Rob Frieden

[Commentary] AT&T has a business plan to integrate vertically throughout the information, communications and entertainment (“ICE”) ecosystem. Acquisitions provide the fastest way for the company to move up and down the ICE “food chain” of content creation, syndication, distribution and delivery to consumers. Vertical integration can achieve operational efficiencies as a single company can achieve savings through scale and a wide footprint of related business ventures. On the other hand, it takes remarkably talented and nimble management to handle different components in the food chain.

Depending on how your rate AT&T senior management, the company has wisely invested in the convergence of content and conduit, or it has unwisely deviated from its true competency. Bear in mind that at divestiture from AT&T, companies like Verizon (then Bell Atlantic) invested heavily in content creation. Verizon failed, because it did not ascend the content creation learning curve quickly enough. Can you teach old dogs new tricks? Bellhead telephone company senior management have to acquire the skills and understand the culture of Netheads and Contentheads. Companies like Verizon and AT&T have made the transition into the Nethead world through acquisitions of companies such as MCI and UUNet. Now comes an even harder challenge to embrace the Contenthead culture of Hollywood. Good luck with that!

[Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law, Penn State University]

[Commentary] Comcast has executed a near-perfect strategy to convince the Justice Department, Federal Communications Commission and public that the merger with Time Warner has great benefits. However, the company has not achieved perfection. Set out below are 2.5 mistakes that the company could have easily avoided.

• A Temporary Improvement in Customer Service and Tactics
• Not Carrying Narrow Niche Networks Even in a Costly and Obscure Tier: Clearly Comcast has bandwidth available to carry RFD and ample funds to pay the few cents per subscriber the network would qualify to receive. Instead a company official, who should know better, accused RFD of driving “a wedge between Comcast and rural viewers as a means to promote your own business interests is unfair and grossly inaccurate.”
• Comcast’s "Vigorous" Support for Network Neutrality: Wasn’t this the company that successfully sued the FCC on its creation of network neutrality rules? Well that was then and now embracing neutrality -- for a fixed time period no doubt -- comes across as noble.

[Commentary] The Aereo decision also suggests that one cannot underestimate the power of broadcasters to establish themselves, even now, as benefactors of the public interest, localism, “free” content and candidates for elective office.

In short order (at least for Congress) local broadcasters got relief, including the right to force cable operators to block channels containing duplicative networks and syndicated content, such as Jeopardy and Wheel of Fortune.

Perhaps amending the Copyright Act was the most expedient legislative option to devise a mechanism whereby broadcasters received compensation and consumers, including first time, rural residents, continued to have the opportunity to view content.

Reliance on 1976 Copyright Act amendments may have an adverse impact on new technologies and entrepreneurial business plans. Any venture offering cloud-based storage of content now has to consider whether it may incur secondary liability for the direct infringement of their customers.

[Commentary] So what does AT&T get for its 50+ billion acquisition? It secures marketing access to 20+ million additional customers, who make sizeable recurring monthly payments.

AT&T also has the privilege of selling rather than reselling direct broadcast satellite video content which presumably already competes with the company’s U-Verse wired bundle. AT&T also gets the privilege of buying into a technology that has significant, and, arguably, increasing risks.

First on average one out of every three satellite launches fail to place the bird in proper orbit. A single DBS satellite costs more than $100 million, but in this age of scale and deep pockets that looks like chump change. Once activated satellites last for about 10 years and the risk for collisions with space junk increases.

The acquisition comes across as the opposite of “if it you can’t beat ’em join ’em.” AT&T is not acquiring a maverick, start up with leading edge technology and a new business plan -- just the opposite. If you can’t beat ‘em, join ranks and hope that your combination -- like others out there -- will continue to lock content access to incumbent technologies.

[Commentary] Despite the remarkably large amount of coverage and analysis of the network neutrality debate, not everyone appreciates the wants, needs and desires of the major stakeholders.

Let’s step back and consider their motivations and incentives of the three primary stakeholders: consumers, retail ISPs and upstream carriers and sources of content. The Federal Communications Commission faces an extraordinary quandary in trying to forge a compromises that satisfices these three constituencies.

No one can achieve total satisfaction here. Consumers will have to pay more for broadband. Retail ISPs will not have unlimited opportunities to raise rates, particularly for content sources that can get by without prioritization of traffic absent deliberate strategies by retail ISPs to degrade basic service. Content providers -- particularly the major causes for ever increasing bandwidth demand -- will have to pay more as well.