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Posted on Techdirt - 19 November 2018 @ 10:40am

Cord Cutting Sets More Records, Yet Many Cable Giants Still Refuse To Compete On Price

from the adapt-or-perish dept

Despite the obvious realities that ratings are sharply down and consumers are cutting the cord, there's a vibrant and loyal segment of cable and broadcast executives and analysts who still somehow believe cord cutting is a myth. Every few months, you'll see a report about how cord cutting is either nonexistent or overstated. Often, they'll try to claim that cord cutters are just lame weirdos they didn't want anyway, or that this is just a temporary trend that stops once more Millennials procreate.

Newsflash: it's not stopping.

The latest data from Kagan indicates traditional pay TV providers lost another 1.3 million subscribers last quarter as users continued to flock to streaming alternatives, embrace the use of over the air antennas, or embrace piracy (something analysts traditionally never mention, as if acknowledging this fact somehow condones it). A big part of this latest surge in losses were courtesy of Dish Network, which saw a record 367,000 departures as its satellite TV customers flocked to greener and cheaper pastures, including Dish's cheaper Sling TV alternative.

Industry analyst Craig Moffett, who used to be among those who mocked cord cutters as irrelevant, has dramatically changed his tune over the last few years. He continues to point out that these numbers are actually worse than they appear, since new homeowners and movers aren't signing up for traditional cable at their new addresses:

"It is the largest quarterly loss ever (the first time the industry lost over 1 million subscribers in a quarter),” writes Craig Moffett, senior research analyst, MoffettNathanson.

“With traditional pay TV penetration still hovering close to 80%, one would have expected growth of about 200,000 more subscribers per quarter on average than a year ago, based solely on the new household formations,” writes Moffett. "To the extent we are not seeing these new households in the subscriber data, we can conclude that cord-cutting has accelerated more than it appears, based on the reported subscribership data alone."

Obviously an 80% penetration rate for traditional cable is nothing to sneeze at.

But while traditional cable TV is still the preferred viewing option du jour, it's equally obvious that the industry needs to adapt sooner rather than later. Many of these customers are older viewers scared by new technology who won't be around for ever. Many others are sports fans, who still struggle to find streaming alternatives to cable given many broadcasters' painfully slow adaptation to this new paradigm, something exemplified by the aggressively terrible losses seen by ESPN in recent years. But leagues like the NFL are very slowly but surely figuring out that direct to consumer streaming is the future.

And while a few companies like Dish and AT&T have figured out that they have no choice in offering cheaper, more flexible viewing options (Sling TV and DirecTV Now respectively), much of the sector remains stuck in a dance of dysfunction that includes refusing to compete on price. Whether it's Charter's decision to mindlessly raise rates on the heels of its latest merger, or Comcast using bullshit fees to covertly jack up your monthly rate, there's a cavalcade of industry executives who haven't received one obvious message: the traditional cable cash cow is dying, and price competition and better, more flexible offerings are the only path forward.

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Posted on Techdirt - 16 November 2018 @ 6:27am

AT&T CEO Continues His Fake Calls For Real Privacy, Net Neutrality Laws

from the ill-communication dept

You'd be hard pressed to find a bigger enemy of consumer safeguards than the fine folks at AT&T. The company has a history of all manner of anti-competitive behavior, from making its bills harder to understand to help scammers rip off its customers, to routinely ripping off programs designed to help everyone from the hearing imparied to the poor. AT&T also of course played a starring role in killing both the FCC's 2010 and 2015 net neutrality rules, and pretty much all meaningful state and federal efforts to protect broadband and wireless user privacy.

Yet like clockwork, company executives like to pretend that despite this, they really love net neutrality, privacy, and healthy regulatory oversight. Case in point: AT&T CEO Randall Stephenson attended a conference this week where he once again proclaimed that AT&T really wants Congress to pass meaningful new net neutrality and privacy laws — something the press, as it loves to do, was quick to repeat entirely unskeptically without any necessary context:

"AT&T CEO Randall Stephenson joked Monday that Washington may not agree “on the freezing temperature of water,” but he called on a divided Congress to come together pass net neutrality and privacy legislation. The executive called for legislative clarity around the issue of broadband Internet access, saying certain basic principles should be codified into law."

Notice for a moment that the linked outlet in question doesn't bother to clarify to readers that we had meaningful net neutrality and broadband privacy rules at the FCC (passed after years of painstaking debate), and AT&T lobbyists worked tirelessly to kill both of them. AT&T also routinely battles any efforts to mandate more competition or broadband availability, to the point where they prevent efforts to even improve broadband availability maps. These are not problems AT&T wants fixed; rather important context when judging the merits of Stephenson's statements.

To be clear, AT&T doesn't want meaningful privacy or net neutrality legislation. It wants loophole filled placeholder laws on these subjects in name only; laws that pretend to address the problems on both of these fronts, but serve one key purpose: pre-empt tougher state or federal laws that might actually accomplish something. AT&T wants laws its lawyers write that don't actually fix the problems we all largely agree need fixing, especially the lack of broadband competition that helped create privacy and net neutrality violations in the first place.

That tech and policy reporters don't understand this (or understand it but for whatever reason don't share this fact with readers) is consistently frustrating.

Stephenson's schtick is always exhausting. But he outdid himself with some additional commentary at the conference, most notably this bit:

"I get fatigued every time the President changes, the head of the FCC changes, and regulations swing from left to right,” Stephenson said in remarks tonight at the Wall Street Journal’s WSJ Tech D. Live conference in Laguna Beach."

Again, Stephenson's lobbyists are directly responsible for this hard shift "right" away from giving a damn about consumer protection. AT&T backed Trump and Ajit Pai to the point where it thought it was a good idea to pay a shady dudebro "fixer" $600,000 to covertly gain access to the President. And since the "swing" shifted in AT&T's favor it has received absolutely everything it asked for, from a full out assault on federal and state consumer protections, to an FCC that's often literally indistinguishable from AT&T's lobbying apparatus.

Again, the pretense being pushed by Stephenson here is that we can't rely on the partisan whims of the FCC and we should encode tough consumer protection into law via Congress. And in an ideal world, that's a sound argument. But this isn't an ideal world, and AT&T's arguments aren't made in good faith. It's a world in which AT&T throws money at politicians to ensure any real protections will never get passed. You can't pass meaningful privacy or net neutrality laws via Congress because companies like AT&T spend billions of dollars and countless man hours to prevent that from happening.

You can, however, throw campaign contributions at lawmakers eager to table "compromise legislation" that's usually nowhere near an actual compromise. Countless politicians (most notably Marsha Blackburn) love to table AT&T-crafted legislation and pretend it's a sincere attempt to solve complex technical problems, ignoring that said bills almost always have fewer teeth than a dottering grandpa and more holes than a ratty, knitted afghan.

AT&T's ideal net neutrality law would ban things ISPs never intended to do anyway (like the outright blocking of websites), while ignoring all the areas ISPs engage in creative anti-competitive behavior (like usage caps and zero rating or interconnection shenanigans). The same applies to privacy. AT&T wants a law that mandates ISPs do things they already do (like "clearly informing" users how they're being spied on via mouse print), but doesn't ban any of the bad things AT&T has been busted doing (like modifying packets to covertly track users, or charging users more money if they want to protect their own private data).

Meanwhile, at the same conference, Stephenson whined incessantly about how numerous state efforts to pass their own privacy and net neutrality laws were a "total disaster," hoping nobody is bright enough to realize that wouldn't be happening if Stephenson's lobbyists hadn't dismantled pretty modest federal guidelines.

There's nothing about Stephenson's arguments that are grounded in good faith, yet you'd have a hard time understanding that if you're a reader of news reports that are often more blind stenography than actual insight fueled by historical context.

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Posted on Techdirt - 15 November 2018 @ 1:34pm

Donald Trump Suddenly Pretends To Care About Comcast Antitrust Violations

from the dysfunction-junction dept

For years, smaller cable companies have complained that giants like Comcast do everything in their power to make life miserable (and expensive) for them. These smaller providers have complained that Comcast often mandates they buy and include NBC channels and regional sports networks in their lineups, driving up costs. Many of these companies have considered getting out of the TV business entirely as their margins get tighter and they find themselves increasingly out-maneuvered by ever-growing, vertically-integrated media, telecom, and broadcast giants like Comcast and AT&T.

This week, the American Cable Association, a coalition of around 700 mid-sized and small cable providers, simply issued yet another request to the DOJ to, you know, actually maybe do something about Comcast's growing monopoly power:

"To help secure the benefits of a competitive pay-TV and broadband market for millions of consumers, the American Cable Association has asked antitrust law enforcers at the Department of Justice (DOJ) to open an investigation into the business practices of the vertically integrated media giant Comcast-NBCU, focusing on harms stemming from the dominant communications firm’s control of cable systems, TV stations, and regional sports networks (RSNs) concentrated in some of the largest local markets in the country."

Their complaint notes that with the conditions now expired on Comcast's 2011 merger with NBC, the company has greater leeway than ever to use its size, wealth, growing broadband monopoly and political power to bully smaller cable operators and consumers alike.

Normally these cries would simply be ignored in M&A manic America. Much like the TV market, smaller cable companies can't compete with the immense political power Comcast's wealth and size buys on Capitol Hill, so their concerns are pretty consistently ignored. As a result, whether we're in the throes of Obama or Trump administrations, blindly letting the biggest media and telecom companies merge, then standing around with a dumb look on our collective faces as these titans do what they always do (raise rates and use their newfound power to hamper competitors) is kind of our thing.

Like many small businesses, the ACA pretty consistently issues these cries for help without anybody much giving a damn. But that dynamic changed when President Trump this week curiously decided to wade in and comment on the ACA's filing:

So for one thing, it's unlikely that Donald actually cares about Comcast's monopoly power. After all, if he did, his FCC wouldn't have just effectively neutered itself and net neutrality (and most meaningful oversight of predatory monopolies) at direct Comcast request. Don probably just saw something on NBC news that made him mad, and decided to punish Comcast for it in a passive aggressive way. And punish it did: Comcast's stock dropped steeply on Monday of this week, and a dozen furrow-browed stories exploring Comcast's antitrust power were published that would have otherwise never have been written.

Oddly, many outlets took the potential for a DOJ inquiry into Comcast's monopoly power seriously. But there's zero real indication that's the case. As the assault on net neutrality should have made pretty clear, letting giant telecom operators like Comcast largely dictate most tech policy has been the Trump administration policy thus far, and that's not likely to change. The DOJ isn't going to suddenly investigate Comcast just because Don ran his mouth on Twitter, and it's certainly not going to suddenly pursue remedies for an eight-year old merger.

Don was likely just being Don: jumping into the fray of a subject he doesn't know much about because he saw some shit on TV that made him sad. And while it's true that Don's DOJ did sue AT&T to thwart (unsuccessfully) its Time Warner merger, it's likely that had less to do with actually helping consumers, and more to do with hurting CNN or helping Trump ally Rupert Murdoch, who spent most of 2017 trying to scuttle the deal for competitive reasons. So yeah, it's possible that the DOJ could ruffle some feathers at Comcast as punishment for critical NBC coverage of the President, but it's just not likely with Comcast already having gotten most of what it wanted (most notably in the form of a self-immolating FCC in the hands of Ajit Pai).

Meanwhile, the ACA has made a pretty consistent habit of complaining about Ajit Pai's failure to keep an eye out for the little guy, despite being breathless supporters of Pai's appointment. Perhaps at some point the ACA can connect the dots between supporting politicians that don't care about monopoly power, and policy that pretty clearly doesn't care about monopoly power.

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Posted on Techdirt - 15 November 2018 @ 12:14pm

Facebook's Use Of Smear Merchants Is The Norm, Not The Exception

from the nobody-wants-to-fix-this dept

So by now most people have probably read the New York Times deep dive into what can only be described as Facebook's deep well of internal dysfunction and self delusion. While there's a lot of interesting bits in the piece, one portion that received some extra, justified hyperventilation was the revelation of Facebook's use of smear merchants. Smear merchants that the Times notes Facebook employed to try and discredit those pointing out that Facebook's privacy practices have generally been hot garbage:

"While Mr. Zuckerberg has conducted a public apology tour in the last year, Ms. Sandberg has overseen an aggressive lobbying campaign to combat Facebook’s critics, shift public anger toward rival companies and ward off damaging regulation. Facebook employed a Republican opposition-research firm to discredit activist protesters, in part by linking them to the liberal financier George Soros. It also tapped its business relationships, lobbying a Jewish civil rights group to cast some criticism of the company as anti-Semitic."

By late 2017, a big part of those efforts involved paying DC-based consultancy Definers Public Affairs to engage in efforts to smear competitors and activist critics alike. In some instances, the Times suggests this involved parroting intentionally dubious stories via Definers' "news" organization, NTK Network:

"On a conservative news site called the NTK Network, dozens of articles blasted Google and Apple for unsavory business practices. One story called Mr. Cook hypocritical for chiding Facebook over privacy, noting that Apple also collects reams of data from users. Another played down the impact of the Russians’ use of Facebook."

Ironic that Facebook was funding disinformation while professing to fight disinformation. Of course, the public reaction was immediate and justifiable. Twitter was stocked with people simply shocked that a major company would hire a PR and policy firm to spread fluff and nonsense. And Facebook was quick to issue a statement downplaying what Definers had been up to, yet acknowledging they'd fired the firm for what they'd apparently have you believe is no solid reason:

"Lastly we wanted to address the issue of Definers, who we ended our contract with last night. The New York Times is wrong to suggest that we ever asked Definers to pay for or write articles on Facebook’s behalf – or to spread misinformation. Our relationship with Definers was well known by the media – not least because they have on several occasions sent out invitations to hundreds of journalists about important press calls on our behalf. Definers did encourage members of the press to look into the funding of “Freedom from Facebook,” an anti-Facebook organization. The intention was to demonstrate that it was not simply a spontaneous grassroots campaign, as it claimed, but supported by a well-known critic of our company."

In a conference call this afternoon, Zuckerberg then tried to claim that neither he nor Sandberg knew anything about Definers being hired, while insisting that Facebook would be taking a much closer look at their DC policy and lobbying partners moving forward. But companies routinely hire firms like Definers knowing full well the kind of tactics they employ, and the idea that neither Zuckerberg nor Sandberg knew anything about the work Definers was doing is generally being seen as either a falsehood or incompetence.

While Facebook's decision to smear critics instead of owning their own obvious dysfunction is clearly idiotic, much of the backlash has operated under the odd belief that Facebook's behavior is some kind of exception, not the norm. Countless companies employ think tanks, consultants, bogus news ops, PR firms, academics, and countless other organizations to spread falsehoods, pollute the public discourse, and smear their critics on a daily basis. It's a massive industry. Just ask the telecom sector.

In the last decade alone broadband providers and firms far worse than Definers have been caught paying minority groups to generate bunk support for bad policy, hijacking consumer identities to support bad policy, creating bogus consumer groups to generate fake support for bad policy, flooding the news wires endlessly with misleading op/eds without disclosing financial conflicts of interest, stocking public meetings with cardboard cutouts (so real people can't attend), or filling news comments sections and social media with bullshit criticism of corporate critics.

This is the world we've built, and nobody wants to do anything about it. In none of the above instances did anyone face the slightest consequences for their actions. And this is just telecom. The same tactics occur in countless sectors. Third party policy and lobbying houses routinely help corporations stuff public proceedings with entirely bogus public support. Reporters are still trying to determine which of a dozen PR lobbying and policy shops helped the broadband industry steal the identities of real (and in some instances dead people) to generate bogus support for killing net neutrality.

These kind of shady business operations are absolutely everywhere and used by countless major companies ranging from AT&T to your local power utility. As (relatively) new entries on the American lobbying scene, Silicon Valley companies have often insisted they're above such behavior, something this week's report pretty clearly disproves. And while it's great everybody's upset about Facebook and Definers' clearly disingenuous tactics, this is a problem we've let infect the marrow of American business culture--in large part because we refuse to actually do anything about it.

You'll routinely see no efforts at serious lobbying and policy reform, no real punishment for involved offenders, and (as Facebook made abundantly clear) zero real unforced interest in addressing disinformation. The best we routinely get is a few bouts of short-lived hyperventilation and some hand-wringing in the press, followed by some collective amnesia as bigger, worse scandals increasingly gobble up our already-strained attention spans.

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Posted on Techdirt - 15 November 2018 @ 6:28am

Sprint Throttled Skype Without Telling Anyone... And Nobody Seems To Care Much

from the slippery-slope dept

Last month we pointed to research out of Northeastern University that showed U.S. wireless video performance was thoroughly mediocre thanks in large part to arbitrary carrier throttling. The study, spearheaded by researcher David Choffnes, found that this carrier throttling usually had absolutely nothing to do with congestion. Instead, much of it was driven by carriers trying to impose arbitrary limits on your connection, then charge you more money to avoid it. For example, Verizon now throttles all video on its "unlimited" wireless data connections to 480p (around 1.5 Mbps), unless you pay Verizon for a more expensive plan.

Choffnes is tracking ISP network management by using crowdsourced data from his Wehe app. More recently Choffnes released an updated report that continues to show that carriers arbitrarily throttle video and select apps. But his report and data also found that Sprint (and its prepaid subsidiary Boost Mobile) routinely throttles Skype performance on its networks... without telling consumers about it. The throttling was discovered in 34 percent of 1,968 full tests run between January 18 and October 15 of this year, note the researchers:

"We found a significant number of instances of Sprint throttling our Skype tests. This is interesting because Skype’s telephony service can be construed as directly competing with the telephony service provided by Sprint...We asked Sprint to comment on our findings. Their reply was: "Sprint does not single out Skype or any individual content provider in this way." Our test results indicate otherwise, particularly for video content providers where we were able to confirm targeted throttling of Wehe tests."

On its surface, Sprint throttling Skype a third of a the time isn't the end of the world. But as is often the case with net neutrality, it's the precedent that matters. Sprint has already tinkered with throttling video, music, and games unless users were willing to pay more money, something nobody in the Obama administration so much as blinked at -- even with net neutrality rules intact.

Now, post-repeal, Sprint is throttling a service that could be directly construed as competing with Sprint's own offerings, something Choffnes told me should be raising alarm bells for anybody interested in keeping the internet competitive and relatively neutral:

"In a neutral network, all of these services can compete on a level playing field to offer a product that attracts the most users,” he said. “When an Internet provider targets a service for throttling, the playing field can tilt in favor of one service over another."

“This is particularly problematic if the Internet provider's service is favored, because they can use this advantage to drive users away from competing products and to ones belong to the Internet provider,” Choffnes added. “And because the competition is limited by the Internet service they are given, in some cases there may nothing they can do to regain equal footing."

Sprint, for its part, justly flatly denied to me and other reporters that this was even happening, though Choffnes stands by his data. Here's the point where an objective regulator would come in, investigate the issue, and then punish companies if necessary. Of course in the Ajit Pai era that's simply not going to happen. Under the FCC's 2015 rules, ISPs had to be transparent about what they were doing so users knew what kind of connection they were buying. With those rules now dead, the FCC has effectively made transparency a largely voluntary affair that ISPs can ignore at their leisure.

That's where Choffnes comes in. He's trying to at least hold ISPs accountable by using crowdsourced data to clarify what ISPs are up to. But with the news of Sprint throttling Skype coming and going without a single comment from anybody in a position to actually do anything about it, it's not clear if knowing alone is going to be enough.

Again, Sprint throttling Skype for a third of its users certainly isn't the end of the world. But it remains a precedent you should be worried about. ISPs are desperately trying to be on their best behavior right now ahead of next February's net neutrality lawsuits against the FCC. They don't want to add any fuel to the fire (well, aside from that Verizon throttling California firefighters for no reason thing). But should the FCC and ISPs win their court battle, you're going to see a lot more "creative" efforts to impose costly new barriers to access, and less and less transparency with the end user about what's happening.

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Posted on Techdirt - 14 November 2018 @ 1:31pm

Colorado Voters Continue To Opt Out Of State's Protectionist, ISP-Written Broadband Law

from the build-it-and-they-will-come dept

For years we've discussed how ISPs like Comcast have spent millions of dollars quite literally buying shitty, protectionist laws in 21 states. Said laws either ban or significantly hamstring towns and cities from building their own broadband networks, or in some cases from even engaging in public/private partnerships. It's a scenario where ISPs get to have their cake and eat it too; they often refuse to upgrade their networks in under-served areas (particularly true among telcos offering DSL), but also get to write shitty laws preventing these under-served towns from doing anything about it.

This dance of dysfunction has been particularly interesting in Colorado, however. While lobbyists for Comcast and CenturyLink managed to convince state leaders to pass such a law (SB 152) in 2005, the legislation contains a provision that lets individual Colorado towns and cities ignore the measure with a simple referendum, something telecom lobbyists have certainly come to regret. Not surprisingly, with frustration mounting over sub-standard broadband and awful customer service, more than a hundred Colorado cities have voted to exempt themselves from the state law over the last few years.

That happened again during the recent midterm elections, when eighteen additional communities voted to opt out of the restrictive, protectionist law. According to the Institute For Local Self Reliance (which helps communities help themselves to improve local connectivity) the votes weren't even close in most of these towns and cities, with voter approval rates like 73%, 80%, and 90%. With this week's votes, the group notes that more than 60% of Colorado communities have taken back their rights to make their own decisions on infrastructure for themselves:

"Within Colorado’s 64 counties, a total of 40 have brought the opt out question to their voters; all referendums passed. Now, 62.5 percent of counties in the state are free of SB 152, leaving only 37.5 percent or 24 counties subject to the harmful law."

The stark voter approval again highlights how issues like better broadband and net neutrality aren't actually partisan in the real world. ISP policy folks just like to pretend otherwise to sow division, hamstring consent, and stall meaningful reform. In reality, most everybody wants cheaper, better broadband. And some basic oversight preventing telecom monopolies from abusing their power to harm consumers and competitors. And the right to declare, via democratic vote, that you'd like your town or city to explore alternative options when the private market fails.

People are constantly looking for a place to begin when addressing the nation's broadband dysfunction, and the 21 states ISPs conned into eroding local citizen rights are a wonderful place to start. The ISLR maintains a handy map that highlights precisely which states have passed such laws at ISP lobbyist behest. While municipal broadband shouldn't be seen as a panacea, letting communities explore public or public/private networks as alternatives to a broken status quo is an organic way to apply a lit bit of pressure on an industry that all-too-frequently finds real competition to be an entirely alien affair.

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Posted on Techdirt - 14 November 2018 @ 6:10am

House To Investigate Whether DOJ's AT&T Antitrust Lawsuit Was Political

from the do-not-pass-go,-do-not-collect-$200 dept

When the Trump DOJ sued to stop AT&T's $89 billion merger with Time Warner last year, more than a few eyebrows were raised. After all, the DOJ's antitrust suit, allegedly a bid to protect consumers, came as other arms of the Trump administration were busy utterly dismantling a wide variety of popular consumer protections (like net neutrality) at the direct request of industry. It raised the question: why suddenly care about consumer protection and antitrust power when you've shown absolutely no general concern for those concepts previously?

As a result, there's always been a lingering question as to whether Trump's obvious disdain for Time Warner owned CNN was driving a petty bid for vengeance. Others wondered if the DOJ's lawsuit was a personal favor to Trump ally Rupert Murdoch, who had tried unsuccessfully to buy CNN from AT&T at least twice, and had spent much of 2017 lobbying Trump to scuttle the deal as a competitive favor to his Fox empire.

With a shakeup in the House, those questions could soon again be making headlines. Incoming House intelligence committee chairman Adam Schiff told Axios last weekend that one of the numerous things the new House leadership will investigate is whether the DOJ's antitrust lawsuit against AT&T was political:

"Schiff said Congress also needs to examine whether Trump attempted to block AT&T’s merger with Time Warner as payback to CNN.

"We don't know, for example, whether the effort to hold up the merger of the parent of CNN was a concern over antitrust or whether this was an effort merely to punish CNN," Schiff said.

To be clear, AT&T's monopoly power is clearly a problem and, regardless of the motivation, it's a good thing the DOJ tried to stop it.

AT&T's domination of both fixed broadband, wireless broadband, and its monopoly over the backhaul connections feeding everything from cellular towers to ATMs was already causing headaches. The company's expanded ownership of "must have" media properties only made things worse by causing new anti-competitive problems for competitors like Dish. Combine these with the death of net neutrality, AT&T's past behaviors, and the FCC's fresh inability to hold AT&T accountable for any of it -- and the over-arching market issues should be pretty clear.

Ultimately the DOJ lost its case for several reasons. Antitrust laws weakened after decades of lobbying left the DOJ arguing obvious outcomes (like AT&T raising rates on competitors and consumers) within narrow confines of economic theory. And because the DOJ didn't want to highlight the fact the Trump admin was harming these same consumers with its other hand (net neutrality), it simply avoided mentioning the idea at all. That's an obvious issue since AT&T's domination of both the media and its broadband monopoly will work synergistically to harm competitors and consumers alike.

Regardless, the Trump DOJ suddenly and exclusively caring about AT&T's monopoly power was always curious. And while many will be sure to suggest that any investigation of the motivation is itself political, it's a question that would be nice to have answered all the same -- since using "instruments of state power" like the DOJ to settle petty grievances with media outlets you don't like is kind of a fucking problem.

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Posted on Net Neutrality Special Edition - 13 November 2018 @ 6:31am

Oh Look, Wireless Sector Investment Is Declining Despite Tax Cuts, Repeal Of Net Neutrality

from the ill-communication dept

You'll recall that one of the top reasons for killing popular net neutrality rules was that it had somehow killed broadband industry investment. Of course, a wide array of publicly-available data easily disproves this claim, but that didn't stop FCC boss Ajit Pai and ISPs from repeating it (and in some cases lying before Congress about it) anyway. We were told, more times that we could count, that with net neutrality dead, sector investment would spike.

You'll be shocked to learn this purported boon in investment isn't happening.

A few weeks ago, Verizon made it clear its CAPEX would be declining, and the company's deployment would see no impact despite billions in tax cuts and regulatory favors by the Trump FCC. Trump's "tax reform" alone netted Verizon an estimated $3.5 billion to $4 billion. A recent FCC policy order, purporting to speed up 5G wireless deployment (in part by eliminating local authority over negotiations with carriers), netted Verizon another estimated $2 billion. And that's before you even get to the potential revenue boost thanks to the repeal of net neutrality and elimination of broadband privacy rules.

Ironically, Verizon's dip in CAPEX came right on the heels of the wireless industry and Ajit Pai, in perfectly coordinated unison, trying to claim that a CAPEX rise in 2017 was directly due to the repeal of net neutrality. They ignored an important point however: net neutrality wasn't even repealed until June of this year. If this endless roster of favors was to impact network investment, accelerate network deployment, and unleash a magical wave of "innovation," that should all be happening right now. And yet, the opposite is happening. And of course it's not just Verizon. AT&T and Sprint are also reducing overall CAPEX:

"Sprint, Verizon and AT&T have all reduced their overall capex numbers for 2018. The operators cite a variety of reasons, from timing issues to more efficient network technologies. But the ultimate result is the same: Where there was once excitement, now there’s a decided sense of pragmatism."

Now there's a number of different reasons for this, including some cost savings in moving from legacy hardware to more efficient virtualization technologies. But again, a decline is not what was promised ahead of the sales pitches for the tax cuts and the attack on net neutrality. The nation was, time and time again, promised unrivaled "innovation and investment boosts" if the nation's companies received a multi-billion-dollar tax cut, and net neutrality and other "regulatory underbrush" was cleared out of the way. That didn't happen.

Instead of investing all these tax breaks, perks, and savings back into the network, they were pocketed by investors and executives. Which, for anybody with half of a functional brain stem was the entire point of having a former Verizon lawyer running the FCC in the first place. This is a longstanding trend in telecom: promise the public the world if they get tax cuts, subsidies, and blind deregulation, then avoid doing pretty much all of those things while pocketing the savings. Perhaps someday America will actually learn some kind of lesson from the experience.

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Posted on Techdirt - 9 November 2018 @ 6:39am

AT&T Ignores Numerous Pitfalls, Begins Kicking Pirates Off Of The Internet

from the raging-over-reaction dept

We've noted for years how kicking users offline for copyright infringement is a terrible idea for a myriad of reasons. Severing access to what many deem an essential utility is not only an over-reaction to copyright infringement, but a potential violation of free speech. As France quickly learned it's also a technical nightmare to implement. Most pirates hide their traffic behind proxies and VPNs, and even if you kick repeat offenders offline, you then need systems to somehow track them between ISPs. There's also the fact that entertainment industry accusations of guilt are often based on flimsy to nonexistent evidence.

None of this is stopping AT&T, which this week quietly indicated they were going to start kicking some users off the internet for copyright infringement for the first time in the company's history.

Axios was the first to break the story with a comically one-sided report that failed to raise a single concern about the practice of booting users offline for copyright infringement, nor cite any of the countless examples where such efforts haven't worked or have gone poorly. I talked a little to AT&T about its new plan, who confirmed to me that while they'd still been sending "graduated warnings" to users after the collapse of the "six strikes" initiative, this policy of actively kicking users offline is entirely new (coming right on the heels of the company's $89 billion acquisition of Time Warner).

Though this doesn't make the idea any better, it's arguably difficult to get on AT&T's bad side under this new program. According to the company, users will need to ignore nine different warnings about copyright infringement before they lose access. AT&T repeatedly tried to make it clear that the actual users getting kicked offline (around a dozen to start) will be relatively minor.

“Based on the notices we received, we identified the customer on the account and shared with them the information we received” from copyright holders, AT&T said. “We also reached out to the customer to educate them about copyright infringement and offer assistance to help prevent the activity from continuing.”

According to AT&T, a “small number of customers” who keep receiving warnings “despite our efforts to educate them” could suddenly find themselves without an internet connection.

While the actual number of users who lose their connections will be minor to start, it's the precedent that remains the problem.

Back in 2013 you'll recall that the entertainment and broadband industries joined forces to create the copyright alert system, or "six strikes." Under that program, users were hit with an escalating number of warnings, and in some instances had their connections throttled or temporarily suspended until users acknowledged receipt of arguably one-sided entertainment industry "education" materials. The program was also widely criticized because users had to pay a $35 fee just to contest potentially-false accusations.

While the argument was that this program would scare users straight and dramatically reduce piracy, the data suggests it didn't accomplish much of anything, and by early 2017 the program had died a relatively quiet death. The entertainment industry's lesson from this adventure should have been that these efforts are a waste of time and that that this time and money should be spent on building better, cheaper alternatives to piracy. Instead, they've concluded the solution is to take this same system and make it even heavier-handed, a goal they've been steadily working toward in the years since.

The result has been numerous lawsuits against smaller ISPs like Cox and Grande Communications, insisting they should lose their safe harbor liability protections under Section 512(i) of the DMCA if they don't follow through on threats to kick users offline. And while the entertainment industry may have had some legal success on this front thanks to several legal screw ups by Cox and a particularly confused judge who believes (in stark contrast to everyone else) that 512(i) applies to ISPs, that doesn't magically mean kicking users off of the internet for copyright infringement actually helps anything or is a good idea.

And while larger ISPs that similarly have an eye on being broadcasters (like Verizon and Comcast) have actually occasionally stood up for users and recognized the perils of ISPs becoming speech and copyright nannies, AT&T, ever the pinacle of anti-consumer sentiment and bad behavior in telecom, clearly has no such reservations.

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Posted on Techdirt - 8 November 2018 @ 6:21am

Marsha Blackburn Continues To Be Rewarded For Screwing Up The Internet

from the rooting-against-your-self-interests dept

You'd be hard pressed to find a bigger telecom sector crony than Tennessee Representative Marsha Blackburn. Blackburn has long made headlines for her support of SOPA, attacks on consumer protections like net neutrality and the FCC's broadband privacy rules. She's also come out in favor of turning ISPs into censors, and has been first in line to support giant ISP-backed protectionist state laws hampering competition. AT&T is routinely one of Blackburn's top donors, and her home state of Tennessee remains one of the least connected states in the nation as a direct result.

Even in our current hyper-tribalistic, post-truth reality, you'd have a hard time arguing that Blackburn has been anything but terrible for the health of the internet and consumer rights. Yet somehow, Blackburn just keeps getting rewarded for giving consumers the tech policy equivalent of a giant middle finger.

Shortly after her attacks on net neutrality (Blackburn absolutely adores the idea of letting the biggest companies buy an unfair market advantage from ISPs) Blackburn was promoted to head the Communications and Technology subcommittee. And this week, Blackburn successfully jumped from the House to the Senate, beating challenger and former Tennessee Governor Phil Bredesen to nab the Senate seat vacated by departing Tennessee Senator Bob Corker. Her win was, unsurprisingly, heralded as a big win for the public welfare by the state's political apparatus:

"Marsha Blackburn demonstrated the type of conservative leadership Tennessee voters want in Washington,” National Republican Senatorial Committee Chairman Cory Gardner said in a statement Tuesday evening. “We want to congratulate Senator-elect Blackburn on a hard-fought victory and look forward to her working in the U.S. Senate to confirm conservative judges, push pro-growth reforms and advocate for policies that improve the lives of all Tennesseans."

It's another example where blind partisan fealty tends to trump common sense, resulting in people who can only see in red or blue cheerfully voting against their own best self interests in what winds up being little more than a self-immolating, facts-optional game of team sports. As we've noted constantly, issues like net neutrality really aren't partisan, since an overwhelming bipartisan majority of Americans support this and other basic checks on monopoly power. ISPs and lawmakers just like to frame such tech issues as partisan, as sowing division hinders consensus and helps stall meaningful change and reform.

Last minute efforts by Taylor Swift apparently didn't help convince Tennessee voters that Blackburn's not their ally. Neither did Consumer groups efforts to educate Tennessee voters about Blackburn's continued tendency to screw them; an effort that at one point involved crowdfunding billboards posted in Blackburn's home district:

With Blackburn how holding a more powerful position in the Senate, Tennessee voters (and the rest of us) can look forward to more of the same. Blackburn is always AT&T's first stop when the company wants to shovel some law its lobbyists wrote into the legislative bloodstream. That was made clear when Blackburn pushed both a fake net neutrality bill and a fake privacy bill, both with only one real goal: to prevent tougher state or federal laws from being passed. As giant ISPs continue their relentless assault on both competition and federal and state oversight, expect Blackburn to play an essential, starring role.

On the plus side, a freshly-reconstituted House filled with more net neutrality supporters should slow any telecom-industry efforts to pass wishlist legislation, while providing something vaguely resembling oversight for the Ajit Pai FCC. Still, it's incredible to watch politicians like Blackburn routinely sell out the majority of her constituents on tech policy, then watch those same constituents happily root against their own best self interests by giving her an endless series of promotions.

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Posted on Techdirt - 7 November 2018 @ 10:50am

Another Study Shockingly Discovers That Cable TV Needs To Compete On Price

from the well,-duh dept

For the last decade the cable and broadcast industry has gone to great lengths to deny that cord cutting (dropping traditional cable for streaming alternatives, an antenna, and/or piracy) is real. First, we were told repeatedly that the phenomenon wasn't happening at all. Next, the industry acknowledged that, sure, a handful of people were ditching cable, but it didn't matter because the people doing so were losers living in their mom's basement. Then, we were told that cord cutting was real, but was only a minor phenomenon that would go away once Millennials started procreating.

Of course none of these claims were true, but they helped cement a common belief among older cable and broadcast executives that the transformative shift to streaming video could be easily solved by doubling down on bad ideas. More price increases, more advertisements stuffed into every viewing minute, more hubris, and more denial. Blindness to justify the milking of a dying cash cow instead of adapting.

Shockingly it's not working, with the third quarter seeing the same old story, as a significant number of customers decide to drop the bloated, expensive, traditional cable bundle:

A study this week by Morning Consult once again made the obvious point that if cable operators want to adapt to this new competitive threat, they absolutely must compete on package flexibility (giving users greater control over the channels they choose in their bundles) and price:

"The poll, conducted from Oct. 18-19 among a national sample of 2,201 adults, found 65 percent of respondents said that TV bundles force consumers to pay for channels they don’t want, with 73 percent of Americans saying they would prefer to choose the exact channels included in their cable or satellite TV packages."

For most people, cost was the biggest reason for cutting the cord: 63 percent said the expense of a cable subscription was a major factor in dropping it, while 53 percent said the same for ending their satellite subscription. The second most common factor for cancellations, cited by 37 percent, was the ability to access all desired content through streaming services.

That cable needs to finally seriously compete on price isn't a new message; it's just that the industry doesn't want to hear it.

That is largely because some of these companies (mostly cablecos) have an ace in the hole: a growing monopoly over broadband. Comcast, for example, has responded to the cord cutting threat by imposing usage caps and overage fees upon huge swaths of its barely-competitive broadband footprint to both a) raise prices on captive broadband customers, and b) use caps and overage fees to punish users for dropping their traditional cable TV packages. They get their pound of flesh one way or another, thanks to the sorry state of the broadband sector.

Again, there are no good choices here if you're a cable and broadcast industry executive actually interesting in staying in the TV business, where actual competition is only just starting to heat up. Either you ignore consumer demand for a cheaper, better, and more flexible product and suddenly find yourself in a terrible hole and behind more agile competitors. Or you adapt, take an upfront financial hit, and at least get out ahead of a trend that's been obvious for the better part of the last decade.

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Posted on Techdirt - 7 November 2018 @ 6:23am

FCC Pretends To Hold Carrier Feet To The Fire On Robocalls

from the annoy-me-during-dinner dept

Despite numerous government initiatives and countless promises from the telecom sector, our national robocall hell continues. Robocalls from telemarketers and scammers continue to be the subject the FCC receives the most complaints about, and recent data from the Robocall Index indicates that the problem is only getting worse. Consumers are routinely hammered by mortgage interest rate scams, credit card scams, student loan scams, business loan scams, and IRS scams. In September, group data showed that roughly 4.4 billion robocalls were placed to consumers at a rate of 147 million per day. The trend is not subtle:

Usually, you'll see the FCC crack down hard on small robocall scammers if the case is a slam dunk. But you'll never really see the agency hold giant carriers accountable for their longstanding apathy, blame shifting, and tap dancing that they have engaged in in terms of quickly adopting modern technical solutions to the problem.

This week, FCC boss Ajit Pai took a break from neutering popular consumer protections to send a letter to 13 companies including AT&T, Sprint, T-Mobile, and Google, demanding they all do more to help protect consumers from robocalls. In a separate statement (pdf), Pai declared that if things don't start improving by next year, he'll maybe actually do something about it:

"Combatting (sic) illegal robocalls is our top consumer priority at the FCC. That’s why we need call authentication to become a reality—it’s the best way to ensure that consumers can answer their phones with confidence. By this time next year, I expect that consumers will begin to see this on their phones...If it does not appear that this system is on track to get up and running next year, then we will take action to make sure that it does."

Pai's letter resulted in numerous outlets stating that carriers must finally move quickly on the scourge of robocalls, "or else." Some outlets took the FCC's letter to mean that carriers absolutely had to solve robocalls by next year or something ambiguously serious would happen to them.

But that's not likely to be the case. Giant carriers have, if you haven't noticed, found the Trump FCC to be a mindless rubber stamp for every single one of their wishes, no matter how preposterous. Surely they're terrified that Pai may actually send them some additional snarky letters. After all, AT&T spent years trying to blame the FCC for its own failure to do more on this front, with zero real repercussions for the behavior (aside from being appointed lead on a "strike force" a few years back that pretty clearly hasn't addressed the problem).

Like past FCCs under opposing parties, the agency loves to do this thing where it "demands" carriers do something they already planned to do. In this case, it's the adoption of a new SHAKEN/STIR call authentication technology to hinder the use of spoofed numbers, which are all but impossible to police. Outside of a few holdouts (CenturyLink, Frontier), most of the carriers Pai sent letters to this week are already engaged in trials of this new technology, and have publicly stated they'll be launching the tech in early 2019.

In short, Pai is "demanding" that carriers adopt technology he knows they already planned to adopt. But his failure to impose a hard deadline (unlike, say, Canada), and his legacy so far of being aggressively cozy with the companies he's supposed to hold accountable, means that it's pretty unlikely that companies that fail to keep pace on SHAKEN/STIR deployments will actually see much in the way of punishment. After all, wasn't letting giant, lumbering telecom monopolies pretty much do whatever they want supposed to be a mystical panacea for the ills of the telecom sector?

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Posted on Techdirt - 6 November 2018 @ 9:35am

Cable's Top Lobbyist Again Calls For Heavier Regulation Of Silicon Valley

from the glass-houses-and-all-that dept

After having just successfully convinced the Trump administration to neuter state and federal oversight of lumbering telecom monopolies, those same companies continue their unyielding call for greater regulation of Silicon Valley.

If you've been paying attention, you'll know that Comcast, AT&T, and Verizon's attack on net neutrality rules was just the tip of a massive, dysfunctional iceberg. Those companies have also convinced the Trump administration to effectively neuter FCC authority over ISPs, and are in the process of trying to ban states from protecting consumers from wrongdoing as well (you know, for freedom or whatever). With neither competition nor even tepid meaningful oversight in place, the kind of bad behavior we've long seen from Comcast appears poised to only get worse.

At the same time, top lobbyists for the telecom industry continue to insist it's Silicon Valley giants that are in need of massive regulation. You're to ignore, of course, that these calls are coming just as giants like Verizon, AT&T, and Comcast try to pivot more fully from broadband into online video and advertising, in direct competition with the companies' they're calling to have heavily regulated. Former FCC boss Mike Powell, now the cable industry's top lobbyist over at the NCTA, has been leading this charge for much of the last year or two.

Powell was back last week at an industry event insisting once again that government needs to step in and start heavily regulating the companies Powell's clients are trying to compete with:

"I think there is a fundamental underappreciation in policy circles about the extraordinary power of the platforms and the data that rides on these companies and value of that information both as a competitive advantage as a platform and the potential dangers to consumers. “That has always been a naive concept and one that I think government was entirely inattentive to for too long, only to wake up in 2018 to realize there are some consequences that are not necessarily affirmative."

Powell's of course trying to play up Silicon Valley's admitted and obvious naivete as it pertains to aiding the amplification of propaganda and racist drivel. But at the same time, of course, he's happy to ignore all of the obvious problems caused by his own sector's growing competition issues, which Powell will be happy to tell you don't exist. In fact back in March Powell gave a very similar speech during which he effectively accused Silicon Valley of most of the things the telecom sector has been doing for years:

"Our governmental authorities need to get a handle on what kind of market power and harm flow from companies that have an unassailable hold on large pools of big data, which serve as barriers to entry, allowing them to dominate industries throughout the economy. For years, big tech companies have been extinguishing competitive threats by buying or crushing promising new technologies just as they were emerging. They dominate their core business, and rarely have to foreclose competition by buying their peers. Competition policy must scrutinize more rigorously deals that allow dominant platforms to kill competitive technologies in the cradle."

While it's obvious that Silicon Valley has plenty of problems that need addressing, listening to Powell's advice (read: Comcast's advice) on these subjects is like getting fire safety advice from a serial arsonist. But for whatever reason it's advice that's clearly resonating in the Trump administration, which pretty consistently has called for antitrust inquiries into major Silicon Valley giants while neutering most meaningful consumer protections (from privacy to net neutrality) governing some of the most clearly anti-competitive and unpopular companies in all of American industry.

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Posted on Net Neutrality Special Edition - 5 November 2018 @ 12:07pm

Supreme Court Rejects Telecom Industry Calls To Hear Net Neutrality Case... For Now

from the round-and-round-we-go dept

Before Comcast, AT&T, Verizon and friends convinced the Trump FCC to ignore the public and kill net neutrality, they attempted to dismantle the rules legally. That effort didn't go very well, with the U.S. Court of Appeals for the D.C. Circuit upholding the FCC's Open Internet Order in June of 2016, and ISPs losing a subsequent en banc appeal. More specifically, the courts found that the former Wheeler-run FCC was well within its legal right to reclassify ISPs as common carriers under the Telecom Act.

But, last August, lawyers for the FCC and Department of Justice (at direct telecom industry behest) filed a brief (pdf) with the Supreme Court, urging it to vacate the 2016 court ruling that upheld the Wheeler-era net neutrality rules. The move was necessary, FCC lawyers claimed, because the FCC's comically-named "Restoring Internet Freedom" proposal had somehow "repudiated those factual and legal judgments." If you watched as the FCC repealed net neutrality using little more than lobbyist fluff and nonsense, it should be fairly obvious to you that wasn't true.

So what was the telecom industry and its BFFs in the Trump administration trying to do? They know their repeal of net neutrality was so filled with procedural missteps and outright fraud that they're worried it will be overturned by next year's net neutrality lawsuits, opening arguments for which begin in February. As such, they were hoping to undermine the established legal precedent supporting the 2015 rules in a bid to ensure they couldn't and wouldn't be restored.

That gambit hasn't worked. The Supreme Court this week stated it wouldn't be hearing the case (pdf). While the announcement states that Justices Clarence Thomas, Samuel Alito and Neil Gorsuch would have taken up the case, the Washington Post notes that John Roberts and newly-appointed Justice Brett Kavanaugh were required to recuse themselves because of conflicts of interest, leaving the telecom industry without enough court backing to move forward:

Three of the Court’s justices — Clarence Thomas, Samuel Alito and Neil M. Gorsuch — would have voted to take up the case, according to the Court’s announcement, and overturn a lower court’s decision backing the Federal Communications Commission’s net neutrality rules, which were originally passed in 2015. But there were not enough justices for a majority, after Chief Justice John G. Roberts Jr. and Justice Brett M. Kavanaugh recused themselves. (Roberts' financial disclosures show that he owns stock in Time Warner, which is now owned by AT&T under the name WarnerMedia, while Kavanaugh took part in the case as a judge in the lower court.)

As we've noted in the past, Kavanaugh was more than eager to support the telecom industry argument that net neutrality violated their First Amendment rights, despite the fact that's obviously not true. While Verizon, Comcast, and AT&T lawyers claimed that blocking content and services amounts to an "editorial decision," in reality, ISPs aren't editors; they're simply connecting people to services. Still, "net neutrality violated ISPs' First Amendment rights" was an argument ISP lawyers basically threw at a wall to see if it would stick, and Kavanaugh was more than happy to agree.

Of course while the Supreme Court has refused to hear this case, they could be hearing future cases depending on how next year's net neutrality lawsuits (filed by 23 State AGs and Mozilla) go. ISP lawyers have routinely claimed at this point that any state or federal attempt to hold them accountable for poor service or fraud is a violation of their First Amendment rights, and Kavanaugh's sure to play an un-recused, starring role in many of these cases, one way or another.

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Posted on Techdirt - 5 November 2018 @ 6:29am

Charter Spectrum's CEO Continues To Whine About Streaming Password Sharing

from the get-off-my-damn-lawn dept

For years now, streaming video providers like HBO and Netflix have taken a relatively-lax approach to password sharing. Netflix CEO Reed Hastings has gone so far as to say he "loves" password sharing, and sees it as little more than free advertising. Execs at HBO (at least before the AT&T acquisition), have similarly viewed password sharing in such a fashion, arguing that young users in particular that share their parents password get hooked on a particular product via password sharing, then become full subscribers down the road once they actually have disposable income.

On the other side of the equation sits Charter CEO Tom Rutledge, one of the highest paid execs in media. He, in contrast, has long complained that he views password sharing as "piracy", and has consistently promised to crack down on the practice. Rutledge and his fellow executives gave a particularly rousing "get off my lawn" lecture at a media event last year:

"There’s lots of extra streams, there’s lots of extra passwords, there’s lots of people who could get free service,” Rutledge said at an industry conference this month...“It’s piracy,” Connolly said. “It’s people consuming something they haven’t paid for. The more the practice is viewed with a shrug, the more it creates a dynamic where people believe it’s acceptable. And it’s not."

Of course it's far from "piracy" if it's being sanctioned by the companies doing it, with an eye on generating product awareness and happy customers. That last bit is something Rutledge could use some lessons on. Rutledge fixates on password sharing when he should be focused on why exactly his company continues to bleed subscribers to these cheaper, more flexible traditional cable alternatives. Hint: endless rate hikes, historically terrible customer service, and megamergers

Last week Rutledge was at it again. During his company's latest earnings call, Rutledge proclaimed that streaming providers like HBO and Netflix clearly "don't know what they're doing" because they've refused to crack down on the villainous practice of password sharing:

"By the content companies going over the top without having the experience of being distributors, they’ve done that in a way without securing their content, which any distributor would theoretically do if they knew what they were doing. But that hasn’t been the case, so you have free service all over the country through passwords,” Rutledge said. “The reality is television can be had fairly easy without paying for it."

Granted just because television can sometimes be "had fairly easy without paying for it" doesn't mean it's bad, or it's "piracy." Millions of users increasingly are flocking to over the air antennas as an alternative to the bloated, expensive cable bundles execs like Rutledge simply can't move on from. It's worth noting that this is a "problem" that really isn't. Most streaming services already limit simultaneous streams per account, and being able to share your password with a limited set of friends and family members is part of the value equation you're paying for.

It's also worth noting that when HBO or Netflix execs acknowledge the trend, they note there really aren't all that many users actually doing it. As such, if there's something Rutledge wants to spend several years hyperventilating over, it should probably be his company's continued failure to actually listen to consumers, and offer a better product with support that isn't ranked among the worst of any company, in any industry in America.

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Posted on Techdirt - 2 November 2018 @ 6:27am

AT&T Blackout Of HBO On Dish Highlights Perils Of Megamerger Mania

from the do-not-pass-go,-do-not-collect-$200 dept

You might recall that AT&T recently defeated the DOJ's challenge to their $86 billion merger with Time Warner thanks to a comically narrow reading of the markets by U.S. District Court Judge Richard Leon. At no point in his 172-page ruling (which approved the deal without a single condition) did Leon show the faintest understanding that AT&T intends to use vertical integration synergistically with the death of net neutrality to dominate smaller competitors and squeeze more money from consumers in an ocean of creative new ways.

Throughout the case the DOJ tried to demonstrate (poorly) that a bigger AT&T has every incentive to behave badly. Admittedly those efforts were pretty feeble since the multi-decade steady lobbyist erosion of antitrust law left them trying to make the case within very narrow confines of legally-acceptable economic theory. The DOJ also shot itself in the foot by refusing to even mention AT&T's attacks on net neutrality, likely because it didn't want to highlight the fact that another arm of the government (the FCC) was actively harming the same consumers the DOJ claimed it was trying to protect.

Regardless, with the merger still less than 5 months old, AT&T has been quick to show why people were concerned. The company has already quickly jacked up rates on most of its subscribers and imposed all manner of bizarre new fees as it tries to recoup the massive debt it incurred from both the DirecTV and Time Warner mergers. And this week, AT&T blacked out (previously Time Warner-owned) HBO content for Dish Network customers during contract negotiations, the first time that has happened in the history of HBO:

"AT&T Inc.’s HBO and Cinemax programs were pulled from Dish Network Corp.’s satellite service after the companies failed to reach a new distribution agreement, setting up a real-life “Game of Thrones” between two of the biggest players in pay TV. It is the first time in HBO’s more than four-decade history that programming has been blocked at a distribution partner over a contract dispute, according to AT&T, which acquired the premium cable network as part of its June $85 billion acquisition of Time Warner.

We've noted for years how retransmission and carriage fee disputes in the cable industry have grown increasingly common and are only getting worse. Basically, when it comes time to sign a new deal paying for content, broadcasters generally demand huge rate hikes for the same channels. Cable operators then play hardball, and during negotiations one side or the other (usually broadcasters) pulls their content from the cable lineup. Consumers never see refunds for these feuds, even though these feuds have occasionally left them without access to channels they've already paid for, for months.

For weeks, consumers are bombarded with PR missives, new websites and on-screen warnings all trying to amplify public outrage and drive greater pressure for one side or the other to buckle. After a while, the two sides strike a new confidential deal, and the higher rates are then quickly passed on to consumers. In a letter to lawmakers last year, Dish Network argued that consumers have faced 750 such broadcaster blackouts since 2010, with the retransmission consent fees that broadcasters demand growing a whopping 27,400% between 2005 and 2016.

Of course Time Warner and HBO management traditionally took the high road to avoid these kinds of problems, something that appears to have suddenly and abruptly changed. HBO execs are implying to media outlets that this could all just be a press stunt by Dish to apply pressure on AT&T as it fights the DOJ's recent appeal. Even if that's the case, consumer groups and out-leveraged smaller cable ops have been pushing for years for updated regulations that ban companies from blacking out content while companies bicker over rates.

These demands are never really taken seriously in DC, as it's seen as too heavy handed of an intervention into negotiations between two companies. Ignored is that during these outages, consumers don't see refunds for content they paid for, and this consumer outrage itself is actively encouraged by both sides in a bid to apply pressure on the other end of the deal. While the FCC under Wheeler flirted with the idea of basic FCC rules putting this ridiculous tap dance to bed, there was simply no follow through.

That AT&T was going to use its newfound power to jack up prices for its TV competitors wasn't rocket science, especially if you've watched AT&T's particular flavor of "doing business" anytime over the last two decades.

The irony here is that AT&T even promised the DOJ that it would avoid these kinds of blackouts as a merger condition if the DOJ approved the deal. But the DOJ sued anyway claiming it was helping consumers (though Trump's disdain for CNN and Trump ally Rupert Murdoch's lobbying against the deal are seen as more likely justifications for a consumer-protection phobic Trump administration). But the DOJ's sloppy handling of the case and a terrible ruling by Leon left AT&T more powerful than ever, and consumers and competitors left more vulnerable than ever.

And that's before you even get to AT&T's plans for the post net neutrality world, currently on hold pending the outcome of next February's looming court battle.

Here in the States we have this bizarre tendency to either mindlessly approve megamergers with zero conditions, or conditions that companies are allowed to just tap dance around. The resulting mega-company then behaves badly, and everybody just stands around with a stupid look on their face. Rinse, wash, repeat.

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Posted on Techdirt - 1 November 2018 @ 10:44am

Verizon Just Obliterated Ajit Pai's Justification For Killing Net Neutrality

from the ill-communication dept

If you'll recall, FCC boss Ajit Pai has spent the better part of the last few years insisting that giving the telecom industry whatever it wants will somehow magically boost sector investment, jobs, and competition. Of course if you've paid attention to history you'll probably notice that in telecom, it never actually works that way. Former FCC boss Mike Powell (now the top lobbyist for the cable industry) engaged in much of the same behavior in the early aughts, promising that if you obliterate consumer protections and regulatory oversight of ISPs, telecom Uptopia magically springs forth from the sidewalk. Instead, we got Comcast.

It's a cycle of dysfunction Americans just can't seem to learn anything from.

Since the start of his tenure, Ajit Pai and the GOP have taken a flamethrower to numerous, basic consumer protections ranging from basic privacy rules governing the sale and collection of your private data, to net neutrality rules that protect consumers and competitors from being nickel-and-dimed by lumbering telecom monopolies. He's also attacked efforts to bring competition to cable boxes, has slowly dismantled broadband programs for the poor, attacked states rights' to protect consumers or build their own networks, and basically neutered the FCC's ability to protect you from monopoly power.

More recently, you'll recall the massive tax cuts were supposed to spur investment, the telecom sector included. As was Ajit Pai's recent policy order neutering local authority over cellular tower placement. Both, like net neutrality, were supposed to result in a dramatic spike in next-gen "5G" network deployment, and a big boost in sector investment overall. This week, Verizon made it clear that none of those things would actually be happening, despite the $2 billion in savings Pai's 5G "reform" alone provided Verizon:

"Verizon Wireless says it will not move faster on building its 5G cellular network despite a Federal Communications Commission decision that erased $2 billion dollars' worth of fees for the purpose of spurring faster 5G deployment...in an earnings call last week, Verizon CFO Matt Ellis told investors that the FCC decision won't have any effect on the speed of its 5G deployment. Verizon also said that it is reducing overall capital expenditures—despite a variety of FCC decisions, including the net neutrality repeal, that the FCC claimed would increase broadband network investment.

That net neutrality hampered broadband industry investment has been the cornerstone of Ajit Pai's entire justification for removing those rules, despite this claim never being adequately supported by the facts. Again, that claim was directly contradicted by SEC filings, earnings reports, and more than a dozen public CEO statements. And here it is again being disproved by the industry itself, just as they were by Powell's empty promises in the early aughts. All the bogus, massaged ISP economist claims to the contrary can't save this turd of an argument when the evidence is sitting right in front of you.

Telecom sector investment doesn't magically explode just because you let AT&T, Verizon, and Comcast directly dictate your tech policy agenda. Gutting essential consumer protections doesn't magically "unhinder the free market," it simply lets lumbering, politically-powerful giants double down on a generation of nickel-and-diming captive customers, with neither regulatory oversight nor healthy competition acting as guide rails.

Targeted deregulation can help healthy markets if it's aimed at eliminating bureaucracy that hinders competition or innovation, but anybody claiming that mindless deregulation can cure telecom either is lying to you for financial gain, or doesn't understand how the U.S. telecom market works. People tend to take Libertarian or free market theories cultivated from other sectors, and apply them to a telecom sector that's uniquely broken and corrupt, failing to understand that blind deregulation won't work here. Steadily weakened antitrust protections similarly aren't the panacea these folks believe.

What the telecom sector desperately needs is even-handed, intelligent tech policy and regulatory solutions with an unwavering focus on one thing: driving broadband competition in whatever form that takes. There's a million ways to accomplish this, from eliminating ISP-written, protectionist state laws banning your town and city from exploring creative alternatives to purely private networks (like public/private options), to actually holding giant ISPs accountable when they try to hamstring both direct broadband or streaming video competitors.

What you don't do is let companies with an obvious, vested interest in less competition and no guard rails completely dictate tech policy, then repeatedly lie about the amazing net benefits this mindless fealty will have. For whatever reason, despite history repeatedly and painfully illustrating the perils of this approach in the form of some of the worst service of any kind available in America (call Comcast customer support or spend a week using a West Virginian Frontier DSL line if you need first-hand experience on this front), it's a lesson the United States stubbornly refuses to learn.

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Posted on Techdirt - 1 November 2018 @ 6:24am

All The Mergers In The World Apparently Can't Save AT&T From Cord Cutting

from the old-school dept

Over the last five years AT&T and Verizon have been desperately trying to pivot from stodgy, protectionist old telcos -- to sexy new Millennial media juggernauts. And while this pivot effort has been notably expensive, the net result has been somewhat underwhelming. Verizon, for example, spent billions to gobble up AOL and Yahoo, but its lack of savvy in the space has so far culminated in a privacy scandal, a major hacking scandal, a quickly shuttered website where reporters couldn't write about controversial subjects, and a fairly shitty Millennial streaming service that even Verizon's own media partners have called a "dud."

Verizon's new CEO Hans Vestberg appears to have gotten the message (that stodgy old telcos kind of suck at disruption and innovation) and has been shifting Verizon back toward its core competency: running networks.

AT&T's efforts have been notably more expensive than Verizon's, but just as underwhelming. The company first decided to shell out $70 billion for a satellite TV provider (DirecTV) on the eve of the cord cutting revolution. And, after a lengthy DOJ lawsuit, shelled out another $89 billion for Time Warner in a quest to gain broader media and advertising relevance. That was paired with the launch of a new streaming service, DirecTV Now, which the company hoped would help it beat back the tide of cord cutting.

Despite hundreds of billions in acquisition costs and debt, it's not working. The company saw a another net loss of 297,000 TV customers last quarter as the company's traditional TV services (DirecTV and AT&T's IPTV service) lost 346,000 subscribers, and the company's shiny new DirecTV Now service only added 49,000 subscribers during the third quarter. To be fair, AT&T actually is more forward thinking than a lot of other cable operators in that it's embracing cheaper streaming alternatives fully. But the company still couldn't help itself when it came to quickly pushing price hikes, the primary reason for last quarter's dip:

"In July, AT&T raised DirecTV Now prices by $5 per month across the board in hopes of making the service profitable. More importantly, AT&T also stopped offering incredible device deals to new subscribers. Until this summer, new customers could get a free Roku Streaming Stick (regularly $50) with a month of $35 prepaid service, or a free Apple TV 4K (regularly $180) with three months of prepaid service at $105. There was nothing stopping customers from signing up, immediately canceling, and walking away with a new streaming device at far below retail prices."

On the plus side, AT&T's strategy of getting out ahead of the streaming revolution isn't entirely unsound. You'd rather be ahead of a trend and take some early hits, than be utterly blindsided while sticking to old habits (oh hi ESPN, didn't see you standing there). But AT&T being, well, AT&T, you just know it won't be able to help itself when it comes to nickel-and-diming its users, something that's going to be made immeasurably easier if it's successful at gutting both federal and state consumer protection authority.

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Posted on Techdirt - 31 October 2018 @ 6:26am

The Foxconn Wisconsin Deal Has Devolved Into A Pile Of Shifting Promises, Buzzwords, And Hype

from the prey-I-don't-alter-our-deal-further dept

Last year, you'll recall that Wisconsin Governor Scott Walker signed what at the time was treated as a revolutionary deal: the state promised Taiwan-based Foxconn a $3 billion state subsidy if the company invested $10 billion in a Wisconsin plant that created 13,000 jobs. Walker hoped that the deal would finally help cement job growth that he had promised his supporters for years, and the press was quick to hype the plan without really giving it too much thought. Quietly, Wisconsin’s non-partisan Legislative Fiscal Bureau was busy pointing out that it would take until 2043 for taxpayers to recoup the subsidy, though that obviously took second fiddle to the hype of bringing American jobs back from overseas to focus on cool new tech.

But as the details of the plan solidified by late last year, the $3 billion subsidy quickly ballooned to $4.1 billion, and some folks quietly began to notice that the math really didn't make much sense:

"Wisconsin currently has an unemployment rate of 3.2%, so they are only so many workers available locally. Realistically, the payback period for a $100,000 per job deal is not 20 years, not 42 years, but somewhere between hundreds of years and never. At $230,000 or $1 million per job, there is no hope of recapturing the state funds spent from taxes on the company and its workers."

Many now doubt whether the subsidy will ever pay for itself. This week, The Verge offered up a new piece dissecting the deal and it's well worth a read. It notes that while the scope of the subsidies Foxconn would receive slowly ballooned, the promised factory Foxconn was supposed to build kept shrinking in size and scope. Instead of building 10-foot by 11-foot panels for 75-inch TV screens, Foxconn would be building a Generation 6 plant that only produces 5-foot by 6-foot glass panels.

Instead of a 10.5 plant needing $10 billion in investment (Foxconn's original promise), the Gen 6 plant actually being built requires about a $2.5 billion investment. And still, the scope of the promised plant continued to shrink:

"But Foxconn officials also said that the company was still committed to a $10 billion investment and 13,000 jobs, adding it might eventually add a Gen 10.5 plant, but it would get there in “phases.” The phases were not spelled out.

Just seven weeks later, in late August, the company announced the plans had changed yet again — far more radically. Woo told the Racine Journal Times that Foxconn would never add a Gen 10.5 plant to its Racine campus, despite past statements, because by the time it was built, the market would be glutted by other manufacturers in China."

Of course none of this should really be surprising, especially given that Foxonn has made similar, magically-shrinking promises of similar ilk in countries like Vietnam, India, and Brazil. And this is all before you seriously consider the environmental impact of the arrangement, which many aren't. At this point, the fading promises have become almost comedic in nature (if you ignore taxpayers footing the bill for the kerfuffle). Vast plans to build a major panel manufacturer plant with thousands of new jobs have been replaced by hype, buzzwords, and nonsense:

"Even the Gen 6 panels might not be manufactured in Racine for long. “We are not really interested in television,” Woo told the newspaper, though he said the company wants to build America’s first thin-film transistor (TFT) fabrication, which can be used in LCD products. Rather, Woo said, workers at the Wisconsin plant will be focused on figuring out new ways to use Foxconn’s display, cellular, and AI technology, building out an “ecosystem” Woo calls “AI 8K+5G."

We've already noted that 5G is important but violently over-hyped, and this idea of an "AI 8K+5G ecosystem" is largely meaningless (they really should have thrown a blockchain reference in for good measure). A May 2018 poll of locals found that 66% doubted the deal would ever actually meaningfully benefit the local economy, and the plan isn't having anywhere near the impact on polling that Walker had hoped ahead of the midterms. At this rate, Wisconsin will be lucky to see a few thousand jobs in exchange for an investment most objective observers doubt will ever actually pay for itself.

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Posted on Techdirt - 30 October 2018 @ 6:32am

FCC Falsely Declares Community Broadband An 'Ominous' Attack On Free Speech

from the bullshit-factory dept

Absent any hard data to support their claims, you may have noted that the Trump FCC often just makes up some shit.

Like that time FCC boss Ajit Pai tried to claim that net neutrality somehow aids dictators. Or that time Pai's office just made up a DDOS attack to try and downplay massive public backlash to his historically unpopular policies. There's often no real-world data that can defend blindly kissing the rings of widely-loathed telecom monopolies, so bullshit tends to be the weapon of choice when Pai's FCC embraces whatever handout to Comcast and friends is on the menu this week.

The latest case in point: during a speech at the ISP-backed and scientifically-sounding Media Institute, FCC Commissioner Mike O’Rielly took a moment to broadly declare that community owned and operated broadband providers are an "ominous" threat to free speech:

"I would be remiss if my address omitted a discussion of a lesser-known, but particularly ominous, threat to the First Amendment in the age of the Internet: state-owned and operated broadband networks."

We've long noted how community broadband networks are often an organic response to the expensive, slow, or just-plain unavailable service that's the direct product of a broken telecom market and regulatory capture. While you'll occasionally see some deployment duds if the business models aren't well crafted, studies have shown such networks (there's 750 and counting now in the States) offer cheaper, faster service than many incumbents. This direct threat to incumbent revenues is a major reason why ISP lobbyists have passed protectionist laws in more than 21 states trying to block your town's ability to even consider the option.

If you thought O'Rielly would provide hard evidence of these networks' "ominous" affront to free speech, you'd be mistaken. The closest O'Rielly gets to evidence is a 2015 white paper crafted for an ISP-funded think tank claiming that because these ISPs' TOS include routine language restricting harassment and hate speech (language every private ISP also includes in their TOS and AUP), community-run ISPs' are more likely to censor user speech:

"The closest O’Rielly gets to supporting evidence appears to be a 2015 white paper written by Professor Enrique Armijo for the ISP-funded Free State Foundation. That paper similarly alleges that standard telecom sector language intended to police “threatening, abusive or hateful” language somehow implies community-run ISPs are more likely to curtail user speech."

Of course the implication is that government-run networks must be bad because hey, it's the government. Forgotten in this false narrative is the fact that on the local level, the government is obviously you and I, and these networks are a direct, democratic response to decades of frustration at the obvious failures of the telecom market. And if you talk to folks that actually have some expertise on this subject (like I did over at Motherboard), they'll tell you that because these ISPs actually have a vested interest in the communities they serve, they're far more responsive to user complaints:

"Municipal broadband experts say the argument has no basis in fact.

"There is no history of municipal networks censoring anyone's speech,” Christopher Mitchell, a community broadband expert and Director of the Institute for Local Reliance, told Motherboard.

“In our experience, the Terms of Service from municipal ISPs have been similar to or better than those of for-profit ISPs in terms of benefiting subscribers,” he added. “And when concerns have been raised about related issues...the municipal ISPs have listened to public sentiments far more than any large cable or telephone company has."

O'Rielly also fails to mention that incumbent ISPs like Comcast routinely argue that absolutely everything the public demands of it (from expanding broadband to adhering to net neutrality) violate its First Amendment rights (an argument new Supreme Court Justice Brett Kavanaugh has already supported). Whereas municipally-run ISPs likely won't be allowed to tap dance around First Amendment lawsuits as government-linked entities mandated to avoid speech regulation.

But the biggest irony here is that one of the ISPs targeted by O'Rielly for non-existent free speech violations is EPB broadband in Chattanooga, which was just ranked by Consumer Reports as one of the best ISPs in the nation in terms of value, speed, and service quality. Comcast tried to unsuccessfully sue EPB out of existence. And as long as we're getting vexed about your rights, both AT&T and Comcast also lobbied legislators to pass a law in Tennessee restricting voter-approved broadband networks like these from expanding, even if voters approve it at the ballot box.

Ultimately, Chattanooga's service forced these ISPs to do the one thing they had been hoping to avoid: compete on both service speed and price. That's not to say local-government owned broadband should be the only solution embraced, but it's obviously one of several ways you can actually prod lumbering, pampered mono/duopolies to actually give a damn.

And of course that's the real problem in O'Rielly's mind: that locals would dare impede on Comcast's god-given right to buy itself a geographical monopoly over an essential service, nickel-and-diming consumers until they grew so frustrated they're forced to get into the broadband business themselves.

Of course ISPs could prevent this by simply offering better, faster, and cheaper service. But it's far easier and cheaper to try and buy laws restricting consumer rights, and to have your favorite public official mindlessly demonize something that is, at the end of the day, a legitimate, organic public response to a broadband competition and availability problem ISPs like AT&T, Verizon, and Comcast would prefer regulators ignore.

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