Quick on Verizon/Vodafone — $130 Billion is “Pro Forma,” But Shows Us Why VoiceLink Matters (And Why Wall St. Sucks).

The financial world is buzzing today with news that Verizon may buy out Vodafone’s 45% stake in VZ Wireless for $130 billion. Despite the fact that VZ’s entire company (both wireline and its 55% share of VZ Wireless) is valued at $133 billion, investors still rewarded this speculation by driving up Verizon stock 7%.


So a few quick things here. First, since this blog focuses on FCC stuff, the logical question is: “does the FCC have to approve the transaction.” The answer is: “yes, but it is an automatic approval so it should not generate any regulatory excitement — although some folks may try to leverage this.”


Verizon already controls all the decisionmaking power of VZ Wireless. They have “de facto” control. Basically, Vodafone just put in money and takes out profit, without having any real say in how VZ manages its operations. Because the law requires the FCC to keep track of who the licensee is, and approve any change in who the licensee is, Verizon technically needs FCC approval. However, because the transfer of ownership (while significant) does not actually change anything relevant from an FCC regulatory perspective, the FCC has rules that say “we will treat this a pro forma (Latin for ‘change in form’ but not a change in fact) filing and automatically approve it at the Bureau level.” So think of it as more like a change of address notification than as a full on application.


This happened in the Sprint/CLWR/Softbank transaction, when Sprint bought out Eagle Creek’s shares in CLWR. Anyone interested in seeing how this played out over there can see read the Public Notice granting the pro forma application here, and the Commission Order approving pro forma treatment of the Eagle Creek transaction here (starts at Par. 138).


What’s more interesting is what this transaction (and Wall St.’s reaction) tell us about Verizon, it’s long term plans, and how moronic Wall St. is in terms of allocating capital in line with public policy priorities. How can 45% of VZ wireless be worth almost as much than Verizon’s 55% share and Verizon’s landline business combined? Oddly, VoiceLink is part of the answer to that.


I elaborate below . . . .

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FCC Does Right (First) Thing On Verizon Request To Make Voice Link On Fire Island Permanent

For those following the summer sitcom That Darned Voice Link, it looks like the FCC has now decided to order new episodes for the fall season.


Short version: the Federal Communications Commission (FCC) Wireline Competition Bureau issued a public notice taking Verizon’s Section 214(a) request to discontinue copper-based TDM service on Fire Island, NY and Mantaloking, NJ off the “fast track” streamlined process on the grounds that it needed more information before it could properly consider the request. Had the FCC not acted before August 27, the request would have been automatically granted.


The Bureau made it clear that this was not in any way a determination on the merits of the request. But in light of several substantive filings raising questions about whether substituting Voice Link for copper would (in the words of the statute) “reduce, or impair service to a community” (including requests from both the NY Public Service Corporation (PSC) and the NJ Board of Public Utilities (BPU) to hold off until they complete their state level inquiries), the Bureau wanted more information to properly consider the request.Consistent with this, the Bureau also sent Verizon a request for additional data that covers the areas you would hope the FCC would want to know about before deciding whether substituting Voice Link for copper lines “impairs” service to the local community.


As decisions go, the decision to take Verizon’s 214(a) off fast track and thoroughly consider all aspects and implications of this first ever complete replacement of traditional copper service with fixed wireless seems like a fairly obvious no brainer. To the contrary, simply allowing such a radical change in service to happen by default should be unthinkable. Of course, it helps that the right thing to do here (taking this off fast track) also pushes the controversial decision down the road until Tom Wheeler can get confirmed as FCC Chair. Nevertheless, in this lamentable age of dysfunction in D.C. (and given some initial stumbles on this at the beginning), it’s nice to see routine things happen without any needless drama or last minute hiccups.


I unpack and give some analysis of what probably comes next below . . . .

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What the FCC Can Do About CBS and TWC — Nudging The Parties Forward

Last Friday, Federal Communications Commission (FCC) Chairwoman Mingon Clyburn addressed the CBS/Time Warner Cable (TWC) retransmission consent fight for the first time. Clyburn noted her “real distress” about the impact on consumers and said she was “ready to consider appropriate action” if the companies can’t resolve their differences.


First, let me say that I am glad to see Clyburn give a “shot across the bow” to the parties that the FCC might actually take some kind of action. This sort of “jaw boning” by officials (like the letters from members of Congress last week) is part of the feedback mechanism for parties. If officials stay quiet or state they have limited options, it is generally taken as a signal by the parties that no official consequences will occur and they can proceed without worries of Washington repercussions. Statements like Clyburn’s amount to a warning that this is not a free ride — even if it is not obvious yet what the FCC would (or could) do.


Since all industry players hate Washington intervention, the threat that it might happen is a modest incentive to the parties to get this resolved sooner rather than later. It also helps by indicating to consumers that the FCC does not consider this a perfectly normal event and that they (the consumers) are right to get pissed about it — which may prompt more calls for Congressional action.


But to really influence the parties, there needs to be a credible something the FCC can do. Since the FCC (including Chairwoman Clyburn) have said before that they don’t think they have authority to resolve the dispute, it raises the question of what the FCC can actually do.


Even accepting the limitation that the FCC cannot resolve the dispute, the FCC still has authority to both limit the scope of the dispute by ordering CBS to stop blocking Time Warner Cable broadband subscribers, and taking other steps to bring the parties together. I outline some of these possibilities below . . .

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Chairwoman Clyburn Shows How It’s Done — Doing The Job On Prison Phone Rate Reform

Today was an extremely emotional meeting at the Federal Communications Commission (FCC). After ten years of fighting, the FCC resolved the Petition filed by Martha Wright and concluded that the rates charged for prisoners to make and receive phone calls are “unjust and unreasonable” and therefore violate Section 201 of the Communications Act. The FCC imposed interim rates and issued a further Notice of Proposed Rulemaking to ensure that rates going forward are based on actual cost to provide service, not jacked up outrageously because prisoners and their families have no choice. Importantly, the FCC ruled that the “commissions” (aka kickbacks) paid to jails for the right to exploit the helpless and profit from the misery of their families are not a “cost” that can be recovered. (FCC press release here.)


As you can tell from the above, I feel rather strongly about this. I have written before that I regard this as a case where the words of Isaiah 1:17 and Zachariah 7:10 apply. I also find it of great significance that this is Shabbas Shoftim, the Sabbath on which we read the portion of the book of Deuteronomy 16:18-21:9 (called “Shoftim,’ judges, because it begins with “Judges and officers shall you give yourselves in all your gates that the Lord shall give unto to dwell in, and they shall judge the people with righteous judgement.”) Specifically, Verse 16:20 enjoins the people “Justice, Justice shalt though pursue! ”


It has been a privilege to support the efforts and advocacy of so many of my friends. I dare not begin to list, because I would invariably leave someone out. The level of organization work in the field, meshing with advocacy efforts at the FCC and on the Hill, has been astounding.  For years, this proceeding went in fits and starts, constantly delayed, because who cares about the incarcerated and their families? Out of sight, ignored, and generally regarded with suspicion. So their cause was neglected and ignored — until then-Commissioner Clyburn became a champion for it in the FCC and breathed new life into our efforts.


Today, Chairwoman Clyburn gave justice. Justice to the Wright Petitioners, and to every family trying desperately to maintain basic contact with incarcerated loved ones. The promise of the Rule of Law is that the benefit of law applies to ALL. The promise of Section 201 of the Communications Act for 75 years has been that everyone is entitled to just and reasonable rates, no matter who you are or where you are. Section 1 of the Act promises to secure the benefit of the Act to “all Americans.

Today the FCC affirmed that all Americans means ALL Americans. Even the most powerless, even those being punished for crimes, are still people protected by the rule of law. Their families are still people, entitled to depend upon the rule of law to protect them from the cruel choice of talking to their father, son, granddaughter or paying for basic necessities because a phone call that normally costs pennies costs the families of prisoners more than $15 for a few minutes.

Today, the FCC, under the leadership of Chairwoman Clyburn, stood up and did its job. it found exhorbitant prison phone rates unjust and unreasonable, mandated an interim cap, and issued a notice of further rulemaking to ensure that future rates are cost-based.

To quote from scripture one last time. “It is from the Lord, and it is wondrous in our eyes. Behold the Day the Lord has made, let us rejoice and make merry!” (Psalms 118)

Finally, this is a reminder of what can happen when people in power have the courage to do their job. Govornment and regulation CAN protect the helpless. People demanding justice CAN make a difference. A “government bureaucrat” like Chairwoman Clyburn CAN be a champion for justice for the oppressed and it DOES matter.

How much greater the shame, then, to those in government who refuse to act when needed? Or those who cynically refuse to believe anything we common folk do can make a difference?

To you handwringers, and you shruggers of shoulders, I tell you this: the problem is not with “the system.” The problem is YOU.

Stay tuned . . . .