December 2013

Mapping major broadcasters' growing TV station footprints: 2013 vs. 2012

With 2013 not yet over, SNL Kagan has counted $10.9 billion worth of broadcast TV deals through Nov. 30, involving 270 full-power stations and 265 low-power stations. By comparison, the entirety of 2012 saw broadcast TV deals totaling roughly $2 billion, and 2011 saw deals totaling only $527 million. There are myriad factors that have driven the uptick in consolidation, including strong balance sheets on the part of certain broadcasters and access to cheap debt, but perhaps the most important is retransmission consent fees.

Moody's senior analyst Carl Salas noted in a report earlier in 2013, "The recent pickup in broadcast M&A activity reflects the buyer's ability to charge higher retransmission fees for most, if not all, of its acquired stations immediately upon closing, and with little risk." He added, "Both buyers and sellers stand to benefit, as buyers, armed with more favorable retransmission agreements, can offer sellers generous multiples for the chance to gain these arbitrage opportunities." As an example, Salas said it was easy to imagine a group of stations earning retransmission fees of 25 cents per subscriber per month being sold to a larger company that is able to earn retransmission fees of 67 cents per subscriber per month. Upon closing or soon thereafter, the new owner would likely be able to raise the fees earned by the acquired stations, immediately increasing their value and profitability. "That is what is allowing this consolidation to happen," Salas said. "Because we can see who's buying who and what the financials are, [we know] this is representative of what you're getting."

Poor Americans Lead Shift to Wireless Homes Abandoning Landlines

Poor adults in the US continue to lead the shift to wireless-only homes, according to a survey by the Centers for Disease Control and Prevention. About 55 percent of adults whose income falls below the poverty line had only mobile phones in their homes during the first half of 2013, up 2.9 percentage points from the year before, according to the report. That compares with 35 percent of individuals whose incomes are at least double the poverty threshold. The research shows the portion of all wireless-only households rose to 39 percent from 27 percent in the same period three years ago, while the portion of homes with both landlines and mobile phones fell to 50 percent from 58 percent. The portion of individuals in wireless households, whose incomes are at least double the poverty threshold, gained 4.6 percentage points from a year earlier, the report said.

As consumers move from landlines to wireless phones, low-cost and contract-free carriers -- like billionaire Carlos Slim’s TracFone Wireless -- have attracted attention over Lifeline, the $2.2 billion US phone subsidy for poor Americans. Congressional Republicans earlier in 2013 tried to rein in the program, saying it’s open to abuse and benefits the providers. The Federal Communication Commission’s program subsidizes telephone service -- either wireline or wireless -- for recipients who can’t earn more than 135 percent of the federal poverty line, defined as $23,550 for a family of four in most states. Started in 1985, the Lifeline program pays carriers $9.25 per customer a month.

State Assessment Group Approves Privacy Rules for Student Data

The Partnership for Assessment of Readiness for College and Careers (PARCC) testing group approved a new policy that is intended to safeguard personally identifiable information about students that is collected as part of states' common-core assessment regimens. The action comes as debate continues to swirl about how student data will be used by PARCC and the other federally funded assessment consortium, Smarter Balanced.

Some critics have raised alarms because they fear that the two state coalitions will hand over student data to the federal government. PARCC's new policy, approved by the governing board of the 19-member consortium, attempts to respond to this concern. On the opening page of a 14-page document, the policy says that states will provide personally identifiable information, such as students' names, addresses, identification numbers, or dates of birth, along with their performance on PARCC exams, to PARCC and its contractors, but that information "will never be provided by PARCC to the federal government without written authority from a state, or unless legally required to do so by subpoena or court order." Further, no state agency or school district will ever disclose students' social security numbers to PARCC or its contractors, the policy says.

CEO Of Frontier Expects AT&T Acquisition To Be Less Of A Struggle Than Similar Deals

Billion dollar acquisitions of old access lines usually take a toll on rural local exchange carriers like Frontier Communications. But CEO of Frontier, Maggie Wilderotter, said the company’s $2 billion acquisition of AT&T access lines in Connecticut is more manageable than similar deals, including Frontier’s acquisition of Verizon access lines for $8.6 billion in 2008.

Previous acquisitions of access lines have burdened acquirers with declining businesses and high costs of upgrading substandard phone lines in areas big phone companies felt disinclined to maintain. Wilderotter said the AT&T transaction comes with a number of differences to its Verizon transaction. In the case of AT&T, Frontier is purchasing assets in one state, only 20% of its business, a state in which Frontier has operated for 70 years. The Verizon deal covered 14 states and tripled Frontier’s size. Another difference is Frontier has a partnership with AT&T and knows these Connecticut customers. “We’ve done everything we can to mitigate risk,” said Wilderotter. “We’re a seasoned team. This deal is easy to do compared to others. And these are also good assets. Not fixer uppers.”

The Mission to Decentralize The Internet

[Commentary] In the 1970s, the Internet was a small, decentralized collective of computers. This is not the Internet we know today.

Nearly two decades later, a staggering percentage of communications flow through a small set of corporations -- and thus, under the profound influence of those companies and other institutions. Google, for instance, now comprises twenty-five percent of all North American Internet traffic; an outage last August caused worldwide traffic to plummet by around forty per cent. Internet users now regularly submit to terms-of-service agreements that give companies license to share their personal data with other institutions, from advertisers to governments. In the US, the Electronic Communications Privacy Act, a law that predates the Web, allows law enforcement to obtain without a warrant private data that citizens entrust to third parties -- including location data passively gathered from cell phones and the contents of e-mails that have either been opened or left unattended for a hundred and eighty days. As Edward Snowden’s leaks have shown, these vast troves of information allow intelligence agencies to focus on just a few key targets in order to monitor large portions of the world’s population. Despite recent efforts by corporations to guarantee more transparency and to close back doors from snooping, an air of distrust surrounds the US cloud industry. One solution, espoused by some programmers, is to make the Internet more like it used to be -- less centralized and more distributed. Though Snowden has raised the profile of privacy technology, it will be up to engineers and their allies to make distributed-server technology for emails and viable for the masses.

“Discussions about innovation, resilience, open protocols, data ownership and the numerous surrounding issues,” said Irina Bolychevsky, an organizer for Redecentralize.org, an advocacy group that provides support for projects that aim to make the Web less centralized, “need to become mainstream if we want the Internet to stay free, democratic, and engaging.”

Snowden’s Leaks Have Finally Forced Companies to Enhance Their Security

[Commentary] Shortly after the news of the National Security Agency was intercepting nearly half a million of Yahoo users’ broke, Yahoo CEO Marissa Mayer proclaimed that “there is nothing more important to us than protecting our users’ privacy.” If that’s the case, why did it take the disclosures of Edward Snowden for the company to finally deliver industry-standard Web encryption? Why didn’t the company protect its customers from hackers using tools like Firesheep, or from the deep packet inspection equipment that we have long known governments around the world are using? The answer is that they didn’t care -- until their utter failure to deploy basic Web security was featured on the front page of the Washington Post.

Yahoo isn’t the only company to up its game in response to the Snowden disclosures. Indeed, many of the big cloud computing companies -- including Google, Facebook, Yahoo, Microsoft, and others -- have started to encrypt information between data centers. They have also increased the size of their encryption keys and switched to encryption algorithms that offer “perfect forward secrecy.” The EFF’s “Encrypt the Web” report reflects the rapid embrace of security technologies by major companies. Finally, Google, Microsoft, and five other leading Web companies just formally requested that the US government rein in its use of dragnet surveillance. However, were it not for Snowden’s whistle-blowing and the brave decision by journalists to reveal technical details about some of the NSA’s activities, it’s doubtful that many companies would have made these security improvements.

[Soghoian is principal technologist with the American Civil Liberties Union’s Speech, Privacy, and Technology Project]

Study Shows Google’s Dominance of Online Advertising

Analysis of the mobile Web browsing habits of over three million people has revealed previously unseen patterns in how the major advertising companies carve up the Internet.

Among the findings: 1) Google’s advertising tentacles extend to at least 80 percent of online publishers; 2) if only a small fraction of Web surfers opted out of being shown ads based their previous online behavior, it would significantly decrease the industry’s profits. The new study was carried out by academics at Stony Brook and Columbia universities, with researchers from two major telcos: AT&T in the US and Telefonica in Spain. They used records of 1.5 billion mobile Web surfing sessions from 2011, supplied by an unidentified mobile network operator, to see which sites people visited and which online ad companies provided ads on those pages. The data showed how advertisers use technology embedded in Web pages to track visitors and target them with ads.

Parents: Don’t Panic About Your Kids’ Social Media Habits

A Q&A with Danah Boyd, a Microsoft researcher who studies social media.

In a book coming out this winter, It’s Complicated: The Social Lives of Networked Teens, Boyd argues that teenagers aren’t doing much online that’s very different from what kids did at the sock hop, the roller rink, or the mall. They do so much socializing online mostly because they have little choice, Boyd says: parents now generally consider it unsafe to let kids roam their neighborhoods unsupervised. Boyd revealed interesting points that she noticed about teenagers’ social media habits. One, she said that teenagers’ limited mobility leads them to seek escape from the house by going online. She also pointed out that bullying is actually on the decline, but that online bullying has gained more visibility. Finally, she pointed out that teenagers don’t like to be as public as people assume, diverting more personal content to chats and private channels.

6 Reasons Sprint Shouldn't Buy T-Mobile

[Commentary] A merger between Sprint and T-Mobile would be a disaster for American consumers. Here are six simple reasons why.

Merger Malaise. For Sprint and T-Mobile to survive, they need to compete aggressively.
Technology Nightmares. Sprint and T-Mobile have incompatible technologies and frequency bands.
The End of Uncarrier. If Sprint and T-Mobile merge, who would be in charge? Softbank.
Three Carriers Isn't Competitive.
Government Roadblocks. While a Sprint/T-Mobile merger wouldn't concentrate things as purely as AT&T or Verizon buying one of the other two carriers, many of the DOJ's arguments still hold. So the companies would burn a lot of time and energy and probably get shot down in the end, anyway.
The Reports of T-Mobile's Death Were Exaggerated. T-Mobile isn't just surviving on its own -- it's thriving.

MediaNews Group to merge with 21st Century Media

MediaNews Group, owner of The Denver Post, will merge with 21st Century Media, according to an announcement from Digital First Media, which manages the two companies.

"It will be easier to push innovation," said John Paton, CEO of New York-based Digital First. "Essentially, it creates an enormous amount of efficiency within the company." 21st Century Media is the successor to the Journal Register Company, which emerged from a bankruptcy restructuring in April. The group operates in 10 states, mostly in the Northeast. MediaNews Group owns or operates 57 major newspapers in 11 states, including Colorado, California and Texas. The merged company will generate $1.3 billion in annual revenues and reach 67 million people each month on more than 800 multiplatform products across 18 states.

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