You’re reading the Benton Foundation’s Weekly Round-up, a recap of the biggest (or most overlooked) telecommunications stories of the week. The round-up is delivered via e-mail each Friday; to get your own copy, subscribe at www.benton.org/user/register
Robbie's Round-Up for the Week of October 24-28, 2016
The Federal Communications Commission rejected petitions for reconsideration of $20 million in fines issued against four prepaid calling card companies for deceptively marketing their products. In October 2015, the FCC issued separate $5 million fines against four calling card companies, Locus Telecommunications, Lyca Tel, NobelTel, and Touch-Tel USA, following an investigation by the FCC’s Enforcement Bureau. Each of the companies formally asked the FCC to reconsider those fines in four, separate petitions for reconsideration. The FCC dismisses and denies those requests and continues to seek payment of the fines.
The FCC has referred these matters to the US Department of Justice, which leads the process of collecting outstanding fines in federal court. The companies’ advertisements, apparently targeting immigrant communities, suggested that their calling cards could be used for hundreds or thousands of minutes of international calls. Multiple fees and surcharges added by the companies, however, caused the actual calling minutes available to consumers to be much fewer than advertised.
[Commentary] For the third time in less than a decade, AT&T is merging again. In the wake of the announcement, there is rampant speculation on whether it’s unconscionable or inevitable. However, whether or not the $85 billion merger rises to the level of an outright rejection or just strong conditions, there is still a far more profound problem, which is not the merger, but the market itself. Four massive firms (AT&T, Verizon, Comcast and Charter) now totally dominate the digital communications landscape. Preventing any further consolidation of distribution is a no brainer, but that will still not address the underlying problem. Public policy cannot force firms to compete and the prospects of a new distribution network entering the market are slim to none. Breaking up the dominant firms requires decades of litigation and may not succeed.
Our only option is to ensure these mammoth network operators cannot use their power over the pipes to stymie competition for the content and applications that ride over them. However, the Federal Communications Commission has four active and nearly complete proceedings that will further that goal and the proposed AT&T Time Warner transaction makes completing them all the more critical: Set Top Boxes, Zero rating, Privacy, and Business Data Services.
[Dr. Mark Cooper is the Director of Research at the Consumer Federation of America.]
The creation of a new media giant with the acquisition of Time Warner by AT&T could cause strategic challenges for Disney and its ESPN unit, according to a new analyst report. Omar Sheikh of Credit Suisse notes that AT&T-Time Warner will have significantly larger earnings and cash flow than Disney. It will also have more than 50 million direct customer relationships in the US alone. “This will confer an enhanced ability to bid for sports rights from 2021 onwards, and thereby put pressure on Disney to invest further in ESPN’s direct to consumer distribution capabilities,” Sheikh said.
AT&T owns DirecTV, which has had to spend aggressively to keep its exclusive Sunday Ticket deal with the NFL. Sheikh suggests that Disney could grow by buying Twitter or Netflix, the companies it has been linked to recently. Or it could build its own capabilities. “We believe the organic option would be significantly less costly and give Disney the opportunity to tailor new services around its own IP,” he said. Credit Suisse continues to rate Disney stock “Outperform,” but Sheikh has lowered his earnings forecast for 2017. He cut his 2017-18 forecast 2%-4% to a range of $6 to $6.79 per share from $6.13-$7.09 a share. The cuts were driven by double-digit reductions in expectations for Disney’s cable networks and its consumer products group. He also cut his target price for Disney stock to $125 from $128.
Three members of the Congressional Black Caucus have urged the Federal Communications Commission to give "strong consideration" to ruling on the Nexstar-Media General merger, saying delay could hurt diversity. The companies did not file requests to transfer the licenses until after the deadline for doing so if the deal involved stations eligible for the incentive auction, which it did. They have asked for a waiver, but the FCC has yet to act on that request. In a letter to FCC Chairman Tom Wheeler, Reps Yvette Clarke (D-NY), Sheila Jackson Lee (D-TX) and Cedric Richmond (D-LA) cited the fact that the deal includes spin-offs of Fox and NBC affiliates to a third broadcaster, Bayou City, which they say is the only African-American broadcaster in the country owning, operating and managing "every aspect" of its TV stations. "We are concerned about the possible unintended impacts the moratorium could have on diversity in broadcast ownership," they said. Given that, they told Chairman Wheeler in a letter, "We strongly urge the Commission give full consideration to the request being filed by Nexstar Broadcasting Group and Media General seeking a limited waiver of the auction rules allowing them to close the merger and related transactions," Bayou City being one of the latter.
The National Association of Black Owned Broadcasters (NABOB) and the Multicultural Media, Telecom and Internet Council (MMTC) have also asked the FCC to grant Nexstar’s waiver request so its deal to buy Media General can close without having to wait for the broadcast incentive auction to do likewise. They argue that delaying the merger until the auction is over is having a significant adverse financial impact on Bayou.
Qualcomm agreed to buy NXP Semiconductors NV for $39 billion, adding the top supplier of automotive chips to the San Diego (CA) company best known for designing smartphone chips. The agreement represents the biggest semiconductor deal ever, eclipsing Avago Technologies Ltd.’s pact to buy rival Broadcom Corp. for $37 billion, and behind only Dell Inc.’s $60 billion acquisition of EMC Corp. among pure tech deals. The deal values NXP at $110 a share, which represents a 34% premium over where NXP shares traded before The Wall Street Journal reported on the talks Sept. 29. Including debt, the deal is worth $47 billion.
NXP’s position in the fast-growing automotive-chip market was seen as a motivation for the deal because analysts say Qualcomm wants to supply its chips for self-driving cars. The combined company is expected to have annual revenue of more than $30 billion. The deal will reshape Qualcomm, pushing the company deeper into the process of making chips and expanding its product line beyond mobile devices. While Qualcomm derives most of its revenue from designing and selling chips, the company earns more than half of its profits from licensing its wireless patents to nearly all makers of mobile phones. NXP, which became a bigger manufacturer through the purchase in 2015 of Freescale Semiconductor, owns seven factories in five countries that turn silicon wafers into chips. Besides those plants, known as fabs, NXP operates seven facilities that package and test chips before they are sold.
© 1994-2024 Benton Institute for Broadband & Society. All Rights Reserved.
