Consumers Get Glad Tidings;  Let The Trend Continue?

Treasure this past week in Washington. It's not often -- no, it never happens -- that that consumers get a multitude of good tidings from Washington. Is it too much to hope that this is the start of a trend?  Of course.  The FCC then approved AT&T's purchase of Qualcomm spectrum without strong interoperability (and poor media ownership rules, to boot.)

Think of it. In one week, AT&T dropped its ill-fated takeover of T-Mobile after spending dozens of millions of dollars. The U.S. Department of Justice, which provided the leadership in scuttling AT&T's anti-consumer strategy, also said it would look at Verizon's new spectrum/marketing deal with leading cable companies, including Comcast. And on a smaller scale, an administrative law judge at the FCC smacked Comcast for anti-competitive behavior through its banishment of the Tennis Channel to a higher, pricier tier while favoring Comcast's home-owned channels.

Does one see a common thread here? Or a more unlikely series of events?

The AT&T takeover was certainly most audacious of the three events. It was nothing less than a direct assault on the concept of antitrust -- the second largest wireless carrier buying out the fourth largest. The result would have totally altered the wireless landscape. AT&T did what it always does, and usually does successfully. It marshalled all the economic resources it could buy. It marshalled all of the political resources it had bought in Congress and in state houses around the country. It put its captive union in harness to make sure recalcitrant and/or uninformed Democrats went along. And, for good measure, it started a massive TV advertising campaign full of hopeful notes for a better tomorrow, rural deployment and, in the face of all logic, lots of new jobs . Of course Wall Street, which sees only deals and profits (and competition is bad for profits) assumed it was a done deal, adding to the chorus of inevitability.

And on the other side? A bunch of public-interest and consumer groups, many of them outraged consumers (many of them T-Mobile customers) and one company -- Sprint. In the currency of Washington, it's the companies that count. Based on past history, no one had any faith that the institutions of government which are supposed to prevent deals like thi,s, the Justice Department's Antitrust Division and the Federal Communications Commission, would actually do their jobs.

And yet they did. Whether it was Occupy Wall Street (and other places) or election-year populism, or the public outcry or just the plain facts of this deal, DoJ sued to stop the takeover. The FCC conducted an intense staff inquiry and then released that scathing document when AT&T tried to use a procedural trick to squash it. Then a Federal judge indicated she wasn't pleased with the whole matter.

Even AT&T reaches its limits, although not often and not so quickly. The $4 billion break-up fee should help T-Mobile, as should access to more spectrum.

Now that the DoJ has flexed its muscles, it's time for the next challenge -- Verizon. That company played it cooler than AT&T, trying to sneak under the radar by buying $3.6 billion worth of spectrum from Comcast and other cable companies, and planning joint marketing agreements.The revitalized Antitrust Division and the FCC will take a look at this deal, although it may be harder to block outright than AT&T's. The harms would be just as serious -- the quashing of broadband competition that has already been already squeezed to near nothing by deregulation. It would be acceptable if the spectrum deal went through but the joint marketing was stopped. Verizon and the cable companies are, in some areas, competitors as broadband providers, particularly in those privileged places where Verizon has built out its fiber optic FiOS network. In other areas, there is ostensible competition, although the basic DSL offering really isn't as good as cable's broadband network. Cable and telephone should be competitors for consumer dollars. DoJ and the FCC should check very closely the details of the joint marketing plans, and shouldn't approve anything without them. If there are to be those hard-to-enforce "conditions" then the conditions should ban some practices and make resolution of complaints easy to accomplish. Usually, complaints on conditions take a long time and a lot of money to resolve.

If either agency needs more inspiration, it should look no farther than the FCC's administrative law judge, Richard Sippel, who wrote a scathing opinion giving Tennis Channel a significant boost over Comcast. Tennis Channel had complained it was banished to the outer courts of Comcast's lineup when Golf and Versus, channels owned by Comcast providing similar content to similar audiences, were given favored placement on the show courts of the lineup.

In a hearing of the type which are rarely held, evidence is introduced and testimony taken. Sippel's opinion is a great example of what the "paper hearings" composed of comments and replies are missing. When he cited testimony by Michael Egan, Comcast's programming expert as "just not credible" when the Comcast exec tried to say the channels were different, Sippel set the tone for a type of opinion that should have been issued long ago in the cable industry. He cited evidence showing Comcast gives better distribution to programming networks it owns, noting, for example, that Comcast had planned to give a Major League Baseball network a spot on the paid sports tier, until it got a piece of the action. Then it got a better spot in the lineup. Comcast Cable "has taken an active role in ensuring that its affiliated networks obtain favorable channel placement," Sippel found.

The fine he proposed, $375,000, is far too modest, although he limited by law. It's smaller than the $500,000 fine the DoJ wants to impose on Comcast Chmn./CEO Brian Roberts for not reporting stock purchases. More significantly, it strikes a first blow for independent programmers trying to get distribution on dominant distribution networks, a model that has hampered new programming for decades.

If a new day is dawning, there's lots of work to be done. The FCC could approve Sippel's order quickly. It could make sure Verizon and Comcast actually compete. It could make certain that wireless operators AT&T and Verizon don't section off parts of the spectrum for their own use, while eliminating the interoperable features that were supposed to take place.

It's a lot to contemplate. But it's easier to do now rather than a few months back.

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