The FCC has yet to release the hearing designation order (HDO), but it is looking more like Sinclair's proposed Tribune deal is headed for an administrative law judge hearing despite the broadcasters' efforts to fix the deal and head off that potentially lengthy process.

The draft order has been changed since it was first circulated earlier this week, but primarily to try to speed the hearing process so it does not become a de facto deal-killer in response to concerns from commissioner Michael O'Rielly, though it appears that may simply be to help the next deal rather than this one.

A source who has seen the final order said that there were "questions of fact on how Sinclair presented information to the commission that have to be resolved through a hearing of some sort, and [FCC chair Ajit Pai] has elected to use the administrative law judge."

Sinclair has strongly denied it did anything wrong and said it made it clear to the FCC who was buying the stations and the sidecar agreements that would be included.

When Pai first circulated the order July 16, he said: “Based on a thorough review of the record, I have serious concerns about the Sinclair-Tribune transaction. The evidence we’ve received suggests that certain station divestitures that have been proposed to the FCC would allow Sinclair to control those stations in practice, even if not in name, in violation of the law."

On Wednesday (July 18), Sinclair withdrew sales of three stations that appeared to create issues with the FCC. The company said it would sell two of the stations to buyers the FCC liked and keep the third, saying that should resolve the issue.

But the FCC source said the takeaway is no quick fix or resolution is likely.

As to why O'Rielly joined in the vote, an aide to the commissioner said: "He recognizes that, based on the material made available to us, there are questions of fact that need to be resolved and, begrudgingly, what's left right now is for us to send it to an ALJ. Unfortunately, that process is so horrendous that we're not naive in believing we are going to get to resolve these questions of fact."

Sinclair and Tribune have an Aug. 8 breakup date for the deal, so that will need to be pushed back if they continue to pursue it. A court decision on the UHF discount that allowed for the deal could also come out any day; it could potentially unwind the deal as well.

"Commissioner O'Rielly has a long history of criticizing the administrative law judge process," the aide said of the changes to the order. "We shouldn't have a process where if we refer something for a hearing it means a death knell for the hearing. We did what we could to enhance the structure of the ALJ process." 

When asked if that meant it could drag on for a couple of years, the aide said, "It probably could."

The aide said O'Rielly's office hoped it would at least serve as precedent for future hearing draft orders.

At a D.C. event Wednesday, commissioner Brendan Carr also said he fully agreed with designating the deal for a hearing, according to a source at the event. Pai and Democratic commissioner Jessica Rosenworcel had already voted it.

The FCC's voluntary merger review shot clock hasn't been getting much action lately.

The Sinclair-Tribune shot clock stopped in January and probably won't start until at least July 12, the deadline for comment on Sinclair's latest version of the deal, though the FCC is not making it particularly easy to figure out just how that fifth version differs from the others.

Related: Groups Petition FCC to Delay Sinclair-Tribune Decision

The shot clock on the T-Mobile-Sprint merger proposal had not started at press time. The FCC opened the comment docket June 15 but has yet to put the application out for comment.

An FCC spokesperson said that clock won't start until the FCC has determined that the application has been correctly and completely filed.

Washington — The seemingly endless review of the proposed Sinclair Broadcast Group-Tribune Media merger doesn’t show signs of being wrapped up anytime soon. And that’s fine with the cable and satellite operators opposed to the deal, who are looking to block it, and maybe also get some help from a federal court in the effort.

While the Federal Communications Commission has put the latest iteration of the proposed merger out for public comment — there have been five versions so far — the agency has set a seven-week comment period, slightly longer than most anticipated, which means it won’t be making a decision on the deal until at least mid-July.

That will make it more than a year since the FCC first put the deal out for initial comment.

Cable and satellite operators — and some other interested parties — want the FCC to deny the merger, arguing that it would give Sinclair untoward leverage in retrans negotiations.

The FCC did not restart its informal deal shot clock, currently stuck on day 167, even though it consolidated all five of the Sinclair iterations for comment and is expecting this to be essentially the final version. But it still wants more information on Sinclair’s proposal to be allowed to own two of the top four stations in Indianapolis and St. Louis. The FCC presumes such dual ownership of dominant stations violates its local ownership rules, but in a deregulatory move last fall, it eliminated the absolute prohibition and said it would look at such combinations on a case-by-case basis.

Until the FCC gets that additional information, however, it likely won’t restart the clock, and may not until all the comments are in by July 12.

Factoring In Delay Rumors

There was buzz last week that FCC chairman Ajit Pai could delay the Sinclair decision until after the U.S. Court of Appeals for the D.C. Circuit rules on a challenge to the FCC’s return of the UHF discount. That move paved the way for the deal, but could unpave it if the court throws it out, suddenly making Sinclair’s merger with Tribune Media virtually impossible since it would represent more than 70% national audience reach (which is only reduced to below the 39% national ownership cap thanks to that discount).

Pai has been under pressure from Congressional Democrats to delay the decision, but made no promises other than to say the court case was “a factor.”

Adding to that buzz was a tweet by commissioner Jessica Rosenworcel: “The @FCC just asked for public comment on the Sinclair merger, speeding the way for regulatory approval. But the @FCC is still waiting on a court decision about how many stations one company can own. No way it should rush ahead now before the court acts. The rule of law matters.”

The FCC hardly seems to be rushing at the moment, given that it has allowed seven weeks for comments on the deal before it will be making any decision, and must wait a while after that to vet the comments that might come in at the eleventh hour.

The chairman’s office had no comment on Rosenworcel’s tweet or the decision’s timing; a spokesperson for the commissioner said she was not signaling any inside information about the chairman’s plans, but instead was continuing to say the FCC “should” wait until after the court weighed in.

A Hill source said the thinking by some was that the chairman might be letting the bureau staffers give the deal a fine-tooth-comb review, no matter the timing, given the ongoing inspector general investigation into the FCC’s handling of that merger review. And more than one source has pointed out that Sinclair’s deal tweaks have continued to draw criticism as insufficient to address concerns about retaining too much control of stations being spun off, making it harder — even for a deregulatory-minded commission — to sign off on the deal.

Not Moving Like Clockwork

As to the immovable shot clock, it is unclear exactly what the FCC is currently measuring, anyway. The merger has been in front of the FCC for almost a year, but the clock has remained stopped since Jan. 4 as Sinclair continued to re-file the deal to accommodate antitrust issues with the Justice Department and local ownership rule issues, with the FCC making deregulatory moves that allowed Sinclair to potentially own more stations. But Pai told Sen. Dick Durbin (D-Ill.) earlier this month that the reason the FCC had not restarted the clock in all that time was “because we have not had adequate information upon which to base a decision.”

The most recent request for further data on Indianapolis and St. Louis was yet another one of those inadequate information-prompted requests, so the clock remains stopped.

“The FCC is giving extraordinary scrutiny to the Sinclair merger, as it should,” said Adonis Hoffman, chairman of Business in the Public Interest, which backs the merger. “While the deal is transformative, the rationale for approval should rest on a realization that Sinclair — and every other big broadcaster — is in the fight of their lives against Netflix, Facebook, Apple and other [over-the-top services] that have bigger market caps and no restrictions on ownership. The market has changed in its fundamental form.

“The reality is that if you aggregated the top 10 broadcasters, they would not be as big as Netflix,” Hoffman added. “That is the fundamental issue and the sooner the FCC acknowledges it, the better for all stakeholders, including consumers and investors.”

The Wall Street Journal was reporting Thursday (Nov. 2) that the Justice Department is "weighing" filing suit against the AT&T-Time Warner deal, but it was not immediately clear whether that was a new flashpoint or a matter of of leaving options open in the ongoing process of negotiations leading ultimately to either conditioning approval of the deal, or conceivably blocking it, either of which would require Justice to file suit.

A source familiar with the ongoing talks between the companies and Justice suggested it was the latter.

Related: Time Warner Shares Plunge on Reports DOJ Will Block AT&T Deal

Some conditions were anticipated if the deal was approved, which would necessitate Justice first filing suit in court to block the deal, then filing a settlement agreement with the merging parties to revolve its antitrust issues.

But if Justice did sue to block the deal, that could raise questions about whether the Trump Administration viewed media mergers as creating too large and powerful media outlets. The President as a candidate suggested the deal created too large a company, and since being elected has slammed CNN as the poster-outlet for fake news.

AT&T and Time Warner only have to worry about resolving any antitrust issues with the meld since the deal was structured to avoid a public interest review by the FCC.

In a note to clients, analysis firm Capitol Forum said Justice's new antitrust chief, Makan Delrahim, was delving into the merger and had been talking with independent programmers pushing for various conditions.

"If Delrahim accepts the programmers’ criticisms of AT&T-Time Warner, it could add to the list of conditions DOJ is pressing the companies to accept," said Capitol Forum. "Until now, the negotiations largely have centered on conditions that would protect rival video programming distributors’ access to Time Warner content and create an arbitration system to resolve disputes."

The note said Delrahim had "not ruled out the possibility" of suing to block the deal. It also said to look for a Thanksgiving time frame for a decision.

AT&T declined comment. Justice does not comment on the status of merger reviews.

“When the DOJ reviews any transaction, it is common and expected for both sides to prepare for all possible scenarios,” said AT&T in a statement. “For over 40 years, vertical mergers like this one have always been approved because they benefit consumers without removing any competitors from the market. While we won't comment on our discussions with DOJ, we see no reason in the law or the facts why this transaction should be an exception.”

More than a dozen media consolidation critics, including Common Cause, Consumers Union and the Writers Guild of America West, have told U.S. Attorney General Jeff Sessions that, from all appearances, the proposed AT&T-Time Warner merger cannot pass muster by "conditions and piecemeal divestitures" and should be blocked.

The Department of Justice is the only authority vetting the deal, which was structured to avoid the license transfers that would have triggered FCC review on public interest grounds.

Related: FCC Approves Sale of Time Warner Station WPCH-TV to Meredith

"Because this merger poses such grave dangers to consumers and creators in mature and emerging markets, we urge the Department to investigate the merger thoroughly, and take whatever action is warranted, based on the evidence uncovered in your investigation, to prevent harm to competition and consumers," the group wrote. "And if you conclude, as appears to us from the available information, that conditions and piecemeal divestitures will not be sufficient, then we hope you will challenge the merger in its entirety."

The groups talked about the ability and incentive of the combined company to harm competition.

"Buying Time Warner would incentivize and enable AT&T to cement its dominance and benefit itself, at the expense of pro-consumer competition in the video distribution market, by raising the cost of Time Warner programming to its rivals," they said. "It would also incentivize and enable AT&T to put onerous restrictions on programming availability, such as device or windowing restrictions, which are another way of raising the costs of its rivals."

Related: EU OKs AT&T-Time Warner Merger

Also signing on to the letter were Public Knowledge, Alliance for Community Media, Media Alliance, National Hispanic Media Coalition, Consumer Action, Open MIC (Open Media and Information Companies Initiative), Consumer Federation of America, Open Technology Institute at New America, Courage Campaign, The Utility Reform Network and Free Press.

Maine Republican Sen. Susan Collins, who famously has issues with the Republican healthcare bill, also has some issues with the AT&T-Time Warner Inc. merger.

Collins said she thinks the merger could have a "significant, negative impact on competition and innovation," according to a letter to acting assistant attorney general Andrew Finch, a copy of which was obtained by Multichannel News.

Collins did not come out against the deal, but said DOJ needs to look carefully at its "potential impact on consumers and competition."

She said the merger could "create an opportunity" for AT&T to "favor HBO in marketing and packaging of premium content to its customers, discriminating against competitors."

The risk that the deal could "dramatically reduce consumer choice" in favor of AT&T's new "in-house brand" is real, she said.

Collins added that the merger could allow AT&T, which also owns DirecTV, to raise content costs to competitors like Dish, which would pass them along to her constituents. "Ultimately, consumers would lose," she said.

DOJ's antitrust review is the sole federal review. The FCC is not vetting the merger on public interest grounds because the deal does not involve any license transfers after AT&T and Time Warner structured it so no licenses were in play. Various states are also reviewing the deal.

The Justice Department is apparently OK with Liberty Interactive's proposed purchase of Alaska telecom GCI.

That came in an early termination notice released Thursday (June 8).

That means that Justice has found no reason to try and block or condition the deal, and put an early end to its Hart Scott Rodino antitrust review.

Related: Why John Malone Is Making Tracks to Alaska

The FCC must still weigh in on the deal. It goes beyond antitrust to look at the public interest impact of mergers in the communications space.

That review will not be concluded until at least next month. On May 19, the FCC created a pleading cycle for the deal, with comments due June 19 and reply comments due July 5.

The $1.1 billion deal was struck in April.

GCI has about 108,000 cable subscribers and is the state’s largest phone and wireless company. The deal was projected to close in early 2018.

WASHINGTON — AT&T’s road to approval of its merger with Time Warner Inc. may have gotten a bit rockier last week with the announced Department of Justice lawsuit against both the telco and its DirecTV subsidiary, and by the same team that will be reviewing the proposed deal.

Whether the Federal Communications Commission will get to review the deal remains a question. As Multichannel News pointed out when the merger was announced, the DOJ will review it for antitrust issues, and that review will be led by two officials who, until only a few months ago, were FCC officials dealing directly with merger reviews.

One is Renata Hesse, who succeeded Bob Baer back in April atop DOJ’s antitrust division, and prior to that was a merger adviser to the FCC on such issues as blocking the proposed AT&T-T-Mobile deal.

The other, former FCC general counsel Jonathan Sallet, last week was listed as the lead attorney on the DOJ team that brought the suit against DirecTV and its corporate parent, AT&T; the suit alleges they were the ringleaders in a series of “unlawful information exchanges” in negotiations with Time Warner Cable over carriage of SportsNet LA, the regional sports network managed by the MSO (since acquired by Charter Communications) and owned by baseball’s Los Angeles Dodgers.

AT&T respectfully disagreed with that conclusion and will fight the charges in court even as it tries to get Sallet and company to approve the merger, promising it will deal fairly with competitors over content.

Sallet, now deputy assistant attorney general of the DOJ’s antitrust division, said in announcing the suit, “Competition, not collusion, best serves consumers, and that is especially true when, as with pay television providers, consumers have only a handful of choices in the marketplace.”

One of the key issues in the AT&T-Time Warner deal is access to all of Time Warner’s content and whether AT&T would try to keep it to itself. The companies argue that they will, in fact, make Time Warner content more accessible and become a stronger competitor to pay TV providers, thus expanding that handful of choices with a stronger mobile content offering.

Not surprisingly, one of the groups trying to block the merger, Public Knowledge, used the suit as an argument against the AT&T-TW deal in particular and further consolidation in general.

Adonis Hoffman, former chief of staff to FCC commissioner Mignon Clyburn, said he thinks the deal will go through and noted that having Sallet lead the review team is both a plus and minus for the deal’s prospects.

“Sallet knows his way around these issues, but clearly there is some pretty strong language on behavior that could carry over into the review, if not by him, then by others on his team,” Hoffman said. “But remember, this is the same Jonathan Sallet who approved the AT&TDirecTV merger and Charter-Time Warner Cable merger. So, he is not opposed to mergers and he is a brilliant antitrust lawyer.”

“If allegations of wrongdoing are there for this specific case, that is one thing, but I think Sallet is professional enough to differentiate between alleged bad action with respect to carriage negotiations versus a vertical merger,” Hoffman said.

AT&T and Time Warner certainly hope so.

Dutch telecom operator Altice has told state regulators that it was willing to make some concessions in its quest for approval of its $17.7 billion purchase of Cablevision Systems, but drew the line at conditions that would return half of the expected cost savings to customers and limit its ability to make changes in its workforce.

The New York Public Service Commission has been critical of the Altice deal. Commission staffers have said in filings that hitting aggressive cost-savings targets could force Altice to drastically reduce customer service and implement massive job cuts. The staff has recommended the deal be rejected unless Altice adheres to a laundry list of conditions.

Altice is confident it will receive the necessary approvals. And with the Federal Communications Commission winding down its review of Charter Communications’s $78.7 billion acquisition of Time Warner Cable, the agency will now likely be able to focus more on this smaller deal for the New York City area-centric Cablevision.

EYES Q2 CLOSE

Altice CEO Dexter Goei — who is also slated to head up the U.S. cable operations — said he was confident the deal for Bethpage, N.Y.-based Cablevision would close by the end of the second quarter. Goei, during a financial-results call, said Altice expects decisions from the New Jersey Board of Public Utilities by the beginning of April, the New York PSC by the end of April and from the FCC in May.

In a March 8 filing with the New York PSC, Altice agreed to offer 30 Megabit-per-second high-speed Internet service to low-income families in the New York area for as low as $14.99 per month.

In a statement, Altice said the filing shows the Cablevision merger “will provide concrete benefits to consumers in the nation’s most competitive market. Altice will make substantial investments to further enhance competition and improve the customer experience, as outlined in the filing. The regulatory approval process is proceeding and we look forward to it continuing in a fair and open manner.

Altice has said it expects to extract at least $900 million in cost savings from Cablevision over the first few years after the deal closes, largely through removing redundancies and operating the network more efficiently.

At an industry conference shortly after the deal was announced in September, Altice chairman Patrick Drahi said better deals with vendors and removing amplifiers from the network would go a long way toward achieving that goal.

In the most recent PSC filing, Altice didn’t offer many specifics about efficiency plans, but did reveal it has earmarked several network improvements — including introducing an all-in-one home center allowing subscribers to integrate pay TV video, over-the-top video, online storage, home media and WiFi- and Ethernet-connected devices into a single hub.

Altice also plans to introduce a new customer interface, similar to one it has developed and deployed in other markets, to offer better navigation and recommendation tools.

PLANS TO INVEST

Because of those investments, Altice recommended passing along about 15% of its overall costs savings to customers — reinvesting the rest in operational improvements — and not the 50% recommended by New York regulators.

Altice balked at the N.Y. PSC staff suggestion to hold off on reducing “customer-facing” jobs for five years after the deal closes, saying improvements in technology and efficiency have already reduced the need for some of those positions.

“[I]mproved service quality will organically reduce the need for customer-facing jobs by reducing key measures of customer dissatisfaction: unnecessary or repeat truck rolls and home visits, repeat calls for technical and service support, and overall support demands to call centers and field service technicians,” Altice told the agency.

Altice said it currently invests a larger percentage of total revenue into operations than Cablevision does. It also said it would not cut back on spending on customer-facing improvements because that would potentially degrade its $17.7-billion investment.

Most analysts believe the deal will win approval with conditions, and point to Cablevision’s stock price since the deal was announced — at $33.10 per share on March 16, the stock is just 5% below Altice’s offering price of $34.90 per share.

“My guess is they make some agreement around investment, maintain the Bethpage headquarters and low cost broadband and they get this done,” Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said.

SIDEBAR: Altice in the Family

Altice mapped out a list of the benefits of its pending merger with Cablevision Systems:

• Offer a 30 Mbps broadband service to qualifying low-income homes in footprint for $14.99 per month, and upgrade the overall network to deliver speeds of up to 300 Mbps;

• Work in partnership with community groups and public authorities to expand broadband into low-income and underserved areas;

• Agree to base its U.S. headquarters in New York City;

• Introduce an all-in-one home center, enabling customers to integrate video, OTT video, online storage, home media and WiFi and Ethernet connected devices in a single hub

• Launch an improved customer interface with better navigation and recommendation tools.

SOURCE: Altice

FCC chairman Tom Wheeler is "likely' to circulate an order approving the Charter-Time Warner Cable merger as early as this week for the four other commissioners to vote on, the Wall Street Journal was reporting late Tuesday (March 15).

An FCC spokesperson declined comment, saying the deal was still under review, though he did point out that the FCC was in day 171 of its informal shot clock on the deal. Multiple industry sources confirmed that their understanding was also that approval with conditions was what the chairman planned to circulate.

Analysts have been predicting a deal approval with online- and broadband buildout-related conditions, was the most likely outcome.

The commissioners still would have to vote on the proposal. But circulating an order would suggest the Justice Department, which is also vetting the deal, did not find any anticompetitive issues that could not be resolved.

The FCC and DOJ generally coordinate their reviews, though the FCC's review goes beyond antitrust issues to look at  public interest considerations.

Filings in the deal docket have suggested the FCC staffers were drilling down on possible conditions, which could include access to online video programming--incuding contractual prohibitions--and overbuilding broadband plant.

The City of New York last week approved the transfer of the TWC franchise to Charter, which that company saw as a positive sign.

Charter has promised to abide by open internet rules and does not have usage fees or data caps, which is has argued was the kind of online-friendly approach the FCC was endorsing, and which it would be extending to Time Warner Cable.

The point Charter has made is that OTT is good for them and consumers since the more widely distributed content is, the cheaper it will be--both to Charter and consumers. That is the other side of the argument that Charter would impede OTT distribution to preserve the exclusivity of its content and thus its attractiveness in a world of exploding choices.

Free Press, which strongly oppose the deal, was characterizing the story as a press leak and hoping it was only test of the waters.

“If this leak to the press was just a trial balloon," said Free Press President Craig Aaron, "Wheeler should pop it. If he’s serious about broadband competition — and he recently admitted he hasn’t done enough to promote it — the Chairman needs to block this disastrous deal and get back to protecting the public interest.”

“The FCC Chairman claims that his mantra is ‘competition, competition, competition.’ Maybe his new slogan should be ‘competition, competition — nevermind.’”

"When you factor in the debt taken on, Charter is paying $10 billion more for Time Warner Cable than Comcast was willing to pay for the same exact assets just over a year ago," he said. "Charter is taking on nearly $27 billion in new debt to finance this deal. It can only recover that by hiking prices for its subscribers.

“This same money could be spent to build new competitive broadband options for tens of millions of people. If this deal gets approved, however, these billions won’t help build anything. They’ll merely be a payoff to Time Warner Cable’s shareholders and executives. CEO Rob Marcus will get a $100 million golden parachute for his troubles, while cable customers will be stuck with the tab."

Rep. Tony Cárdenas (D-Calif.) has sent his letter to the Federal Communications Commission and Department of Justice asking them to vet the Comcast/Time Warner Cable for access to independent programming issues, but suggesting there might not be any safeguards that would protect unaffiliated content.

That is according to an aide to the congressman.

A copy of the letter shows that Cárdenas was able to get three other Democratic California colleagues and one Arizona representative to sign the letter: Reps. Sam Farr, Zoe Lofgren, and Janice Hahn (all California) and Raul Grijalva of Arizona.

Cárdenas announced Wednesday (Feb. 18) that he opposes the merger and wants the FCC and DOJ to oppose it, but the letter only asks them to look closely at the potential of the combined company to discriminate against unaffiliated content.

Comcast Wednesday strongly defended its deal and record on independent programming.

As promised, the FCC's informal 180-day "shot clock," timing the review of the Comcast/Time Warner Cable merger, is running again -- it is now on day 105.

Earlier in the day, the clock was still stopped at day 104, which dated from Dec. 22, when the FCC stopped the clock for the second time, this time so FCC staffers could review 31,000 pages of documents that the FCC said TWC did not produce in a timely fashion due to what TWC said was "vendor error."

FCC Media Bureau Chief Bill Lake had said the clock would not start again until Jan. 12.

Time Warner Cable has called the document production a procedural issue, "not a substantive one," and pointed out that it had "already provided the FCC more than 5 million pages of documents" and would "continue to provide the FCC everything that they need to review this transaction.”

The FCC also stopped the clock on the merger review in October over the issue of third-party access to documents.