Broadband Cable Association of Pennsylvania


February 10, 2014

In his first 100 days as the chairman of the Federal Communications Commission, Tom Wheeler persuaded mobile phone companies to agree on rules about unlocking consumers' phones, cemented an effort to increase the reliability of calls to 911, proposed tests to do away with old-fashioned telephone networks and freed $2 billion to connect schools and libraries to the Internet.

Those were the easy tasks. In the coming days, the telecommunications, media and Internet industries will be watching to see how Mr. Wheeler responds to last month's federal appeals court decision that invalidated the rules created by the F.C.C. in 2011 to maintain an open Internet. Mr. Wheeler has said that he views the decision, which many people saw as a setback for the agency, as an opportunity. He contends he can use it to assert the commission's broad legal authority to enforce equality and access throughout the networks on which Internet traffic travels - a concept known as net neutrality.

Stressing the depth of his conviction, Mr. Wheeler answered a reporter's question at a recent news conference about how the F.C.C. would react by pounding the lectern, emphasizing each word: "We will preserve and protect the open Internet." An open Internet means that the companies controlling the network through which digital traffic travels cannot determine who gets access to the network. An Internet company could not charge more for certain kinds of content, say a movie or breaking news, although the appeals court decision makes those kinds of practices possible.

Republican members of Congress have warned Mr. Wheeler that the federal court has twice told the F.C.C. it does not have that authority. In a pointed statement after the appeals court threw out the F.C.C.'s rules, Senator John Thune, a South Dakota Republican, reminded Mr. Wheeler that he had promised during confirmation that he would return to Congress "for more direction before attempting another iteration of network neutrality rules." But in an interview Friday, Mr. Wheeler asserted that he was under no such obligation. "What I said was if the Open Internet Order was thrown out by the court, of course I would talk to Congress. But the Open Internet Order was not thrown out by the court," he said. "In fact, the court affirmed our authority."

How Mr. Wheeler navigates the issue represents a critical stage in his short tenure. Members of Congress on both sides of the aisle will be watching closely, largely because they are staking out positions for a rewriting of the laws governing the nation's communications systems, which were last updated in 1996. "His goal is to determine how the agency as an institution will develop and evolve in a more advanced technological arena," said Phil Weiser, the dean of the University of Colorado law school. If he feels pressure, Mr. Wheeler, a former businessman in both the cable and Internet industries, is not showing it. "These are issues I've been living with for a lifetime," he said Friday. "My job is to be here representing American consumers."

He has assembled a team of experienced telecom hands to guide him. Among them are Philip Verveer, the politically connected lawyer who headed a federal effort to prosecute AT&T that led to the breakup of the Bell phone monopoly; Gigi B. Sohn, former president of the advocacy group Public Knowledge; and Ruth Milkman, who has held senior positions in several F.C.C. departments. "He has taken people with lots of different real-world experiences and perspective, and he has been clear about his goals," said Karen Kornbluh, a telecommunications specialist who was a candidate for the F.C.C.'s top post.

Mr. Wheeler's first 100 days have not proceeded without missteps - most notably, creating a firestorm with the impression that the F.C.C. was about to allow cellphone calls to be made on airplanes. (The F.C.C. did say there remained no engineering reasons to maintain the prohibition, but it is the Federal Aviation Administration's decision whether or not to do so.) "I think, frankly, that I handled it clumsily in that I didn't use terms that were not regulatory-ese," Mr. Wheeler said. "I learned that the minute you put something on an agenda you need to be able to explain it in something other than regulator jargon." In fact, Mr. Wheeler rarely resorts to jargon; a 67-year-old Midwesterner, he seems to have a wry aphorism for every occasion.

In three months he has reminded listeners that this is "not my first rodeo" and that as chairman he did not intend to "sit around and suck eggs." When a public interest group delivered a petition with more than one million signatures urging the F.C.C. to protect the open Internet, Mr. Wheeler said - without irony - "That's boffo!" But he has yet to speak plainly about his plans to overcome the net neutrality decision. Critics say that in doing so he has hidden just how much power the F.C.C. had gained from the decision.

In the case, Verizon v. F.C.C., the United States Court of Appeals for the District of Columbia Circuit said that the commission was wrong in how it went about imposing rules on how broadband providers treat Internet traffic. But the decision embraced a view the F.C.C. itself had previously rejected - that the agency's charge to promote the expansion of broadband gives it sway not only over Internet service providers but also over companies that offer Internet content, like Google, Facebook or Netflix. "It gave the F.C.C. a lot more power to do anything it wants to a lot of Internet companies," said Berin Szoka, a founder of TechFreedom, which promotes digital rights and privacy. "It means three unchecked bureaucrats at the F.C.C.," the number required for a majority on the five-member commission, "get to regulate the Internet however they want without any oversight."

Robert M. McDowell, a former F.C.C. commissioner who is now a visiting fellow at the Hudson Institute, said the decision "was clearly written in a way to give the F.C.C. the authority to do something." However, he added, "The court left open what that something is." New York Times

Charter Communications Inc. plans next week to nominate a full slate of candidates for Time Warner Cable Inc. 's 13-member board, say people familiar with the situation, setting in motion one of the biggest recent hostile takeover bids. Charter isn't likely to raise its offer for TWC at the same time as putting forward the slate, the people said, despite expectations among some investors of such a move. Instead Charter is likely to wait a few weeks until later in the proxy fight campaign before bumping the price, one of the people said. Meanwhile it would likely continue trying to negotiate a deal privately.

Charter, the fourth largest cable operator by subscribers, has been attempting to bring Time Warner Cable, the second biggest cable company, to the negotiating table for a merger deal since late last spring. It has made three offers so far, the most recent at $132.50 a share, each rejected by TWC as being too low. Time Warner Cable has said it wants a price of $160 a share and won't negotiate with Charter otherwise.

All 13 of Time Warner Cable's board members are up for re-election at the annual meeting this spring, presenting Charter with a rare opportunity among recent hostile bidders, to take control of the board. Other hostile bids have been hampered by staggered boards, in which only one-third of seats open up each year. Men's Wearhouse Inc., for example, has said it plans to nominate two directors at Jos. A. Bank Clothiers Inc., hoping to press a $1.6 billion takeover bid. But a win would be largely symbolic. Because Jos. A. Bank's board is staggered, Men's Wearhouse would have to win a second vote in 2015 to take control.

A central point of Charter's proxy campaign will be that its candidates would, if elected to TWC's board, make a priority of evaluating Charter's offer. A vote for Charter's candidates, one of the people said, would therefore be a vote for TWC to engage with Charter. The identities of Charter's nominees couldn't be learned; the deadline for nominations is Feb. 15. How high Charter will raise its offer still isn't clear. Several Time Warner Cable investors say they'd like around $145 a share. Time Warner Cable shares were up 94 cents to $136.29 in after-hours trading on Friday. At $145 a share, a deal would be worth about $41 billion excluding debt.

Even a clean win in the proxy fight wouldn't guarantee that a deal gets done. The new board would have to independently evaluate the offer, setting aside their allegiance to Charter. This responsibility has tripped up hostile bidders before. Air Products & Chemicals Inc. in 2010 won three board seats at Airgas Inc., which Air Products had been trying to buy. Once on the board, the new directors recommended against the deal. Charter's proxy nomination may also occur without clarification of one big issue surrounding the monthslong takeover battle: the role of Comcast Corp. , the number one cable operator. Charter has been negotiating a deal with Comcast in which Comcast would endorse Charter's bid for TWC in exchange for an agreement to buy some of TWC's systems in the event Charter is successful in buying Time Warner Cable. The systems under discussion are some of TWC's east coast systems, including those in the New York area.

Such a deal would be a big boost to Charter's hopes of winning control of TWC, by removing Comcast as a potential rival bidder. But despite expectations among some TWC investors that a Comcast-Charter deal would be struck ahead of Charter's nomination of its slate, an agreement isn't expected to be announced next week, a person familiar with the situation said. If Comcast and Charter reach a deal, Comcast isn't expected to put money into a Charter bid upfront, or get involved with any Charter-led proxy fight. Wall Street Journal

DirecTV, which has blacked out the Weather Channel for several weeks over a fee dispute, said Monday that it struck a deal with WeatherNation TV Inc. to boost customers' access to local weather forecasts. DirecTV customers will be able to get their local weather information through a feature on the WeatherNation channel (362), the companies said. The agreement also enhances severe weather coverage, filling a void left by the Weather Channel. "We realize that having instant access to local weather is important to our customers and are proud to partner with WeatherNation on these great new services, which will provide more in-depth local and severe weather coverage than any other TV provider," DirecTV executive Dan York said.

DirecTV has balked at the Weather Channel's fees, reportedly seeking a cut of more than 20%. Last month, the satellite television provider's chief executive, Mike White, said the channel is worth a quarter of the price it wanted DirecTV to pay. The Weather Channel, meanwhile, has fought the blackout in an ad and public relations campaign, including through the website, framing the issue as a public-safety issue. The channel is a unit of Weather Co., which is owned by NBCUniversal Inc., Bain Capital LLC and Blackstone Group L.P. DirecTV added WeatherNation to its lineup in the weeks leading up to the blackout, which took effect after midnight Jan. 13. Wall Street Journal

The fun-filled Democratic State Committee meeting in Hershey over the weekend produced - in addition to a nasty spat between Jonathan Saidel and Rob McCord - some mildly interesting results when it came to voting. After fighting over whether to have an endorsement vote (as party rules call for) or not, the county-by-county results on the first of two ballots included a few eyebrow-raisers. For example, "frontrunner" Allyson Schwartz got only about half the votes McCord got. He led six party-nominated contenders with 146 votes; Schwartz got 75. (Tom Wolf was third with 52. John Hanger got 22. Katie McGinty got 19. Jo Ellen Litz got none. And Max Myers did not have his name put into nomination.)

But among southeastern counties - homebase to Schwartz, McCord and McGinty - Schwartz got nearly double McCord's take: she got 65 votes (driven by 49 from Philadelphia) and he got 36 votes. She got more in Montco. He got more in Chester and Bucks. They tied in Delaware. McGinty drew goose eggs. A couple counties abstained. Juniata (pronounced Junie-AT-uh) didn't vote. I assume this was due to lingering anger over having been called Juan-EAT-uh County by Democratic U.S. Senate candidate Lynn Yeakel way back in 1992. And Union County didn't vote, probably because "union" never seems to really fit anything the Democratic Party does.

Tom Wolf swept the "W" counties of Washington, Wayne and Westmoreland, getting all their votes, no doubt due to alphabet allegiance. And Litz, although a four-term comissioner in Lebanon County, got no votes from Lebanon County. There were 319 votes cast. To secure party endorsement, 209 votes were needed. So noboby went home with the, um, "prize." There was a second ballot that didn't much change things, but at least took a long time. It all reminded me of the way the Legislature works.