Who Owns the Broadband Pipes and Who Gets Service: Robbie's Round-Up (October 12-16, 2015)

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Who Owns the Broadband Pipes and Who Gets Service
Robbie's Round-Up (October 12-16, 2015)

Cable Ownership Consolidation Under Review

Writing for Benton’s Digital Beat blog this week, former Federal Communications Commission Chairman Michael Copps warned of a barrage of consolidation proposals flooding the FCC and the Department of Justice that proves “consolidation mania” is alive and well—and actually accelerating. This week saw an early deadline for public comment regarding one of those deals: Charter’s purchase of Time Warner Cable and Bright House Networks. “Post-merger, New Charter alongside Comcast would approach a national broadband duopoly, further strangling hopes for consumer-friendly, reasonably-priced, and ubiquitously-deployed twenty-first century communications. This deal would create a giant gatekeeper with the power to dictate prices to both consumers and content providers, in the process squelching independent content and diversity on the cable dial,” Copps wrote.

Here's some filings at the FCC we reported on in Headlines:

• Free Press also filed a petition to deny the transaction saying the deal fails both the public interest and the antitrust tests required for regulatory approval. Free Press pointed out that the deal poses as many problems as Comcast’s failed attempt to acquire Time Warner Cable. It would produce the same consumer harms by exacerbating the problems in a broadband marketplace with very few choices for Internet users. If the transaction were approved, New Charter and Comcast together would form a national broadband duopoly controlling nearly two-thirds of existing customers and the telecommunications wires connected to nearly 8 out of every 10 U.S. homes.
• Public Knowledge, Common Cause, Consumers Union, and Open MIC asked the FCC to deny the merger unless a broad set of concerns are thoroughly addressed, “questions as to whether consumers will lose out in an ever-consolidating video marketplace... the FCC must ensure that the increased market power this deal would give Charter would not harm competition, diversity of programming, or the public interest,” said Public Knowledge Senior Staff Attorney John Bergmayer.
• COMPTEL, which represents competitive communications network providers, asked the FCC to deny the Cable merger, focusing on the combined company’s market power over video programming and its impact on broadband deployment. "The crucial issue for determining whether the transaction would be in the public interest is whether New Charter would face substantial competition in the future," COMPTEL told the commission. "If New Charter were to face 'dynamic' broadband competition, it would come from the competitive community that COMPTEL represents. The feedback from COMPTEL's membership, however, is that New Charter's cost advantage for video programming would make irrational any thought of investing in broadband to compete against the new firm."
• The American Cable Association, which represents nearly 850 small and medium-sized independent cable operators, is asking the FCC to apply conditions to the merger saying without "significant, effective and long-lasting remedial conditions," the deal is not in the public interest and should not be approved. ACA says must-have remedies include a non-discriminatory access condition and a commercial arbitration condition for New Charter-affiliated programming, and that the FCC has to "significantly bolster" enforcement of that nondiscriminatory access condition so ACA’s smaller members are protected from the combined company's increased bargaining position, and make sure the arbitration condition is a viable option for smaller carriers.
• In its filing at the FCC, AT&T, fresh off its $48.5 billion purchase of DirecTV, said it does not oppose Charter/TWC/Bright House, but asked the commission to “review the transaction carefully and consider the impact of cable consolidation and coordination on emerging competition.” Cable companies are coordinating and could end up acting as "a single national cable company," AT&T claims.
• Dish Network, the satellite television provider, said the deal would be “no better for the public interest” than Comcast’s failed $45 billion deal for Time Warner Cable. Dish cited the potential for the combined company to harm its new Sling TV video service, which offers streaming television without a traditional cable or satellite subscription. The proposed merger “would cause significant and irreparable harm to emerging competitive online video products and services, as well as the performance of traditional satellite television service, ultimately reducing competition and choice for consumers,” Roger Lynch, chief executive of Sling TV, stated in a filing. “Accordingly, I believe that the merger as currently constructed is not in the public interest and should be denied.”
• Zoom Telephonics, a manufacture of cable modems, asked the FCC to deny the deal, primarily over the issue of access to third-party set-top boxes. Since 2012, Charter has bundled the price of leasing its modems into the overall price of service, which Zoom said gives customers no financial incentive to purchase their own devices. Zoom also petitioned the FCC to deny the Comcast/TWC deal over the issue, asking the FCC to condition any approval on Charter stating an unsubsidized price for leasing cable modems and not “unreasonably” refusing to allow “nonharmful” modems to attach to its network.

Obviously, this was a week for critics to have their say. Now Charter, Time Warner and Bright Networks will have a chance to review the filings and rebut the criticism before the FCC takes all the arguments under consideration.

In addition to these public filings, Bloomberg reported this week that the FCC is focusing on how the merger would affect Internet service. The commission sent requests for information to companies including AT&T, Verizon, Comcast, Netflix and Internet-traffic carrier Cogent. Questions included whether AT&T and Verizon plan to offer faster Internet service and how those companies and Comcast use data caps. The letters also asked Cogent and Netflix to offer comment on Charter’s pledge not to charge for accepting traffic onto its network.

And, as Michael Copps pointed out, the Charter deal isn’t the only one in town. On October 15, Altice officially filed its application with the FCC to buy Cablevision, telling the FCC the deal has no anticompetitive issues, will reduce vertical integration of programming and distribution, and should get expeditious treatment. Now the FCC will have to establish protective orders for how to deal with sensitive information, and set a comment cycle.

IP Transition Update and Universal Broadband Deployment

From Atlanta, Georgia, on Thursday, FCC Commissioner Ajit Pai made a lengthy statement on broadband deployment, a statement which started bluntly, “The American government needs to embrace the IP transition.” The IP transition, as you may know, is about the steady decline in use of traditional, copper line phone technology and growing use of Internet protocol (IP)-enabled communications networks. [The Benton Foundation wrote extensively about the transition in The New Network Compact: Making The IP Transition Work For Vulnerable Communities] Commissioner Pai this week visited broadband operators on the front lines of the transition. He was in Carbon Hill, Alabama, one of two locations taking part in AT&T’s IP Transition Trial. Pai's takeaway from his visits: broadband operators need regulatory certainty if they are going to continue investing in their networks.

Telecompetitor this week reported that only a small fraction of AT&T customers in areas where the company is conducting the trials are voluntarily switching off of traditional voice service. AT&T offered to replace traditional phone service with an IP-based alternative – either an LTE-based fixed wireless service or, where available, a service based on the company’s U-verse fiber-to-the-node infrastructure. AT&T began with 2% of its customers on VoiceLink, 28% on U-verse and 70% on traditional voice. By this time the company hoped to have 25% of customers on VoiceLink and 45% on U-verse, with only 40% still on traditional voice, but instead those percentages are 2%, 34% and 51%, respectively, with another 6% having cancelled AT&T service completely. AT&T did not want to make its TDM-to-IP transition trials voluntary, but agreed to that approach at the urging of the FCC. The company has said that it still wants to conduct trials of a mandatory switch-over. Whether the FCC will look upon that possibility more or less favorably as a result of the trials is unclear.

In a filing at the FCC, Verizon shared progress on its copper-to-fiber migration strategy. It set a goal to convert a total of 200,000 customers from copper to fiber by the end of the year. As of the second quarter, Verizon converted 51,000 copper customers to fiber, bringing its first-half total to 98,000.

Verizon’s migration hasn't been without controversy. Verizon has had to fight back against claims from competitive providers that it has engaged in a practice known as de facto copper retirement where it let its aging copper plant deteriorate to the point where it would become necessary to replace the copper with fiber. Verizon asked the FCC to not include new requirements addressing the issue in its technology transition plans.

After the planned migration is complete, Verizon no longer offer services over copper wires, but will offer consumers and businesses a 64 Kbps grade public switched telephone network (PSTN) over the fiber connection. Verizon emphasized that consumers, the majority of which are POTS (plain old telephone service) customers, will not see any effect to the services they use and it is not a transition to IP-based services. Verizon has not revealed whether it would try to upsell these customers with FiOS services once they are connected to the fiber-to-the-home network. But a former copper-based POTS customer in Herndon (VA) was told to switch to fiber or have his voice service cut off.

On October 15, Verizon executives testified at a New York City Council oversight hearing about rollout of its fiber-based FiOS service throughout the city’s five boroughs. In 2008, Verizon signed a franchise deal with the city that promised to "pass all households" with fiber by June 30, 2014. Verizon says it delivered FiOS to everyone who wanted it in all of NYC by the end of November 2014. New York City, however, contends that more than 40,000 official requests for FiOS service have gone unanswered and that Verizon hasn’t fulfilled its end of the FiOS rollout agreement. As New York considers whether to take legal action against Verizon, this week’s hearing included some debate about the definition of "pass." Verizon execs argued that the company extended fiber so that a building could theoretically then be connected to the network. As one council member pointed out, that's like installing water pipes but not hooking them up to individual apartments: the water's flowing on by, but no one can actually drink it.

"We consider it to be passed if we're within the realm of substantial fiber placement," Verizon’s Kevin Service said when pressed on how the term is actually defined. "I'm not a lawyer, but here's what I would say: we're passed if, when we get the request for service and have the necessary rights of way, what we have left to do does not create a delay in bringing service to that customer. Under that Kevin Service Definition, we've passed every household." The Fiber to the Home Council, an industry group, says a home is passed only if service can be activated "without further installation of substantial cable plant such as feeder and distribution cables (fiber) to reach the area in which a potential new subscriber is located." Getting service from Verizon is no simple matter in New York, with city officials saying that Verizon takes credit for "passing" households even when it declines to accept orders for service installations.

About a year ago, FCC Chairman Tom Wheeler said, "This is not a matter of old vs. new technologies. Rather, it concerns a simple question: as we reach the tipping point at which the older networks and services are turned off, will the transitions to the next generation networks benefit all Americans or will we allow some to fall through the cracks? I firmly believe that we can facilitate the transitions, even while ensuring that the benefits accrue to everyone." This week reminds us why we must keep a close eye on the IP transition to ensure the benefits of broadband really do reach everyone.

Events Calendar

• Tuesday, October 20: 2015 Everett C. Parker Lecture celebrating the incredible life of Dr. Parker and honoring danah boyd, Joseph Torres and Wally Bowen
• October 21 and 22: Creating Connections, Building Bridges: Advancing the Digital Divide Research, Policy, and Practice Agenda. Researchers, policymakers, and practitioners to strategize actions and catalyze solutions to this pressing societal concern
• October 21: The House Communications and Technology Subcommittee will reconvene a hearing on Broadcast Ownership in the 21st Century
• October 22: FCC Open Meeting. The Commission will vote on items concerning prison telephone rates, foreign ownership of broadcast licensees, 600 MHz Band wireless service, incentive auctions, video relay service, and service rules in certain bands above 24 GHz.

ICYMI from Benton

• Is Change Here to Stay? by Michael Copps