Daily Digest 7/19/2018 (FCC votes to refer Sinclair merger to judge)

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Ownership

FCC votes to refer Sinclair merger to judge

The Federal Communications Commission voted unanimously to send the merger between Sinclair Broadcast Group and Tribune Media before an administrative law judge, a process that could doom the $3.9 billion deal. 

The Hill notes that Sinclair responded to Chairman Pai's proposal on July 18 with a revised plan to sell off certain stations from the combined company in order to get it under a congressionally-mandated ownership limit. The 4-0 vote the evening of July 18 appears to be a rejection of those concessions.

Sinclair proposes buying WGN in latest move to win FCC approval of Tribune deal

Sinclair Broadcast Group wants to buy Chicago's WGN-TV outright as part of its latest effort to win the Federal Communications Commission's approval for its proposed acquisition of Tribune Media Co. In addition to buying WGN, Sinclair plans to put stations in Dallas and Houston into a divestiture trust to be operated by an independent third-party trustee. Sinclair had previously proposed selling the Texas stations to Cunningham Broadcasting Corp. and WGN to an entity called WGN-TV LLC. Sinclair had included service agreements in the deals allowing the company to continue to run the stations. Cunningham was controlled by the estate of Sinclair chairman David Smith's mother. WGN-TV LLC's president is Steven B. Fader, a business partner of Smith in Atlantic Automotive Corp. which owns dozens of car dealerships in Greater Baltimore.

"There can be no question regarding misrepresentation or character given that Sinclair has fully disclosed all terms of all aspects of the transactions it has proposed," Sinclair said. "The FCC's reported concerns with sales to certain parties have been eliminated in light of the withdrawals of the applications relating to Dallas, Houston, and Chicago. Accordingly, we call upon the FCC to approve the modified Tribune acquisition in order to bring closure to this extraordinarily drawn-out process and to provide certainty to the thousands of Tribune employees who are looking for closure."

Robert McDowell, a former FCC commissioner who is now an attorney at Cooley LLP, said Sinclair could actually end up coming out ahead as a result of addressing the specific problems identified by Pai. "What was noteworthy about this hearing designation order is that it was pretty specific regarding what defects it perceived needed to be cured," McDowell said. "The HDO could have the effect of pushing Sinclair into accepting terms it was resisting previously. If Sinclair complies with the FCC’s wishes, it could get more than half of the loaf it was pursuing in the first place."

FCC Establishes Pleading Cycle for T-Mobile/Sprint Transaction

T-Mobile US and Sprint have filed applications seeking Federal Communications Commission consent to the transfer of control of the licenses, authorizations, and spectrum leases held by Sprint and its subsidiaries to T-Mobile and the pro forma transfer of control of the licenses, authorizations, and spectrum leases held by TMobile and it subsidiaries in furtherance of T-Mobile’s and Sprint’s previously announced agreement to merge. T-Mobile also filed a petition for declaratory ruling to permit foreign ownership in excess of the statutory benchmark. Under their agreement, the proposed transaction contemplates a merger of Sprint into an indirect subsidiary of T-Mobile, with Sprint surviving as a direct subsidiary of T-Mobile USA, which is a direct subsidiary of T-Mobile. Post-transaction, Deutsche Telekom AG would hold approximately 42 percent of the fully-diluted shares of T-Mobile Common Stock, Softbank would hold approximately 27 percent of the fully diluted shares of T-Mobile Common Stock, and public shareholders would hold approximately 31 percent of the fully diluted shares of T-Mobile Common Stock. Deutsche Telekom would retain de facto control of the combined company (New T-Mobile) because it would have the right to designate a majority of the members of the Board of Directors and because its planned agreement with Softbank would grant it the right to direct the voting of Softbank’s New T-Mobile shares.

Interested parties must file petitions to deny no later than August 27, 2018. Persons and entities that file petitions to deny become parties to the proceeding. They may participate fully in the proceeding, including seeking access to any confidential information that may be filed under a protective order, seeking reconsideration of decisions, and filing appeals of a final decision to the courts. Commenters may also become parties to the proceeding for the purpose of seeking access to confidential information filed under a protective order. Oppositions to such pleadings must be filed no later than September 17, 2018. Replies to such pleadings must be filed no later than October 9, 2018. All filings concerning matters referenced in this Public Notice should refer to WT Docket No. 18-197.

All requests for meetings with Commission staff regarding this docket should be made via email using T-MobileSprintTransaction@fcc.gov. Those who lack Internet or email access may direct their requests to Morasha Younger, Competition and Infrastructure Policy Division, Wireless Telecommunications Bureau, (202) 418-1203.

Defining “Digital Platform”

[Analysis] Digital platforms that (a) provide a two-sided or multi-sided market; (b) are accessed via the internet; and (c) have at least one side that is marketed as a “mass market” service, share a set of characteristics and raise a similar set of concerns so that we should consider them as a distinct set of businesses. This does not make laws of general applicability such as antitrust inapposite. Nor are these distinct capabilities and incentives intrinsically bad or good. Identifying the nature of digital platforms and understanding the implications of this increasingly important sector of the economy is critical to understanding both how to update antitrust and other generally applicable laws, and when sector-specific regulation is required to promote the public interest. In particular, this analysis should make clear that regulation based on surface similarities is not merely unlikely to be helpful, but may be downright harmful. It is a common cliché that “if it looks like a duck and quacks like a duck, it’s a duck.” Unless, of course, it is actually a clever hunting decoy. For ducks, distinguishing between these two possibilities is rather essential. Similarly, for the formulation of good policy -- whether through updating antitrust law or applying sector-specific regulation -- understanding what makes digital platforms different is critical to protecting and promoting the public interest.

[Public Knowledge Senior Vice President Harold Feld]

Google’s Grip on Search Is Secure, but Getting Pricier

complying with the European Commission’s demand to loosen up requirements for handset makers to pre-install Google’s apps on their phones has the potential to raise the costs that have already been acting as a counterweight to the profit margins for Google’s lucrative search business. For example, the company pays Apple an undisclosed-yet-sizable sum to direct search traffic from its mobile Safari browser. Google’s traffic-acquisition costs rose 32% for the trailing 12-month period ended in March, outpacing the company’s 22% gain in advertising revenue for that period. But those changes will take some time to show up, and Google is planning to appeal the ruling, which ultimately could lessen its impact. Government actions typically only can accomplish so much against technology giants with the scale to dominate their businesses. In the absence of a mass-market competitor—Apple’s iPhone will only ever reach an affluent consumer base—no amount of unbundling is likely to erode Google’s dominance of services within Android, which is the heir to Windows. Only a shift in technology, possibly to voice-activated services such as Amazon’s Alexa, is likely to challenge Google.

Broadband and Telecom

FCC Announces Updated Lifeline Minimum Service

The Federal Communications Commission's Wireline Competition Bureau updated minimum service standards levels for speed and usage allowances for Lifeline-supported services as required by the 2016 Lifeline Order including newly-calculated minimum service standards for fixed broadband. The FCC reminded providers of the updated minimum service standards for mobile broadband and mobile voice service. These standards will take effect on December 1, 2018. Finally, the FCC announced that the budget for federal universal service support for the Lifeline program for calendar year 2019 will be $ 2,327,114,250.

  • Beginning December 1, 2018, the Lifeline minimum service standard for fixed broadband speed will be 18 Mbps downstream and 2 Mbps upstream. The standard for fixed broadband data usage will be 1000 GB per month.
  • Beginning December 1, 2018, the Lifeline minimum service standard for mobile broadband data usage will increase to 2 GB per month. The Lifeline minimum service standard for mobile broadband speed remains 3G mobile technology.
  • Beginning December 1, 2018, the Lifeline minimum service standard for mobile voice service will increase to 1000 minutes per month.
  • The indexed budget for federal universal service support for the Lifeline program for the calendar year beginning January 1, 2018 was $2,279,250,000, and the indexed budget for the calendar year beginning January 1, 2019, will be $2,327,114,250.

WISPA Outlines Broadband Fixed Wireless Economics, Policy Goals Before Congress

Broadband fixed wireless economics are considerably better than those for fiber-to-the-home, said Claude Aiken, president and CEO of the Wireless Internet Service Providers Association (WISPA) in written testimony presented to the House  Subcommittee on Communications and Technology. Aiken urged subcommittee members to support spectrum policy favorable to WISPs. He argued that by spurring investment in broadband fixed wireless, a WISP-friendly spectrum policy could help minimize the need for government subsidies to support broadband buildout.

Content

Facebook to Start Taking Down Posts That Could Lead to Violence

Facebook will start removing misinformation that could spark violence, a response to mounting criticism that the flow of rumors on its platform has led to physical harm to people in countries around the world. Facebook will rely on local organizations of its choosing to decide whether specific posts contain false information and could lead to physical violence, company officials said. If both hold true, the posts will be taken down. A Facebook spokeswoman said the company will implement the new policy first in Sri Lanka and later in Myanmar, two countries where some people and groups have used Facebook to spread rumors that ultimately lead to physical violence. The attacks in those countries have garnered significant media attention.

The new policy raises questions that company officials said are too early to answer, including who its partners will be and what the criteria will be to become one. A Facebook spokeswoman said she couldn’t provide a list of organizations Facebook plans to team up with or countries where they could deploy this new policy.

Journalism

Reporters, Facing a Hostile White House, Try a New Tactic: Solidarity

An unusual show of solidarity between rival journalists seemed to signal a new approach by the White House press corps toward an administration that regularly uses briefings to deride, and divide, the news media.

Hallie Jackson, a correspondent for NBC News, was grilling the press secretary, Sarah Huckabee Sanders, about President Trump’s credibility, given his attempts at damage control after a Helsinki summit meeting with President Vladimir Putin of Russia. Sanders, eager to move on, invoked a tried-and-true spin doctor tactic: Next question, please. “I’m going to keep moving,” she said, interrupting Jackson and turning to Jordan Fabian of The Hill. “Jordan, go ahead.”  A brief silence fell over the room, before Fabian spoke up. “Hallie,” he said, “go ahead if you want.”

Covering the White House is among the most competitive jobs in Washington journalism, a fact that press secretaries are keen to exploit. Between the demands of story-hungry editors — and a shot at cable-news glory — few reporters pass up a chance to ask a question on live TV. So Fabian’s gesture, which caught Sanders off guard, quickly resonated beyond the West Wing. Perhaps the moments of stonewalling from Sanders — and a notable recent drop-off in the frequency of the briefings — had generated a minor revolt in the press.

Government and Communications

Taking Sides on Facebook: How Congressional Outreach Changed Under President Trump

The 2016 presidential election coincided with substantial shifts in the ways that members of Congress communicated with their constituents online. Democrats expressed political opposition nearly five times as much under President Donald Trump as they did during the last two years of Barack Obama’s presidency. Much of this opposition was directed at President Trump, though Democrats also increasingly opposed Republican members of Congress. Meanwhile, congressional Republicans posted in support of Trump more than twice as much as congressional Democrats posted in support of President Obama during his final two years in office. Members of Congress who expressed political opposition most often were also the most liberal or conservative. This pattern is in line with the Center’s previous research on how members of Congress express political disagreement. But the new analysis also shows that the most ideological members were also the most likely to express support for others in their party. In other words, the most liberal and conservative members of Congress both attacked those on the other side more often and were more likely to affirm their own side’s decisions and positions. Moderates, meanwhile, tended to focus most of their posts on local issues.

Elections
Oversight

House Subcommittee Vets New FTC

The House Subcommittee on Digital Commerce and Consumer Protection, in the first oversight hearing for the new slate of Federal Trade Commission members, probed the commissioners on issues like data security, the Internet of Things, privacy, deceptive advertising, and more. Chairman Bob Latta (R-OH) said the subcommittee is sending letters to location data aggregators Location Smart, Securus, and 3C Interactive "to probe their data handling and use." The letters are a follow-up to letters it sent to Apple and Google asking them to explain how smart phone user data is protected when it is compiled and shared. Full Commerce Committee Chairman Gred Walden (R-OR)  said the FTC needs to go after bad actors, and named some names: Facebook, Equifax and Uber. Chairman Walden said data security incidents are a significant threat and the committee was "laser focused" on the issue. He again named names: Facebook and Cambridge Analytica. "Particularly with Facebook being under a consent order with the FTC, we are closely evaluating the tools being used by the Federal Trade Commission" as that investigation of the consent order and whether Facebook violated it moves forward, he added. Chairman Walden said the committee would look into whether there were ways to improve privacy regulation that could help consumers better understand how data flows support the global economy.

While Republicans are concerned about data-sharing issues, they also are concerned that too strict a regime, say opt-in for all data sharing, could undermine the basic economics of the web, something that concerns edge providers as well. Full Committee Ranking member Frank Pallone (D-NJ) put in a pitch for giving the FTC fining authority for first-time violations. Under the FTC Act, the agency can only seek an injunction for such a violation or strike a settlement. Subcommittee Ranking Member Jan Schakowsky (D-IL) suggested the commission needs more tech resources, including tools to protect consumer online privacy, such as civil penalty authority.

New FTC Chairman Joseph Simons said that the agency is "very interested" in learning more about the European Union’s record fine of Google. "We’re going to read what the EU put out very closely," said FTC Chairman Joseph Simons, while noting the US and EU have different antitrust regimes. He said he had discussed the issue with EU Competition Commissioner Margrethe Vestager. Chairman Simons said the mobile operating system market dominated by Android and Apple Inc.’s iOS is "concentrated." "In the antitrust world, most of the problematic conduct occurs where firms are big and have market power," Simons said. "This is one of the places we would focus." He added Google and Apple do "compete pretty heavily against each other."

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