appeals for the DC Circuit has been chosen to hear both its and Prometheus' challenges to the Federal Communications Commission's media ownership rule review vote.

NAB had filed suit in that circuit, while Prometheus chose the Third Circuit, which remanded the original rules back to the FCC. In that case, there is a lottery to see which court gets the case (held by the US Judicial Panel on Multidistrict Ligitation). And DC won, as did NAB, which prefers that venue.

NAB is challenging the FCC's decision to make joint sales agreements of over 15% attributable as ownership interests, saying the decision was arbitrary and capricious. Prometheus says that decision was arbitrary and capricious, too, but because the FCC did not explain why 15% was the magic number, and because it did nothing to rein in other sharing arrangements.

The challenges extend beyond JSA's and sharing agreements to broader ownership issues, including the FCC's decision not to loosen the newspaper/broadcast crossownership ban.

DOJ/FTC To Look At Bundled Pricing

The Department of Justice and Federal Trade Commission want to hear from stakeholders on the pros and cons of the bundled-pricing model that has become the cable industry's -- make that the cable, broadband, wireless, phone, home security industry's -- bread and butter.

The agencies are teaming on a June 24 joint workshop on "conditional pricing practices." They say the goal is to understand the harms and benefits of conditional pricing, including bundled pricing, and to look at how they are treated under antitrust laws.

Netflix Nags Another New Partner, Blaming Verizon for Slow Streams

In April, Netflix signed a Web traffic deal with Verizon. Now it is telling some of its customers that Verizon’s pipes -- and, presumably, other Internet service providers as well -- aren’t up to snuff.

Vox Media designer Yuri Victor tried watching Netflix on his MacBook and ended up seeing this message from the streaming service on his browser, blaming Verizon for slow speeds:

“The Verizon network is crowded right now.” Netflix spokesman Jonathan Friedland, via Twitter, described the messaging as a way to “keep members informed.” Via email, he said the wording was a “test that advises members when their network is congested,” and that it isn’t specific to Verizon. “We’ll see whether they think it is valuable or not.”

Verizon PR representative Robert Elek responded: “This is a PR stunt. We’re investigating this claim but it seems misleading and could confuse people.” This messaging is much clearer, and Netflix is delivering it directly to its customers: There’s a problem with your picture. Blame the guy who owns the pipe.

TV Apps Are Soaring in Popularity, Report Says

When it comes to online video, people may not want to cut the cord. Instead, they want to take the cord with them. People are streaming broadcast television on their smartphones in record numbers, according to Adobe’s state-of-the-industry report on digital video viewing.

Online video has reached record numbers, according to the report, compiled by Adobe Digital Index, the marketing and research arm of Adobe. Mobile video viewing went up 57 percent over the same time in 2013, and overall online video was up 43 percent, representing more than 35 billion viewings. Among the report’s more interesting findings are that TV Everywhere -- a term for authenticated viewing of broadcast shows from channels you subscribe to on your cable or satellite network -- is approaching mainstream use and is growing much faster than other online video sources like YouTube, Hulu or Daily Motion.

However, Adobe’s numbers do not include Netflix, which has about 48 million subscribers worldwide, so cord-cutting might not be entirely off the table. Authenticated TV viewing is more palatable to content providers than services like Netflix, because it encourages people to keep their ad-rich cable subscriptions, and gives them the benefit of streaming the TV they already pay for.

Benton

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