December 2010

Why Groupon Said No To Google's $6 Billion

Why did Groupon's board and executives say no to Google?

How do you turn down hundreds of millions of dollars in personal wealth? The simple answer, of course, is by believing you are NOT saying "no" to hundreds of millions of dollars or a billion dollars, but are saying "yes" to billions of dollars. But there's also a more nuanced answer.

Confirming lots of speculation, a source close to Groupon board members said that anti-trust concerns ultimately forced Groupon to turn down Google's $6 billion offer. This source says the view on Groupon's board was that a Google-Groupon merger would draw more regulatory scrutiny than any other deal Google has ever done. That's saying a lot.

Reaction to FCC Retransmission Announcement

Early reaction was generally positive to the news that the Federal Communications Commission would be issuing a rulemaking on network neutrality, likely within the first quarter of 2011, though fans of retransmission reform were calling it a first step and suggesting more work needs to be done.

“We are very pleased to see the FCC begin a new look at retransmission consent," said Public Knowledge President Gigi Sohn. "These disputes between broadcasters and cable operators are becoming more frequent and increasingly bitter, and consumers are more than ever becoming innocent victims of those disputes. That’s why we and others asked the FCC in March to start a rulemaking on the issues."

"This is a good step toward resolving retransmission disputes, but the FCC will need to do more than just help cable companies and broadcasters," said Corie Wright, policy counsel for Free Press. "A definition of good-faith bargaining does little to stop companies from threatening to pull channels from subscribers, and it does less to help consumers who have lost channels they paid for during a blackout."

Cable operators in the form of the American Television Alliance (ATVA) called the NPRM "welcome news for millions of American TV viewers."

"The NPRM is a constructive step forward and serious review of a marketplace that has undergone significant changes and merits a fresh look," said National Cable & Telecommunications Association spokesman Brian Dietz. "ACA applauds the Federal Communications Commission's intention to launch a rulemaking to review the broken retransmission consent regime that local TV stations have been abusing to gouge cable operators and their customers for many years, especially in small markets where ACA members are most active," said American Cable Association President Matt Polka. ACA was one of the signatories on a Time Warner Cable-spearheaded petition to get the FCC to reform retrans rules, including mandating outside arbitration in standstill agreements.

If the government injects itself into the "private business negotiations of retrans," says National Association of Broadcasters President Gordon Smith, it could ultimately mean the flight of the Super Bowl from free TV. "NAB strongly endorses educating consumers with the multiple options available to them in the exceedingly rare instance when a retransmission consent dispute arises, including the antenna TV option. In the final analysis, injecting Washington into private business negotiations that have a 99% success rate only serves to embolden pay-TV companies," said Smith.

In light of the FCC's announcement, Sen John Kerry (D-MA) said he would not proceed with retransmission consent legislation.

Separately, News Corp chief operating officer Chase Carey set the stage for significantly higher payments from cable operators in the future. “We could have asked for a lot more,” Carey said, and would ask for greater sums in the future. While Cablevision accused the company of charging an “unfair price,” even after agreeing to terms, Carey indicated in his remarks that News Corp. has so far intentionally pursued shorter term deals with cable companies -- compared to the 10-year agreement struck by CBS and Comcast -- with an eye toward ramping up rates fairly quickly. The Fox broadcast network is the most important channel in the company’s portfolio “and should be the most profitable,” Carey said.

FCC To Launch NPRM On Retransmission Consent

Federal Communications Commission Media Bureau Chief Bill Lake announced that the FCC plans to issue a proposed rulemaking on retransmission consent.

He said the FCC plans to issue a broad notice looking at what more it could do "to advance the statutory objectives of allowing retrans fees to be set by market forces while protecting the interests of consumers." In addition to posing that question, it will also provide "some limited guidance" on what good faith bargaining entails, and may also "try to identify additional practices that will be treated as per se violations of the duty to bargain in good faith," though leaving that open for public input as well. Lake suggests the FCC's NPRM is meant to address the old African saying that "when the elephants fight, it is the grass that suffers." And in the spirit of the Christmas season, Lake suggested something of a naughty-or-nice test (our interpretation, not his) for possible FCC action. "We will pay close attention to...future developments in the marketplace," he said. "Are the disruptions of the last year an anomaly -- perhaps just a sign of friction as prices move to a new level? Or will we see a continuing pattern of disputes that threaten viewers’ access to programming?"

Cablevision overwhelmingly favors Democrats

New York cable operator Cablevision gave $58,200 to Democrats running for the US Senate in 2010 while giving to Republican Senate candidates. The company only gave scantily to Republicans in the House, donating $3,750 in total. That compares to $92,950 given to Democrats. That means around 96 percent of House donations went to Democrats. The company also hired more Democrats than Republicans to lobby Congress last year. Cablevision's top issue — retransmission consent — picked up more support from Democrats than Republicans.

Level 3: Comcast Charging For Local Access, Not Peering

Level 3 Communications objected to Comcast asking for payment for local interconnections to the cable operator's network -- which is a separate issue from backbone peering relationships, according to company president and COO Jeff Storey.

"We carry Netflix traffic or other traffic deep into the Comcast network, and we hand it off to them generally at the last point we can," Storey said. "We respond to that request [for content by Comcast's subscribers] by handing it off at the last possible minute, not the first possible minute." Level 3 last week griped that Comcast was erecting a "toll booth" on the Internet by demanding payment to deliver additional traffic, after Level 3 landed a contract as a primary content delivery network for Netflix. Level 3 accused Comcast of violating network neutrality principles. In response, the cable operator said Level 3 was asking to dump twice the amount of traffic on its network without paying customary CDN fees. Storey said the crux of the dispute was that Comcast now wants to charge for access at the local network level. "If I were handing off traffic to Comcast in New York and expecting them to deliver it in San Diego, I would expect to pay for that," Storey said. "But that's not what we're doing. We spent billions of dollars to get into this business and expect to use that infrastructure in an efficient way."

Apple, Google Asked to Pay Up for Network Upgrades as Data Clog Bandwidth

Google, Apple, and Facebook need to pitch in to help pay for the billions of dollars of network investments needed for their bandwidth-hogging services, European phone operators say.

As mobile and Web companies add videos, music and games, operators including France Telecom SA, Telecom Italia SpA and Vodafone Group Plc want a new deal that would require content providers like Apple and Google to pay fees linked to usage. “Service providers are flooding networks with no incentive” to cut costs, France Telecom Chief Executive Officer Stephane Richard said last month. “It’s necessary to put in place a system of payments by service providers as a function of their use.”

Tech Sector Adds 47,000 Jobs So Far in 2010

Tech jobs are coming back after hitting bottom early this year, according to economy tracker Moody's Analytics.

The U.S. economy has added 47,000 technology jobs so far this year amid resurgent demand for tech products in Asia and Latin America. That represents 15 percent growth in tech jobs, compared with an 11 percent jobs growth in the economy overall since the beginning of the year, according to Moody's. Since a peak at the end of 2007, the tech industry had lost 307,000 jobs nationally in the economic downturn. "It seems like this industry is embarking on a new growth spurt," says Sophia Koropeckyj, a managing director for Moody's Analytics. "Tech jobs seem to be accelerating." Asia and Latin America's demand for tech products has resulted in new hiring and is one contributor to the recovery, Koropeckyj says.

Report shows most U.S. cities lost hi-tech jobs in 2009

Fifty-three of the country's top 60 metro areas lost hi-tech jobs last year due to the recession, according to a new TechAmerica Foundation report.

"Most of the metro areas we examined lost tech jobs in 2009 as the full force of the economic downturn hit the industry,” said Josh James, vice president of research and industry analysis at TechAmerica Foundation. James emphasized the jobs lost were highly desirable with an average salary in excess of $100,000 in cities like Washington and San Francisco. “These are the types of jobs every city wants. They are very well-paid, with 57 of the 60 cybercities having average tech industry wages that are 50 percent higher than the average private sector wage," he added. TechAmerica Foundation chair Phillip Bond said cities will have to focus on how to attract and retain hi-tech workers and firms or face the possibility of them moving abroad.

Nielsen: Internet Access On Rise In Latin America

With Latin America suffering less from the global recession than North America or Europe, Internet access rates in the region have gained steadily in recent years, according to new data from Nielsen.

The research firm conducted a study that examined how the increased affluence of consumers in Latin America has affected media penetration rates -- focusing on four countries: Brazil, Chile, Colombia and Mexico. Chile came out on top in home Internet access, with 41% penetration in 2009 (the most recent year for which data is available), up from 35% the prior year. Computer ownership in Chile was also the highest among the four countries -- at 57%, up from 52% in 2008. Brazil's Internet rate of 31% was well below Chile, but that figure reflects a significant increase from just 18% in 2008. Computer ownership also jumped in 2009, nearly doubling to 51% from 26% year-over-year. Internet penetration in Colombia was up five points to 29%, and in Mexico, it rose three points to 24%. PC ownership in Colombia was just 13% -- up from 9% -- while in Mexico it was 32%, a percentage point down from 33% in 2008.

Has Facebook Jumped the Shark?

[Commentary] Although many believe that "bigger" is the main value to marketers, Shapiro believes that Facebook feature overkill will result in a complicated user experience that is going to work against the company over time.

Successful societies deliver more and better benefits to their members which, invariably, leads to the tax of "complexity." This tax is easily born by members until the added complexity does not add enough incremental value to compensate for the "complexity" tax due. Then, over time, the burden of complexity causes the society to implode in on itself. This was the trap that had caught Facebook in its grip. In chasing scale, they used "feature sprawl" to attract users and in doing so made the Facebook experience more and more complex, imposing a tax that ultimately would not be borne by users. Far better, in my mind, would have been for them to have anchored their growth strategy in their heritage as a trusted social network by creating more trusted interactions between members and innovating in the "trust" space within the Facebook experience.

Benton

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