AT&T's $85 Billion Time Warner Buy Could Be An Anti-Consumer Shit Show Of Monumental Proportions

from the synergies-ahoy dept

As fixed and wireless broadband growth crawls to a halt and cord cutting begins to hammer TV numbers, incumbent telecom giants have been trying to pivot into the media and advertising game with mixed results. Verizon so far has shelled out billions to acquire aging 90s internet brands Yahoo and AOL, believing this can somehow transform the stodgy duopolist into a sexy, sleeker Facebook and Google competitor. So far these efforts to woo Millennials have been arguably underwhelming and occassionally comical, highlighting how innovation and disruption is somewhat foreign to these companies' DNA.

AT&T has decided to follow a similar tack, over the weekend announcing a mammoth $85 billion deal to acquire Time Warner (not to be confused with Time Warner Cable) and its media properties (CNN, HBO). AT&T was quick to proclaim that the deal would be a "perfect match of two companies with complementary strengths," who can bring a "fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers." The deal comes not too long after AT&T decided to spend $79 billion to acquire DirecTV, adding notable debt for the already giant company.

AT&T's decision to announce the deal now signals that it believes, or has been directly told, that regulators (both the tail end of Wheeler's term and his replacement in the new year) would look kindly upon such a deal. But given AT&T's long, rich history of aggressive anti-consumer behavior (and just blatant lying to prop up past mergers), there's more than a few justified questions raised about AT&T growing larger.

This is, after all, a company that in the last four years alone has been fined for ripping off programs designed for low-income households, ripping off programs designed to aid the hearing impaired, actively aiding drug dealing directory assistance scammers, and making bills harder to understand to help crammers. It's the same company that fought viciously against net neutrality, and is busy using "zero rating" to begin giving its own content an unfair advantage in the market. Yes, what could possibly go wrong with letting AT&T grow immeasurably larger?

Letting one company control an ocean-sized portion of all progamming and the conduit to the home has always been controversial. And while regulators did set some conditions to Comcast's 2011 acquisition of NBC Universal, it was found that Comcast ignored many of those conditions, ultimately leading to regulators blocking its subsequent acquisition attempt of Time Warner Cable.

In this case, AT&T is making it clear that the acquisition is all about the company's upcoming launch of its DirecTV Now streaming video service:

"Both Mr. Stephenson of AT&T and Jeffrey L. Bewkes of Time Warner stressed that during nearly three months of deal negotiations, the idea driving the talks was that Time Warner could help AT&T build out its own video streaming service. That service, called DirecTV Now, is Mr. Stephenson’s response to the migration of consumers toward mobile and online video watching and away from traditional cable packages."

Owning that much content certainly makes licensing easier for AT&T. The problem, again, is that the current FCC has refused to seriously address zero rating (giving your own content a broadband cap exemption while still penalizing Netflix) as a potential anti-competitive weapon. AT&T, in response, has made it abundantly clear that zero rating will play a huge role in this upcoming service. Regulators could ban AT&T from using zero rating to favor Time Warner content, though history has shown enforcement of these promises is inconsistent.

And that's before you get to the spectre of AT&T almost certainly (based on past behavior) using its role as a broadcaster to hamstring the streaming services that hope to compete with it. Or AT&T's abysmal history on privacy issues, be that the use of stealth cookies to track user behavior without consent, or the company's attempts to charge users more money just to opt out of private data collection and sales. AT&T's also fighting tooth and nail against new FCC broadband privacy protections the agency is expected to vote on later this week.

In short, AT&T apparently believes that the best way to navigate a dramatically changing TV landscape that requires flexibility and innovation is to grow bigger and clumsier than ever.

The company has been losing broadband, TV, and postpaid phone subscribers the last few quarters. Executives apparently believe the best solution is to strike a series of massive traditional media deals (with valuations based on peak TV earnings and cash flow) just as the traditional TV sector prepares for a free fall. AT&T bought a satellite TV giant on the eve of the cord cutting revolution, and now aims to buy a traditional media giant just as the TV market begins truly entering an identity crisis. But there's absolutely no indication that any of these deals will make AT&T magically more relevant to Millennials, or that vertical integration between distributors and content producers is still a guaranteed route to success.

That doesn't mean AT&T won't engage in anti-competitive behavior to try and make it work. Once AT&T launches its new streaming service, the company could make it much harder than ever for competing streaming providers to license the programming necessary to compete with it. AT&T could also zero rate its own content, further penalizing streaming video providers trying to compete in the space. And again, that's before you get to AT&T's history on privacy or any other creative new efforts AT&T will cook up to use its significantly larger scale and broadband monopoly to unfair advantage.

This being election season, the Presidential hopefuls were quick to chime in (sort of). Hillary Clinton gave somewhat of a non-answer by saying that she "certainly thinks regulators should look at" the deal (as if regulators tasked to review a deal would do anything else). It was actually Donald Trump's camp that issued the clearest opposition to the deal:

"This oligopolistic realignment of the American media along ideological and corporate lines is destroying an American democracy that depends on a free flow of information and freedom of thought,” Peter Navarro, a senior economic adviser to Mr. Trump, said in a statement on Sunday.

Broken clocks, twice a day, etc. All told there's little to any indication that the deal would be good for consumers, AT&T competitors or small businesses. But there are also doubts that regulators under the (likely) Clinton administration would stop the deal, if her non-answer and the notable amount of telecom money headed in the Clinton camp's direction is any indication. Regardless of the regulatory response, history suggests it should at least be fun watching AT&T's lawyers, lobbyists, and armies of think tankers once again try to spit shine the company's latest attempt to become larger and more powerful than ever.

Filed Under: acquisition, antitrust, consumers, doj, fcc, merger
Companies: at&t, time warner

Time Warner, Defenders Of Copyright, Forced To Pay Up For Copyright Infringement

from the live-by-the-copyright,-die-by-the-copyright dept

You can almost set your watch that any company or group that comes out vehemently in favor of restrictive copyright protection under the guise of protecting artists will be found to be in violation of copyrights and acting in a manner demonstrating clearly that zero care is given to the well-being of artists. The most recent example of this is Time Warner. Recall in the past that the massive media company has regularly sued music startup groups, pimped the six-strikes agreement with Hollywood, worked with Rightscorp to milk money out of accused infringers, and back a ways waged a war unpopular with its signed musical artists against YouTube. This, all done by Time Warner in the name of advocating for artists and creators, was done even as we learned just to what lengths Warner Music has gone to make sure it paid artists as little as possible.

But paying artists "little" is better than paying artists "none," I suppose, which is exactly what Time Warner has been found to have done in playing artists' music entirely without permission at the company's Spanish amusement park.

Time Warner, the owner of Warner Bros, which is known for being prolific in its battle against copyright infringement, is now in trouble in Spain for using the music of local artists in its theme park for six years without ever paying a licence fee. The Supreme Court of Spain has ordered the Parque Warner Madrid resort theme park (co-owned by Time Warner and Parques Reunidos) to pay €321,450 ($358,651, £250,539) in damages for playing the music of Spanish artists on loudspeakers to park visitors between 2002 to 2008. As the tunes were played in public areas across the park, including attractions, restaurants, retail outlets and transportation, the court ruled that the park had not gained permission from the artists and producers affected.

The thing about claiming to take a moral stand is that such a stand requires consistency. Framing its advocacy of copyright as benevolence to artists makes the blatant use without permission of musicians in its theme park appear more dastardly than, say, a fan of a band that uploads a music video to YouTube. That this went on for six years creates a legal setting in which it strains credulity to believe that the company was completely oblivious to these goings on.

But let's say you wanted to give Time Warner the benefit of the doubt here. Maybe this was all done by a manager of the park unbeknownst to company higher-ups. Were that to be the case, and given what staunch supporters of artists being compensated that the company claims to be, you'd have to imagine that Time Warner would have graciously recognized its error and made sure artists were compensated for it. Hahaha, no.

In May 2010, Madrid's Commercial Court Number 7 ruled in favour of the copyright holders, and on appeal the Provincial Court of Madrid also found in favour of AGEDI and AIE. Parque Warner continued to argue against the decision because it said that it should not have to pay a yearly rate for the music if the park was only open from March to November, eventually appealing to the Supreme Court.

Unfortunately for Parque Warner, the Supreme Court sided with the artists and rejected Parque Warner's claim that the compensation amount had been miscalculated, demanding that the park fairly compensate the artists and producers for using the music without authorisation in an "intense and continuous" manner.

Even after admitting to the infringement, Time Warner wanted to haggle over just how much to pay for it based on the hours it deigned to keep at its amusement park. Not exactly the warm hug to musical artists that one would expect from these paladins of musicians' rights.

But, as I've said before, live by the copyright, die by the copyright.

Filed Under: copyright, infringement, spain
Companies: time warner

Time Warner Eyes Hulu Stake, Wants Service To Remove Current Seasons Of Shows

from the don't-innovate-too-much dept

We've discussed for years now how Hulu is hamstrung by the fact that it's owned by the traditional cable and broadcast industry. Owners 21st Century Fox, Disney and Comcast/NBC have gone out of their way to ensure the service is never too disruptive -- lest it hurt the traditional cable cash cow. And that's been the cable industry's mantra for years now -- crow ceaselessly about how you're "innovating," while simultaneously trying not to innovate too much, lest your customers realize your legacy TV service is absurdly expensive, inflexible, and outdated.

As the industry has slowly realized that it can no longer just pretend cord cutting doesn't exist -- things have improved slightly, with Hulu making a renewed effort to invest in original programming and dramatically broadening its content catalog to better compete with Amazon and Netflix. The company has also listened to consumer complaints and now offers an ad free version -- while placing fewer ads in the ad supported option. Hulu is also attracting new investors, with reports that Time Warner is looking to give a $2 billion cash infusion in exchange for a 25% stake.

But while Time Warner isn't making it a condition of the deal, the company is making it clear that it would like to see Hulu pull current seasons of shows in a misguided belief that it can turn back time:

"Time Warner believes that the presence of full, current seasons on Hulu—or anywhere else outside the bounds of pay-TV—is harmful to its owners because it contributes to people dropping their pay-TV subscriptions, or "cutting the cord." In the discussions about taking a 25% equity stake in Hulu, Time Warner has told the site's owners that it ultimately wants episodes from current seasons off the service, at least in their existing form, although that is not a condition for its investment, according to the people familiar with the discussions.

The problem is that Time Warner would join Comcast in sharing the delusion that you can be both simultaneously disruptive and innovative on the streaming side, while still magically preventing traditional cable customers from noticing and cutting the cord. Comcast was barred from meddling in matters of Hulu management as a condition of its acquisition of NBC, but it's a condition Comcast largely ignored. It's also a seven year condition that will expire shortly after Time Warner seals its new ownership stake, meaning a double dose of myopic, backward-looking leadership at Hulu at precisely the wrong time.

Though many in the insular cable industry ecosystem like to pretend otherwise, it's simply no longer a debate: consumers are increasingly cutting the cord and migrating to cheaper, more flexible viewing options. Traditional TV customers get 194 channels, but they only watch, on average, about 17 of them. 16% of consumers cut the cord last year, while 23% of consumers engaged in "cord-trimming" (reducing their overall cable package) in some way. 57% of those asked, unsurprisingly, say that price is the biggest reason they're looking to shake things up.

It's not an enviable position for the traditional TV industry to be in. To seriously combat cord cutting, it needs to offer a more flexible product at a lower cost -- something that (with a few "skinny bundle" exceptions) it absolutely refuses to do. What we get instead is turf protection (broadband usage caps), a boat load of denial and failed "me too" services like Comcast Streampix that, thanks to fear of cannibalizing the legacy cash cow, are neither here nor there. The problem is, if Hulu isn't willing to offer what consumers want, Netflix, Amazon, or some other company certainly will.

Filed Under: cable tv, disruption, ownership, streaming, streaming tv, tv
Companies: comcast, hulu, time warner

Hollywood Collectively Loses Its Mind About Latest Set Of Livestreaming Apps

from the get-a-grip dept

If you (lucky you!) don't pay attention to the latest craze among the internet media, you may have missed the mid-to-late-March hype cycle around two livestreaming apps that are available via Twitter. The initial darling was Meerkat, which became this year's annual darling-for-a-week at SXSW. Soon after, it was eclipsed by Periscope, a startup that Twitter bought, just about the same time it pulled Meerkat's ability to push notifications out to users. Both offer the same basic idea: enabling Twitter users to easily livestream video to their followers. Of course, livestreaming is not a new concept. It's been around for ages, and things like Ustream and JustinTV are well-known. Even BitTorrent has tried to get into the livestreaming game. Not surprisingly, livestreaming technology has been particularly useful for newsworthy situations -- and have been used extensively in violent clashes around the globe or at protests like in Ferguson, Missouri last summer.

But, of course, Hollywood absolutely hates such things. For years, they've argued that Ustream and JustinTV were destroying their businesses because some people would turn on a television and set up their phone or computer to livestream whatever they were seeing. So it should come as little shock that right after the media hype cycle around Periscope and Meerkat, a whole series of silly articles started appearing about the copyright consequences of livestreaming. The Guardian warned that these new livestreaming apps "could cost unwary brands dear." Billboard warned that these two new apps created a "legal minefield" because a song playing in the background might (*gasp*) infringe on someone's copyrights. The Atlantic warned that these apps were enabling "a new kind of internet pirate." And, CBS really went the distance with a fearmongering headline about how Periscope and Meerkat "threatened" the "multi-billion dollar sports broadcast copyrights," even though they do no such thing (and, in fact, that article speaks to no actual sports officials, whereas when Major League baseball was asked, it noted that it sees no real threat).

And, rather than admit that (1) livestreaming has been around for ages and hasn't really been a serious drag on revenue, and (2) it's not a particularly good user experience for watching broadcast content anyway, various folks in Hollywood lost their minds about these two new services. The main culprit? HBO. After there were a few scattered reports of various Game of Thrones fans using Periscope to broadcast the latest episode of the popular show, HBO decided that it's all Twitter's fault, and who cares about DMCA safe harbors, something must be done, and Twitter has to do it:

"We are aware of Periscope and have sent takedown notices," an HBO spokeswoman said in a statement. "In general, we feel developers should have tools which proactively prevent mass copyright infringement from occurring on their apps and not be solely reliant upon notifications."

There are two issues there. First are the takedowns -- which is a part of the DMCA. But the second part is asking for Twitter to go Beyond the DMCA and to start proactively reviewing and policing the content that is streaming over Periscope. This is a bad idea for a whole variety of reasons that both Twitter and HBO should already understand. First, such efforts inevitably lead to takedowns that block important, legitimate, non-infringing speech. Considering how Periscope and Meerkat are designed for livestreaming events right now, blocking those could lead to important content never seeing the light of day at all. The chilling effects could be massive.

On top of that, there is little to no evidence that unauthorized streams of Game of Thrones are doing any harm whatsoever. In fact, Game of Thrones is often the prime example of how unauthorized streams have helped certain content get more attention and more long-term committed fans. Both a director on the show and Time Warner's CEO (who owns HBO) have admitted as much. So why the collective freakout about these new apps?

It seems, as is the tradition among some in Hollywood, any new technology that might possibly be used for some amount of infringement must be loudly condemned and shamed. Despite the fact that this policy never works, and tends to just lead to widespread ridicule, it is the only gameplan that the old guard in Hollywood have. They could embrace these things. HBO execs -- especially with the launch of HBO's new streaming services -- could be highlighting how much better the official streaming experience is than the crappy Periscope/Meerkat experience. But, what fun is that? That, apparently, takes work.

Filed Under: copyright, dmca, livestreaming, takedowns
Companies: hbo, meerkat, periscope, time warner, twitter

HBO Decides It's Finally Time To Go It Alone

from the timing-and-details-are-everything dept

For years, plenty of people have been wondering why HBO absolutely refused to offer a standalone internet offering for cord cutters (and cord nevers), with the general response being that "the math" was against it. Basically, HBO gets a ton of money from cable, and every time new customers sign up, that's free money for HBO without having to spend anything on marketing. A standalone product may not even bring in as much money and would require HBO to do more marketing efforts on its own for the offering. Of course, as we pointed out in response to that argument, "waiting for the math to make sense" is a kind of predictor for legacy companies that wait too long to innovate and find that the future has become the present while they're still in the past.

Eventually, the timing was going to be right, and apparently HBO has decided that time is now. Or, at least, sometime next year. The company announced plans to launch a stand-alone internet offering leading to much speculation. Actual details are lacking, and there's some speculation that it might be a very different product than the current HBO Go offering. Some are saying it may actually be in coordination with another player (like Amazon or Hulu). Reading too much into at this point doesn't do much good.

Of course, this has also led to some speculation that it may increase people cutting the cord -- and that's likely true for the segment of the population that has cable for HBO (duh) and not for sports (a bigger driver). However, the real point here may be that where HBO goes, others are likely to follow -- including sports.

HBO's decoupling with cable TV may not single-handedly change the cable TV market, but it's a sign of a much larger shift that started long before and is now dragging HBO along with it. The traditional cable TV market has been ripe for disruption for quite some time. This is just a single mile marker in an ongoing process.

Filed Under: cable, cord cutting, hbo go, internet, pay tv, tv
Companies: hbo, time warner

Quantifying Comcast's Monopoly Power

from the merger-scrutiny dept

Comcast is a monopoly. The question is, how much of a monopoly is Comcast, and how much of a monopoly will it be after it absorbs Time-Warner Cable (TWC)?

To help quantify market influence, economists use the Herfindahl–Hirschman Index (HHI), a metric that is calculated by adding the squares of the market shares of every firm in an industry. HHI produces a number between 0 (for a perfectly competitive industry) and 10,000 (for an industry with just one firm).

Using HHI, antitrust law puts markets into three categories:

• Unconcentrated Markets: HHI below 1500
• Moderately Concentrated Markets: HHI between 1500 and 2500
• Highly Concentrated Markets: HHI above 2500

For HHI calculations, the question becomes: a percentage of what market? Discussions of the Comcast-TWC merger have often noted companies' shares of both the broadband and cable TV markets are comparable. Although their market shares in Internet and TV are similar, the difference in importance between the two markets cannot be overstated. Residential broadband is how every person reaches the Internet. In time, the Internet will become the way to reach almost all content.

By contrast, cable television is close to being an anachronism. Companies like Netflix, Amazon and YouTube (Google) already provide most of what cable television offers. In addition, new technology—Internet technology—allows much greater flexibility in the content consumers choose. Consumers do not need to subscribe to individual channels or watch advertisements—at least not to the extent they used to.

Because of how important the Internet is, the Comcast-TWC merger is primarily about broadband, not cable television. So the question is, what share of the high-speed Internet service will Comcast have? According to Free Press, Comcast-TWC would have 47% of truly high-speed broadband service. This figure is extremely conservative. It ignores that the Comcast-Verizon duopoly has many methods at its disposal—most importantly, dividing up geographic markets ("I'll take Philadelphia, you take New York") and dividing up entire industries ("I'll take residential broadband, you take wireless").

Comcast's CEO has admitted that Verizon FiOS is Comcast/Time-Warner's only competitor in high-speed Internet service. And, Comcast has admitted that it has 40% of the high-speed broadband market. Comcast-TWC would have a subscriber base that reached 70 million, and, according to CableTV.com, Comcast-TWC service would be available to 70% of the United States. According to WSJ, More than 61% of consumers would have one cable company serving them.

These figures do not take into account regional dominance, which means that they dramatically underestimate the limited consumer choice and market consolidation across industries. Competition (or lack thereof) in geographic markets is extremely significant. Here, by Comcast's own admission, pre-merger Comcast and Time-Warner did not compete in any markets.

In addition, Comcast's national market share does not take into account market share in related markets—which present additional anticompetitive harms, but are not factored into the HHI calculation. For Comcast, its market share ignores its interest in Hulu, NBC Universal, and other content industries. In addition, Comcast ties its high-speed broadband connections to cable television and landline phone service—another factor not taken into account in the HHI calculation.

Recall that markets with a Herfindahl–Hirschman Index (HHI) between 1500 and 2500 are problematic; above that, the market is consolidated. Therefore, Comcast's admission of 40% market share automatically puts the Internet service market into the middle category of a "moderately concentrated" industry. In other words, without factoring in the market share of Comcast's competitors, and using Comcast's own figure, there is still limited competition in high-speed Internet service.

This market share calculation also ignores the effect of dominating local markets, the tying of television and phone service, and the business interest in competing content industries. In short, a raw calculation of market share ignores market power.

Comcast has argued that—regardless of the competitive landscape in Internet service and cable television—the merger will not result in "merger-specific" harm. That is, the Internet may already be monopolized, but allowing it to acquire Time-Warner Cable will not make it any worse.

When analyzing merger-specific harm, antitrust law puts substantial weight on whether a "significant" competitor will be eliminated and how the merger will affect market concentration:

Mergers resulting in highly concentrated markets that involve an increase in the HHI of between 100 points and 200 points potentially raise significant competitive concerns and often warrant scrutiny. Mergers resulting in highly concentrated markets that involve an increase in the HHI of more than 200 points will be presumed to be likely to enhance market power. The presumption may be rebutted by persuasive evidence showing that the merger is unlikely to enhance market power.

According to conservative estimates, Time-Warner has about 13% of broadband customers in the U.S. That means that the increase in HHI resulting from the merger is 169 points. According to the Merger Guidelines, Comcast's acquisition of Time-Warner Cable would "raise significant competitive concerns and warrant scrutiny," even if Comcast didn't have dominant market share (which it does). Scrutiny of the deal reveals that Comcast-TWC would have significant leverage in other industries: cable television, content (such as sports), and phone service.

Acquisitions involving a firm with a majority stake are almost always anti-competitive, because, by definition, they occur in a concentrated industry and result in the largest firm gaining market share. When a merger between smaller competitors occurs, it is less likely to be anti-competitive. The best examples of this distinction between dominant-firm acquisitions and non-dominant firm mergers are the Comcast-TWC, Sprint-T-Mobile, and AT&T-DirecTV transactions.

Comcast and Time-Warner are the two largest firms in both residential internet service and cable television. By contrast, Sprint and T-Mobile are second-tier competitors, with the third and fourth highest market share in the mobile market, respectively. And the proposed consolidation of AT&T-DirecTV, like the Sprint-T-Mobile transaction, does not result in the elimination of a significant competitor; rather, it unites companies that primarily operate in different, though related, industries.

The AT&T and Sprint transactions still require scrutiny. With AT&T and DirecTV, there is a concern that AT&T will leverage its position in the wireless and broadband industries to expand DirecTV's U-verse video service. And, Sprint's acquisition of T-Mobile has raised concerns that consumers will see higher cell phone bills because T-Mobile will stop undercutting prices and paying to buy out its customers' contracts. Still, because AT&T and Sprint do not have market power across multiple markets, the acquisitions of those companies pose a lesser threat to consumers.

By contrast, a Comcast-TWC transaction unites companies that dominate across multiple markets. A more liberal, and perhaps more accurate, way to calculate Comcast-TWC's market share is to reverse-engineer it by subtracting its competitors' share from 100. Susan Crawford, citing Verizon, calculates that FiOS serves 14% of the country. Tim Wu calculated that Verizon FiOS has 8% market share (Google Fiber has 1%). (Crawford and Wu may both have calculated accurate figures. Crawford was calculating "coverage" or "service" area; Wu was calculating actual subscribers.)

Comcast and Time-Warner's combined market share in the extremely important Internet service market could be 75% or more. Comcast's competitors may have less than 10%, depending on how you define "high-speed" broadband. It doesn't take a mathematician or an antitrust scholar to know that consumers are losing. In sum, a straightforward application of antitrust law says the merger is in a highly concentrated market posing an extraordinary danger to consumers.

Filed Under: broadband, monopoly, monopoly power
Companies: comcast, time warner

Cable Industry Lies Through Its Teeth: Falsely Claims Greater Broadband Investment & Support For Net Neutrality

from the lying-liars dept

So we already had the story about AT&T's FUD claiming that all sorts of horrible things would happen if the FCC went with Title II reclassification, and now Comcast and the other cable companies are ramping up the FUD efforts. They have a "friendly" Congress person, Rep. Gene Green, passing around a letter to his colleagues, which claims that:

In the years that broadband service has been subjected to relatively little regulation, investment and deployment have flourished and broadband competition has increased, all to the benefit of consumers and the American economy.

And it hints that such investment would somehow go away with reclassification. Of course, this is all a lie. In part, because Wall Street hates capital expenditure and gets angry any time broadband providers actually invest in broadband, these companies have actually been doing everything possible to decrease how much they spend on infrastructure investment over the past five years. Even worse, they're playing stupid statistical tricks to try to hide it. Thankfully, Matthew Yglesias, over at Vox.com calls them out on this. The big cable lobbying organization, NCTA, pulls two tricks with the following chart that it uses to falsely pretend that broadband investment is increasing: First, the more obvious trick is that those numbers are cumulative -- which is what you generally do when you want to hide the actual rate of investment per year. But the rate is actually slowing down quite a bit. The second trick is more subtle. Note that there are three years between each of the first four numbers? But between the second to last one and the last one, there are four years. That's because the actual numbers would show pretty clear decline in investment, so they're fudging it by combining cumulative totals and then adding an extra year to that last number. Yglesias then used that data to calculate the actual averages showing a more accurate picture: As you can see, it certainly suggests that, as they've grown more powerful, and as real competition has decreased, investment has been cut back significantly. That fits with plenty of other evidence concerning how the major cable and telco companies have acted. That story about "greater competition" is -- as we've discussed previously -- a complete joke. That's fudging statistics in a different way, lumping in totally non-competitive wireless accounts, which can't be used as broadband replacements.

Update: NCTA has responded to Yglesias's article, claiming that "the [original] chart had a few simple errors" which it claims to have now fixed. It also posted a new chart with yearly data, which still appear to show a decline from peak investment, though NCTA tries to spin at as continued growth in investment. It does appear that there are cycles, but investment has clearly declined. In fact, this new chart appears to confirm Yglesias' point, that capital expenditure hasn't grown massively as NCTA suggested (and that's because... it hasn't).

Oh, and Comcast's now even got the gall to argue that allowing it to merge with Time Warner Cable will mean more net neutrality protection and a "faster internet." It's putting those claims in big newspaper advertisements Of course, they're being misleading. It's what they do. They're defining "net neutrality" very narrowly, based on the merger terms that were forced upon it when it bought NBC Universal. But that's got little to do with the actual net neutrality issues of today. As for a "faster internet" they mean, yeah, sure, if internet companies agree to pay extra (meaning you'll pay extra too).

I'm not exactly sure what the cable companies think they accomplish with these kinds of easily debunked claims, but it really makes them look excessively desperate.

Filed Under: broadband, cable, fcc, investment, lies, net neutrality, tom wheeler
Companies: comcast, ncta, time warner

Retrans Fights Get More Annoying As Cable Hits Users With Sneaky Below-The-Line 'Broadcast TV' Fees

from the nickel-and-dime dept

If you hadn't noticed (read: are a cord cutter), the battle over higher retransmission fees between broadcasters and cable operators has grown immensely more annoying for consumers, with last year seeing a record amount of content blacked out as the two sides fought over rates. Consumers are usually put in the middle of the battle, with broadcasters blaming pay TV companies for the breakdown in negotiations and vice versa; both sides then bombarding consumers with calls or on-screen tickers insisting they act immediately and call the other guy to complain. We've seen these fights evolve over the years to include the blackout of online content as well, with the Time Warner Cable and CBS fight last year reaching entirely new levels of annoying.

After the smoke clears, confidential deals are struck, and the pretense of caring about how much consumers are paying fades away, the costs then get passed on to the consumer as the icing on an ugly process. Normally, cable companies include these hikes in the cost of doing business on your final bill. However, a growing number of cable companies are embedding a portion of these hikes in below the line fees, allowing them to jack up your cable bill, but still advertise the same price. Comcast, for example, recently started charging users a $1.50 Broadcast TV Fee that the company insists is part of improving your entertainment experience:

"At Comcast we are committed to constantly improving your entertainment and communications experience, and we continue to invest in making your services even better. As we make these and other investments, we periodically need to adjust prices due to increases we incur in programming and other business costs. Among these price changes, we have itemized a Broadcast TV Fee in order to identify some of the rising costs or retransmitting broadcast television signals. In recent years, the cost of retransmitting broadcast television signals has increased significantly, and going forward we want to address these increasing costs through a separate itemized charge."

While I know massive multi-billion-dollar new skyscrapers don't build themselves and the $45.2 billion needed for new mergers doesn't grow on trees, I was always under the impression that part of the primary cost of doing business in the cable industry was programming -- and as such, that should be included in the normal price of service (the same service broadcast and cable raises the price of sometimes as often as twice a year). Comcast certainly isn't alone in this practice; Charter has imposed this kind of charge for more than a year, and AT&T this week notified U-Verse customers they'll now be paying $3 per month instead of $2 for the fee. If you're on Time Warner Cable, you should be getting a notice soon that they're adding the fee as well.

Again, burying ordinary costs of this kind is a common tactic in the cable TV industry, and it's a form of false advertising regulators seem to believe is all in good fun. It's useful if you're a cable operator interested in jacking up prices while keeping advertised prices the same, bumping prices on people you've convinced have signed "price lock guarantees," or raising rates on users who are otherwise paying a fixed-rate under contract. It's also useful if you want to trot out statistics showing how cable rate hikes are slightly less than they actually are. Or, as Comcast phrases it, ensuring you have a really fantastic, compelling television "experience" and are getting the utmost "value" for your entertainment dollar. Enjoy!

Filed Under: broadcast, cable, retransmission, television
Companies: cbs, time warner

The Nation's Entirely Objective Think Tanks And Consultants Want You To Know Comcast Deal Is Secretly Awesome

from the my-wooden-unreasonable-arguments-are-entirely-my-own dept

Comcast faces obvious regulatory and public relation obstacles in getting its $45.2 billion acquisition of Time Warner Cable approved, given concerns about vertical integration and scale. Comcast last week got a running start on selling the deal to regulators by insisting that allowing them to get absurdly massive would somehow be "pro-consumer." Comcast's other big argument last week appeared to be the idea that the larger company couldn't possibly use its larger size as anti-competitive leverage, because Google Fiber (with all of its 1,000 or so users) and Hulu (which Comcast co-owns) would somehow keep Comcast honest.

If you watched AT&T's ham-fisted acquisition attempt of T-Mobile, you know that this is just about the time when Comcast's lobbyists, PR agencies, "non-partisan" think tanks, consultants and various other policy tendrils all work to create a massive media sound wall insisting that the deal will be really wonderful for consumers. Most reasonable people generally understand that an already universally-despised company with a history of anti-competitive behavior getting much more powerful isn't a great thing, regardless of their beliefs. But buried among the massive wash of complaints about the deal are some folks who'd like you to know the deal is secretly awesome. And not just kind of awesome, but a-benefit-to-humanity-the-likes-of-which-you-may-not-see-again awesome.

Enter Scott Cleland, a "consultant" who has built an entire career testifying as an objective telecom analyst in DC while taking money from ISPs and Microsoft to smear their competitors via incoherent arguments (usually directed at Google, as we've illustrated previously). Cleland offers his two cents on the amazing deal:

"Not only is the Comcast-Time Warner Cable merger pro-competitive, via the improvement of services and innovation for millions of Americans and many thousands of businesses, this merger also is occurring in the most competitive communications marketplace with the most consumer choices ever. It should be approved"...

"Since the last cable-to-cable mergers were approved about a decade ago, every single facet of the communications marketplace has become dramatically more competitive, dynamic, and innovative.”

Yes, when two of the worst-ranked companies for customer satisfaction -- from the worst ranked industry for customer satisfaction -- in one of the least competitive industries in the country get together -- magic happens. History has proven it. So has your incredibly inexpensive and "dynamic" cable and broadband service.

You'll note deal supporters are quick to (correctly) point out this isn't really about market share or competition (at least in telecom), since Time Warner Cable and Comcast don't directly compete. However, supporters-for-hire like Cleland intentionally ignore how a larger Comcast has even more leverage to use regulatory capture, content licensing deals, and ever-expanding broadband usage caps in a broadband market that's actually getting less competitive as AT&T and Verizon back away from it. It's also worth noting that Comcast's historically-low customer satisfaction rankings are thanks to growing too quickly for customer support to keep pace and a lack of competition, and another deal fixes neither. The deal's problems aren't really about competition (at least in telecom), but size and scale.

Yet the Information Technology and Innovation Foundation, a think tank whose donors include telecom companies and the MPAA (ITIF was a big pusher of SOPA/PIPA), wants you to know that you needn't worry, because a bigger Comcast will mean lower bills for you:

"...the economic benefits of the combined efficiencies and economies of scale will flow to consumers in the form of lower prices and/or higher quality service. Comcast expects to save about $1.5 billion in annual operating efficiencies through the deal. The combined company, which will have 30% of the pay TV market, will also be able to drive harder bargains with upstream content providers, resulting in savings that will be passed on to cable subscribers."

I'm not sure in what plane of reality the cable and broadcast industry ever passes on savings to you, but it's not the one most of us inhabit. Whether it's modem rental fees, below the line surcharges, soaring cable TV costs, or the ramping up in usage caps and overages, cable broadband is an industry that prides itself on not competing on price. I guess I should note here that Comcast's David Cohen, on a conference call defending the deal last week, stated "we're certainly not promising that customer bills are going to go down or even increase less rapidly." Apparently the ITIF has no problem making that promise for Comcast.

It's always hard to know where the for-hire astroturf ends and genuine-but-just-plain-wrong opinion begins (which is the entire point of astroturf). Enter TechFreedom, a non-profit think tank that, like most such groups, doesn't disclose its funding -- professing its insights are driven solely by its honest Libertarian leanings (perhaps that's even true, I'll give them the benefit of the doubt). The think tank believes the deal will be truly nifty, and consumers don't have to worry about Comcast bullying Internet video startups because Comcast has kindly agreed to keep adhering to the FCC's dead net neutrality protections:

"When Comcast bought NBC Universal in 2011, it agreed to a long list of conditions required by the FCC, including special protections for online video distributors and Net Neutrality rules. These remain in effect even though the D.C. Circuit Court has struck down the same rules in the FCC’s Open Internet Order. The deal will extend these protections to eight million Time Warner Cable subscribers."

Well, no. People crying over the FCC's freshly-deceased net neutrality protections fail to remember (or never knew) that the rules didn't do all that much. They don't really cover wireless whatsoever, and the language of the rules (because it was crafted predominately by industry) allows for all manner of discrimination -- just as long as the carrier uses faux-technical justifications to claim it's for the protection and safety of the network (don't worry, regulators won't check). The rules did restrict outright blocking of competing content and services on fixed-line networks, but generally no incumbent ISP is dumb enough to do that and incur heavier regulation prompted by public outcry. It's also worth noting that most of the conditions attached to the NBC acquisition were suggested by Comcast itself and, like the neutrality rules, don't do much of anything by design.

TechFreedom goes on to pretend the deal will make service better and lower consumer bills (again, as if rate reductions ever happen in the cable industry), before finishing its love letter to industry with the claim that it's not broadband carriers that are responsible for limited sector competition -- it's all the local governments' fault for being jerks:

"Those concerned about broadband competition should focus on the real problem: barriers to entry created by local governments and the pricing of rights of way and pole attachments,” added Szoka. “That’s what’s made it hard for companies like Google, Verizon and Centurylink to build fiber networks. Last summer, Szoka explained in Wired that it’s local governments, not cable companies, that are to blame for hampering broadband competition."

While I knew that towns and cities could occasionally be annoying in TV franchise and pole attachment negotiations, I was just as shocked as you to learn that awful protectionist bills write themselves, politicians bribe themselves, and you pay $70 for a 3 Mbps DSL line because your Mayor is mean. I'm equally amazed to learn that mediocre, over-priced broadband isn't the product of limited competition, regulatory capture or myopic investors too short-sighted to wait for investment returns, but entirely because of the villainous machinations of Billy and Janet Burbit on the Podunk town council. Nefarious, indeed.

For the record I do think the deal could bring a few small improvements to some users. Comcast might be an upgrade for users in markets where Time Warner Cable has historically been even worse at providing either faster speeds or improved television services and set top boxes (looking at you, New York City). It's again those Comcast usage-cap "trials" where my attention is fixated, as all the upgrades and promises in the world don't matter if Comcast insists on arbitrarily throttling the pipe to the detriment of smaller businesses and startups. Deal supporters like to insist regulators will crack down should this happen, but so far regulators have dumbly nodded in agreement that usage caps and per gigabyte overages are just "creative pricing innovation."

Over the next few months you'll start to notice a pattern of editorials popping up in papers and on websites around the country. They'll all cling to the same talking point insightful logic, with none of the outlets noting any author's financial ties to industry. Be aware that these individuals and groups, no matter how specious, wooden and incoherent their arguments might be, are simply looking out for your well being as consumers because they're good people. That said, Comcast might want to tread carefully. Part of the reason the AT&T/T-Mobile deal put a bad taste in regulators' mouths (aside from it being based entirely on lies, totally unnecessary and reducing competition) was AT&T's hubris in making pretty much any bizarre claim they wanted, from the idea that reducing competition increased competition, to the argument that the inability to acquire T-Mobile would harm children and make the Internet explode.

That's not to say the Time Warner Cable/Comast merger isn't still totally awesome. I'm just saying that those who want the deal to succeed (whether you're paid to take that position or not) might just want to dial back the bullshit just a tad this time around.

Filed Under: acquisition, cable, television
Companies: at&t, comcast, hulu, time warner

European Commission Admits It Plans To Put 'Corporate Christmas List' Of IP Demands Into TAFTA/TTIP

from the acta's-back dept

A few months ago, we quoted the EU trade commissioner Karel De Gucht, who is responsible for handling the TAFTA/TTIP negotiations on the European side, as saying:

"ACTA, one of the nails in my coffin. I'm not going to reopen that discussion. Really, I mean, I am not a masochist. I'm not planning to do that.

If the Commission advances new basic legislation, which I think she should, we will revisit the question, but I'm not going to do this by the back door".

Well, either that was just more misdirection, or he's not in control of his staff. Because we learn from a stunning report of a little-publicized meeting between corporate lobbyists and the EU's negotiator on intellectual monopolies, Pedro Velasco Martins, that putting many of the worst features of ACTA into TAFTA/TTIP is precisely what the European Commission has planned. Here's the background:

Taking place at the American Chamber of Commerce offices in Brussels, the purpose of the two hour exchange was to strategize between businesses and the Commission in order to make sure that the maximum level of new IP restrictions will be written into the treaty. Present at the meeting were representatives from a range of the very largest multinational corporations. Among these were TimeWarner, Microsoft, Ford, Eli Lilly, AbbVie (pharmaceutical, formerly Abbott) and the luxury conglomerate LMVH. The participant list also included representatives from Nike, Dow, Pfizer, GE, BSA and Disney - among others. Also present was Patrice Pellegrino from OHIM [Office for Harmonization in the Internal Market], the EU/Commission agency responsible for trade marks in the EU.

As you will notice, most of those companies are from the US. Nothing wrong that, of course, except when you consider the following:

Controversially, the supposedly neutral Commission negotiator and the OHIM representative not only defined themselves as allies with the businesses lobbyists. They went far beyond this and started to instruct the representatives in detail on how they should campaign to "educate" the public in order to maximise their outcome in terms of industry monopoly rights. In particular, concerns from elected representatives, such as the European Parliament -- as well as civil society criticisms about ever increasing intellectual property rights -- were to be kept out of the public debate.

Here's what the European Commission really wants to see in TAFTA/TTIP:

Commission negotiator Velasco Martins revealed the existence of a secret list of corporate demands for new intellectual property rights in the transatlantic treaty. Previously -- towards the public and the Parliament -- the Commission has created the impression that intellectual property rights will be downplayed. The only IP right mentioned has been geographical indications, a minor issue which few are concerned about. In reality, the Commission now revealed that they have received "quite a Christmas list of items" on IP from corporate lobbyists and that they are working to implement this list. The list has already been discussed with the US in several meetings, in person as well as online.

The Christmas list covers almost every major intellectual property right. On patents, industry had shown "quite an interest" especially on the procedures around the granting of new patents. On copyrights the industry wants to have the "same level of protection" in the US and EU; in reality this always means harmonization up which results in more restrictions for the general public. On plant variety rights the pharma sector has lobbied for "higher levels" of protection. On trademarks the corporate lobbyists had made classification-related requests to the Commission. Additionally there had been a lot of interest in trade secrets.

There's also stuff from our old friend ACTA -- stricter enforcement:

According to the negotiator, the most repeated request on the Christmas list was in "enforcement". Concerning this, companies had made requests to "improve and formalize" as well as for the authorities to "make statements". The Commission negotiator said that although joint 'enforcement statements' do not constitute "classical trade agreement language" -- a euphemism for things that do not belong in trade agreements -- the Commission still looks forward to "working in this area".

That seems to go against explicit promises made earlier by the European Commission:

Since the beginning of the TTIP negotiating process, it is very clear that the eventual agreement on intellectual property rights will not include elements that were controversial in the context of ACTA. For example, the ACTA provisions on IPR enforcement in the digital environment (ACTA articles 27.2 to 27.4) will not be part of the negotiations. Neither will ACTA's provisions on criminal sanctions.

The report of the meeting contains many other fascinating insights into the real thinking of the European Commission. For example, apparently there is some relief that people are focusing on the horrors of corporate sovereignty, since that has allowed work on the "corporate Christmas list" to proceed unnoticed. There was also a warning that it is probably only a matter of time before details get out:

"Lots of people are waiting for the first slip, the first leak"

In the wake of the good things that have already flowed from Edward Snowden's leaks, and the enhanced status of whistleblowers today, that seems increasingly likely to happen. Finally, there was a useful hint of how the European Commission is going to attempt to justify bringing back ACTA in TAFTA/TTIP:

A recurring theme was that the public needs to be re-educated to understand the value of industry monopoly rights.

According to Pellegrino, the key to doing this is a number of pro-IP reports that will or have been released by OHIM.

One recent report was highlighted. It claims that every fourth job in the EU only exists because of intellectual property regulations.

That would presumably be this report, which claims ridiculously that:

IPR-intensive industries contribute

26% of employment and
39% of GDP in the EU

Techdirt wrote about this back in October, where we pointed out that it obtains these unrealistically high figures by including a whole range of industries that use things like copyright and patents only in the most limited and tangential way. Expect to see more of these exaggerated claims, based on similarly shoddy methodologies, appearing in the next few months.

That OHIM is putting out such propaganda isn't perhaps too surprising -- it's just a form marketing for its activities. But what is shocking is that an OHIM representative, along with the most senior EU negotiator for intellectual monopolies, should be offering detailed advice to US companies on how to subvert the TAFTA/TTIP negotiations by trying to keep the dissenting views of Members of the European Parliament and EU civic groups out of the debate. That's a direct assault on fair and open discourse, and ultimately undermines European democracy at a time when many are calling into question the entire idea of the European Union.

At the very least, the European Commission should set up a formal inquiry into what happened at this meeting, to make sure such blatant favoritism is avoided in future. If it doesn't, we'll know definitively that not only is it happy to see corporates on both sides of the Atlantic given preferential treatment during TAFTA/TTIP, but that it really doesn't care who knows. Meanwhile, those who took to the streets of Europe to fight off ACTA last year may want to start getting their boots ready.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: acta, copyright, karel de gucht, patents, pedro velasco martins, tafta, trade agreements, treaty, ttip
Companies: abbvie, bsa, disney, dow, eli lilly, ford, ge, lvmh, microsoft, nike, pfizer, time warner, us chamber of commerce