Tag: fcc

Ergen Makes Bid For CLWR After All, What’s Up With That?

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Last Sunday, I noted that while Ergen was a potential bidder on Clearwire’s (CLWR) 2.5 GHz spectrum, it seemed unlikely given the fact that Sprint would still own a majority stake in CLWR and that governance issues would make this a very messy fight that would potentially tie up DISH assets when they are needed for its own network deployment and for a potential H Block Auction bid. I also noted a lot of other issues that make a purchase by anyone other than Sprint less attractive — such as the cost of network buildout — that cast serious doubt on Crest’s valuation of CLWR’s spectrum at $30 billion.

48 hours later, Ergen makes a bid for CLWR valuing CLWR at at $3.30 a share (a reasonable enough premium over Sprint’s offer to require serious consideration). Mind you, nothing in the bid (what details there are can be found here) contradicts anything I said previously. As noted by CLWR in it’s press release, the proposed deal comes with a bunch of conditions and caveats that reflect Sprint’s ownership and the cost of building out a network that would integrate with Ergen’s AWS-4 spectrum. Which naturally raises the question of why Ergen decided it was worth it to make the bid anyway. Making a serious tender offer — even if you think it will ultimately be rejected — is a non-trivial process that incurs expense. Before dismissing this as mere payback for Sprint’s (successful) push to amend the AWS-4 rules to protect H Block (creating delay in the approval and potential issues for deployment), it is worth considering what the potential upsides are to DISH that justify the cost.

Oh yeah, I should also talk about some consumer stuff and broader stuff as well. Horse race is all well and good, but there are a lot of industry folks that do that better than I do.

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Will The Program Access Rules Expire On October 5?

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Back in March, the FCC released a Notice of Proposed Rulemaking on whether to extend the “program access rules” for another five years, either as they exist now or in some modified form.  For those unfamiliar with the program access rules, they require a cable or satellite provider that also owns programming to make that programming available to rivals on commercially reasonable terms. For example, Cablevision has to sell AMC to Verizon for at least a facially reasonable price, even if it would rather not sell AMC to Verizon at all.

Congress required the FCC to create the program access rules as part of the 1992 Cable Act. Because Congress did not particularly trust the FCC to do a good job fighting cable market power, it gave the FCC very explicit instructions in Section 628(c) (codified at 47 U.S.C. 548(c)). But it also said the rules would expire after 10 years, unless the FCC extended them. The FCC extended the rules for 5 years in 2002, and again in 2007. Without another extension, the Program Access Rules will expire on October 5, 20122.

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FCC Authority In VZ/SpectrumCo, or “Real Lawyers Read The Footnotes.”

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Many years ago, I taught a semester of law school as an adjunct. I assigned the students to read the FCC’s 2005 Internet Policy Statement. I was dismayed to discover that, after doing the reading, none of them had even heard of the concept of “reasonable network management.” How was that possible? Reasonable network management is not mentioned in the main text, but in footnote 15 which says that the principles are “subject to reasonable network management.” Given the centrality of the “reasonable network management” concept to the net neutrality debate, I was rather irritated. “Understand this before you graduate,” I warned them. “Real lawyers read the footnotes!”

I thought of that after reading Geoffery Manne’s and Berin Szoka’s piece about VZ/SpectrumCo over on CNET.

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Turning Off The Phone System? What Do You Mean We’re Turning Off The Phone System?

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A few weeks ago I went to a fascinating gathering of a few dozen academics, policy wonks, and others from the U.S.  and elsewhere to talk about the end of the phone system. While by no means a unanimous consensus, a very solid majority considered the phone system obsolete and ready for the scrap heap. This will come as a surprise to those of you who called home on Mother’s Day or who thanked God for a call center number when your broadband connection went down. But in fact, most of you are probably not using a phone service but a “phone service,” so we are half-way to shutting down the actual phone system anyway.

 

For about a year now, folks in the nerdiest, geekiest, obscurest reaches of Policyland and Wonkdom have been talking about how to turn off the phone service and replace it with “phone service.” For those of you enjoying “phone service” from the likes of cable companies or cell phone providers, you may wonder why this matters. Sure, Grandma may finally need to replace that princess phone, but other than that, who cares? As is so often the case, however, these technical issues matter quite a bit in the real world – but you won’t notice until waaaay too late to make a difference. (Unless you keep abreast of these things by reading this blog.)

 

In the best case scenario, we shift over to an all digital network free from antiquated laws and policies that stifle innovation and needlessly increase cost to consumers. In the worst case scenario, your phone becomes an utterly unreliable overpriced service that doesn’t guarantee that you can communicate with someone on another phone network because the two networks are having a “peering dispute” and won’t exchange traffic. What actually happens is anyone’s guess at this point, but the recent effort to totally deregulate “phone service” in California gives us something of a preview.

 

More below . . . .

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AT&T, Anger Management and Spectrum Legislation

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Based on recent statements, it’s hard to tell whose angrier at the Federal Communications Commission (FCC) and its Chair, Julius Genachowski: AT&T’s Upper Management or the House Commerce Committee Republicans. Mere mention of Genachowski’s name converts House Commerce Committee Republicans, such as Telecom Subcommittee Chair Greg Walden (R-OR), from urbane sophisticated legislators into sputtering mad parodies of Elmer Fudd.  “Oooh that wascally Chaiwman! Always wegulating the fwee market! I’ll fix his wagon!” Meanwhile, AT&T CEO Randal Stephenson devoted the main part of his recent earnings call to repeating variations on “Juliuth, you’re desthpicable.”

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Smart Cities, Spectrum, and Senator Snowe — Will Any Republican Presidential Candidates Show Vision?

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Thomas Friedman writes in his column yesterday that none of the Republican candidates has focused much on technological innovation, then proceeds to focus on the matter of “smart cities.” Friedman’s thesis is fairly straightforward: to maintain our competitive edge, we will need to keep pumping up our bandwidth, particularly in cities and towns which historically act as the incubators for The Next Big Thing and all its associated, Highly Useful Little Things. Blair Levin’s Gig U gets favorable mention, and Blair gets quoted a lot on why we want huge bandwidth in urban areas as well as making sure everyone gets access to functional broadband.

Let me give the Republican candidates that care (and I just know y’all hang on my every word) some advice. When you want to know where to stand on spectrum, follow the lead of Senator Olympia Snowe (R-ME). Most importantly, do NOT follow the lead of House Republicans. Why? See below . . . .

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My Insanely Long Field Guide To Cisco’s War On The TV White Spaces

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Will Cisco’s war against the TV white spaces tank incentive auctions? No doubt this question comes as a surprise to the vast majority of people unaware Cisco was running a war against TV white spaces (TVWS). True, Cisco has mostly tried to stay behind the scenes. But as we get closer to the Super Committee deadline, which include negotiations for incentive auction rules that would let TVWS survive, Cisco has become increasingly willing to go public with its anti-TVWS lobbying efforts.

This blog post on the Cisco blog, followed by this letter from the High Tech Spectrum Coalition (HTSC), finally say publicly what Cisco and its allies have been saying privately since debate over spectrum legislation began last January: “Death to the TV White Spaces.” Instead, argues Cisco, open up a new block of 5 GHz spectrum to “replace” the white spaces. But with spectrum legislation in trouble – as evidenced by CTIA’s non-stop radio advertising here in D.C. and it’s recent ‘we love unlicensed, can’t we all get along?’ letter to the Super Committee – Cisco’s continued opposition to white spaces threatens to tank any hope of getting incentive auctions passed either in the Super Committee or elsewhere.

Incentive auctions, while popular as a revenue generator, were always a tough sell because of broadcaster passive/aggressive opposition. Adding D Block reallocation made it even more difficult. Cisco’s war on the TVWS threatens to be the final straw that makes this lift just too heavy. It splits a tech community that would otherwise wholly support incentive auctions, while simultaneously pissing off key members of Congress who helped get TVWS done in the first place.

So the time has come for Cisco, CTIA, and others who really want incentive auctions, to ask themselves whether it’s worth it to risk incentive auctions just so that Cisco can keep Microsoft, Google/Motorola, Dell, and others from bringing a competing product to market. The Hutchison/Rockefeller Bill, S.911, was a compromise that kept spectrum for TVWS, gave Cisco the 5 GHz block it wants, and made sure that a minimum threshold of 84 MHz would be auctioned before allocating any recovered spectrum to replace white spaces lost by auction or repacking. While not great from my perspective as a white spaces supporter (and I’d still like to see it tweaked some), it was at least a livable compromise. Cisco’s anti-TVWS campaign already backfired once, with the Republican discussion draft to require auction for all unlicensed spectrum. Will Cisco and CTIA fail to learn just how easy it would be for them to blow this for everyone? Or will they settle for the compromise that got a bipartisan bill out of the Commerce Committee?

Why Cisco has been gunning for the TVWS, the quiet little war of the last ten months, and how to get out of this quagmire before it’s too late, below. . . .

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Obama finally Nominates Rosenworcel and Pai: Can They Get Confirmed Before The FCC Drops to 3?

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The White House finally confirmed what everyone in the D.C. telecom world has expected for months. Obama officially nominated Jessica Rosenworcel to replace outgoing FCC Democratic Commissioner Michael Copps, whose term expires when Congress adjourns, and Ajit Pai to replace Republican Commissioner Meredith Baker, who stepped down last March. Both have considerable experience at the FCC, giving them understanding of how the agency functions in a very nuts and bolts kind of way. Both have broad experience with a range of communications issues, and no particular ties for/against any particular industry sector or company.

In short, both are “workhorse wonks,” with a proven track record of digging in on the complex issues that make this sector such a joy for those of us who like wonkiness and tough questions and such an eye-glazing, mind-numbing experience for those who don’t. While no one can say with any certainty what happens in this crazy and poisonous partisan environment, which every day comes more closely to resemble the delightful fable of the turtle and the scorpion crossing the river, their nominations should raise little controversy. Hopefully, the Senate will confirm both before the end of the year, when the FCC will otherwise drop down to 3 Commissioners.

For those unfamiliar with how this works, or with the candidates themselves, I provide a primer below.

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Will Wall St. Put The Kibosh On The AT&T/T-Mo Takeover Before the DoJ Does?

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The more I see AT&T frantically spend money like water and call in every political chip it has to try to pressure the Department of Justice to settle its case, the more I become convinced that it will ultimately be the Wall St. financial community that will finally persuade Randal  Stephenson to give up before AT&T gets to trial. Oh, I expect to see more wild gyrations. There’s perpetual whispers that AT&T will find a dance partner in the form of MetroPCS (the current favorite of the rumor mongers) or Leap or U.S. Cellular (one even occasionally hears Sprint, but that doesn’t even pass the laugh test) and they will publicly announce some big proposed settlement so that AT&T’s political friends and its cadre of honest politicians can howl some more for DoJ to settle. Who knows? We have five months until trial, and AT&T seems infinitely capable of making all sorts of political noise.

But the more I look at it, the more convinced I become that the upper management at AT&T and that of T-Mobile’s parent, Deutsche Telekom (DT), have not really thought through just what kind of a settlement they would now have to offer and how radically different it is from what AT&T expected to offer before DoJ brought suit. A settlement now is far, far more expensive than anything AT&T envisioned and quietly vetted with Wall St. analysts back in March. Back then, AT&T expected to divest from 30-50 midsized markets via a divestiture trust (allowing them to sell licenses at profit-maximizing prices over time), some wussy roaming and deployment conditions that could be easily evaded or ignored. Now, AT&T will need to divest enough to create a “T-Mo Lite,” something that can at least pretend to replace the loss of a national carrier. As I explain below, that becomes so expensive and complicated that even if AT&T can find the financing to make it happen, its stock is likely to tank on the mere announcement of such a deal.

Mind you, I am not saying a settlement is desirable or good policy. I continue to believe that AT&T’s take over of T-Mobile is so thoroughly awful as a mater of both antitrust and telecom policy that no conditions or divestitures can save it. But even discounting my opinion on the matter, there are certain practical realities that make a settlement at this point not merely bad policy, but so expensive and complicated to manage that it is effectively impossible.

If I’m right, the only question is how much shareholder money and political capital AT&T spends lobbying for a settlement that can’t be done for financial reasons before enough officers on the AT&T and DT Boards sit down AT&T CEO Randal Stephenson and DT CEO Rene Obermann and explain to them that the time has come to face reality, renegotiate the break up fee to let DT out early, and cut their loses before AT&T stock starts to tank big time.

I demonstrate why below. Warning, as this is a “show your work” thing, it’s kinda long . . .

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DoJ Says “No” To Ma Cell; Here’s What Happens Next (and Why It’s All Over But The AT&T Screaming)

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In what is undoubtedly the best Labor Day present the Department of Justice ever gave America, DOJ has filed to block the AT&T/T-Mobile Merger in court. One should not, however, expect AT&T to give up easily. AT&T can, and almost certainly will, decide to fight rather than simply abandon the deal. If nothing else, it has $6 billion in break up fees to pay if the merger does not go through. On the plus side, the odds definitely favor the DoJ, which is why so many companies simply abandon the merger once DoJ has filed.

Meanwhile, the FCC, an independent agency, still needs to make its decision on what it will do. Unlike DoJ, where the head of the Anti-Trust division makes the call (subject to the usual political checks, of course), the FCC must have a vote on an Order, which must get a majority of the Commission (3 votes). Since Congress repealed the FCC’s ability to immunize phone mergers from antitrust back in 1996, the FCC cannot approve if DoJ wins in court. OTOH, the FCC is under no time pressure, and can wait to see how the court case turns out. At the same time, however, the court may decide to stay consideration until the FCC decides, since the merger cannot proceed without FCC approval.

All of this has huge implications for AT&T and its current bluster that it will fight DoJ for the right to eat T-Mo. Normally, AT&T could hope to get this wrapped up in a few months, and continue to try to use its political muscle to force a settlement. But the interaction between DoJ’s challenge and the FCC lawsuit make it incredibly difficult for AT&T to get this done before Deutsche Telekom decides it wants it $6 billion cash ‘n spectrum break up fee. As I explain below, AT&T must simultaneously persuade the FCC not to act while convincing the court to move at super speed, despite the fact that the usual way things work is for courts to wait for agencies to finish review (because the agency may remove the need for the court to act).

I explain AT&T’s legal problems below . . .

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