Computer companies currently facing increased regulation and legislation from Washington are warning that such government action could cost the economy $300 billion and affect companies as wide-ranging as Comcast and Home Depot, as well as the edge-provider behemoths — Facebook, Google and Twitter — that are the bills‘ principal targets.

That was the takeaway from a just-released study from NERA Economic Consulting commissioned by the Computer & Communications Industry Association.

The study came out just hours after powerful senators signaled they would be grilling edge providers Instagram, TikTok and YouTube at a hearing next week.

The CCIA study asserts that, under proposed edge-targeted legislation, more than a dozen companies, including Comcast and Netflix, would be subjected to "significant regulatory risks" stemming from an "overly broad" definition of online platform, the extensive regulatory scaffolding that would erected, the discretion given competition authorities and the penalties for noncompliance.

Among others on the list of affected companies are The Walt Disney Co., AT&T and Cisco Systems, which along with Comcast and Netflix would “exceed the inflation-adjusted market cap threshold of $550 billion or $600 billion from the bills in the next five to 10 years.”

That is assuming the legislation subjects online platforms and marketplaces to “common carrier, structural separation and line of business restrictions.”

Congres is considering a number of bills to rein in Big Tech, including ones targeting Section 230 of the Communications Decency Act, which holds that companies cannot be treated as the publisher or speaker of information provided by users. The current legislative focus of Big Tech’s pushback, though, is the just introduced American Innovation and Choice Online Act. That measure would prevent an online platform from: 1) keeping another business form interoperating with a dominant platform of other business; 2) requiring a business to buy a dominant platform's products or services in order to get preferred placement; 3) "misusing" a business's data to compete againt it, and 4)biasing search in their favor.

The bill allows civil penalties for violations of up to 15% of U.S. revenue for the duration of the violation and authorizes a court to penalize a CEO or corporate officer an amount equal to their compensation for the 12 months preceding or following a complaint.

Legislation that sets size thresholds for companies would force them to break up to avoid regulation, reversing cost savings that benefit consumers, the analysis concluded. By contrast, such restrictions would not apply to foreign operators of online platforms, creating a bias against U.S.-based companies.

“The bills are likely to negatively impact consumers, small and medium-sized businesses, U.S. firms’ international competitiveness, and the broader economy," CCIA director of research and economics Trevor Wagener said. “The preliminary findings will inform the public discourse surrounding these bills as policymakers determine whether the legislation’s purported benefits outweigh the costs.”

Reading the regulatory handwriting on the wall, and on proposed legislation to crack down on Big Tech, Twitter has offered up its “guiding principles” for preserving an open internet, which include not targeting only the biggest players, like Twitter, and a call for algorithmic transparency, something Congress has called for in the wake of Facebook whistleblower revelations.

In a position paper tweeted out by the company in what it said was an effort to inform the current debate, Twitter painted a rather dystopian overregulatory vision of Big Government taking over Big Tech.

“The risk that the rhetoric of policy and language of law will be co-opted and weaponized by those seeking to usher in an age of techno-nationalism is real,“ it said in the preamble to its five major policy points, which it published online as Protecting the Open Internet: Regulatory Principles for Policymakers.

In the past, the open internet language coming from Silicon Valley focused on internet service providers, while those ISPs argued that Open Internet reguations were from a bygone era. Twitter was still looking for government to advance open internet rules, including rules to prevent blocking or throttling by ISPs, it took the same tack as ISPs when it came to any proposed edge provider regs.

"Regulatory approaches to new industries are often shaped by the policy responses designed in the aftermath of the industrial revolution, oriented towards frameworks that specify standards for outcomes of mechanical processes. This approach struggles to adapt to the unpredictable and rapidly evolving nature of human use of technology and expression," Twitter said.

The Twitter principles are:

1. ‘The Open Internet is global, should be available to all, and should be built on open standards and the protection of human rights.“

2. “Trust is essential and can be built with transparency, procedural fairness, and privacy protections.“

3. “Recommendation and ranking algorithms should 3 be subject to human choice and control.“

4. “Competition, choice, and innovation are foundations of the Open Internet and should be protected and expanded, ensuring incumbents are not entrenched by laws and regulations.”

5. “Content moderation is more than just leave up or take down. Regulation should allow for a range of interventions, while setting clear definitions for categories of content.”

On guideline number two, Twitter said that transparency should apply to government as well as Big Tech.

‘There’s a deficit in trust in many online services and government functions alike,” Twitter said. “It’s essential every sector works to rebuild trust, beginning with greater transparency.” 

It said the public should understand not only “the rules of online services,” but also “the way that governmental legal powers are used.”

ISPs have frequently called for regulatory clarity on which to base their business decisions.

Calling for regulatory fairness, Twitter said:

“Regulation by proxy, where governments use broad standards to push the burden of defining types of content onto service providers to avoid having to do so in legislation, is a dangerous trend, particularly when set alongside seemingly contradictory obligations to protect certain types of content. This is fundamentally a constitutional issue as much as a trust issue. Both individuals and companies need notice of what is prohibited by law so that they can act accordingly.”

One big problem for Big Tech when it comes to the bipartisan pushback on social media is that Democrats and Republicans don‘t agree on what speech qualifies as problematic and should be subject to heightened scrutiny by edge providers, so that a government standard could change with the change in political fortunes and majorities.

The Parents Television and Media Council is calling on the FCC and Congress to regulate streaming services.

That came Tuesday (June 8) after the heads of the top streaming services did not participate in its virtual town hall on better content controls.

“We renew our call on the top streaming companies who didn’t join our town hall to meet in some other public forum where they can identify Industry Best Practices, which all streaming platforms would adopt," said PTC President Tim Winter. "These guidelines should include, though not be limited to, reliable gating/blocking technology measures, and an accurate, consistent and transparent age-based ratings system."

PTC also renewed its call for the government to step in.

Also Read: PTC Seeks Parental Control Town Hall

“It is abundantly clear that Congress and the FCC must help improve the streaming landscape for American families in order to prevent children from accessing harmful and explicit programming that proliferates in streaming media," Winter said. "We are urging the FCC to follow through on the promises that Congress made to families when it unanimously passed the Child Safe Viewing Act. And we are urging Congress to update the Family Movie Act of 2005..."

That is the law that allows for third parties to provide content-filtered versions of DVDs--editing out language or nudity--without getting permission from the content rightsholder.* It does not apply to editing video streams, which still requires permission of the copyright holder/distributor.

The argument goes that given that universal broadband availability and adoption are a national priority, there need to be better content controls given the range of adult-targeted online content, including on streaming services, that will be accessible by all the children in those households.

The traditional response for pay-for content was that it had been invited into the home, but broadband is being billed as a must-have, with the government paying to get it into the home if need be, which makes that a tougher argument.

PTC had invited key execs from Amazon Prime Video, Apple TV Plus, Disney Plus, HBO Max, Hulu, Netflix, Paramount Plus, Peacock, to talk about ways to provide "adequate" parental controls and best practices, but said that none had accepted the invitation, though Apple TV Plus and Netflix did not rule out participating in possible future forums, PTC said.

Next TV reached out to those companies late Monday (June 7) to ask about their participation. Netflix co-CEO and COO Ted Sarandos said he had not heard of the event and did not know he had been asked to participate, which was why he was not planning to be there.

A representative of one of the other invitees said they were not familiar with the invitation and did not plan to participate.

The town hall came in the wake of PTC's report, Dollars and Sense: A Parent’s Guide to Streaming Media, which gave a mixed review for streaming parental controls and signaled there was room for improvement.

Also Read: PTC Issues Cord-Cutters Guide to Streaming Services

*"Family Movie Act of 2005 - Exempts from copyright and trademark infringement, under certain circumstances: (1) making limited portions of the audio or video content of a motion picture for private home viewing imperceptible; or (2) the creation of technology that enables such editing." Source: congress.gov.

John Eggerton has retired as senior content producer, Washington, for Multichannel News, Broadcasting+Cable and NextTV.com but will remain a contributing editor, the Future-owned publications said.

Eggerton joined B+C in January 1981 as an editorial assistant before taking over the job-changes and obituaries column for the magazine as well as compiling a weekly stock index. He moved to a position on the editorial desk two years later, where he was assistant editor, associate editor and assistant managing editor before being named Washington Bureau Chief, overseeing three reporters, when the magazine's production moved to New York in 1999.

He was also an editorial writer for most of his tenure at B+C and editor of its TV Fax newsletter for two decades.

Eggerton started covering Washington full time for B+C in 2005 and later added Washington coverage for sister magazine Multichannel News.

Kent Gibbons, the content director for MCN and B+C, said Eggerton has wanted to step back and pursue other interests and spend more time with his family for the last couple of years but put off the move out of dedication to readers and to the publications. “John devoted incredible amounts of time and energy keeping the B+C readers informed in every way possible, in print and online, and we know readers will miss his coverage -- but they’ll be happy to know he isn’t getting out of the game completely,” Gibbons said. “He is a tremendous colleague as well as a smart reporter.” 

"John leaves behind a remarkable journalistic legacy," said Bill Gannon, Global Editor in Chief of Broadcasting+Cable. "His four decades of deadline reporting and in-depth analysis not only accurately reported the news but actually helped shape regulatory policy by providing invaluable context the television industry and Washington D.C. insiders came to rely upon."

At various times, Eggerton has also written for present and past co-owned publications B&C International, Radio World, TV Technology, TWICE and Variety (under previous ownership).

Eggerton has been an online journalist for over 25 years, initially (in the early 1990s) compiling Dow Alerts, which were early computer-to-computer news feeds back when it was DOS prompts, orange type, and the sound of modems buzzing, as well as contributing to the NATPEnet online newsletter. He was also web editor for B+C.

Eggerton is a 1979 graduate of William & Mary.

His contact information as contributing editor continues to be john.eggerton@futurenet.com.

Cable operators want the Federal Communications Commission to start looking at over-the-top video competitors as the 800-pound gorillas they appear to be rather than the plucky upstarts they once were. That view from Washington could change how traditional cable systems and cable broadband providers are allowed to operate, and NCTA-The Internet & Television Association hopes that will be the case.

In comments to the commission, the NCTA said the FCC needs to level the marketplace, ideally by not maintaining regulations on cable providers that it does not place on those OTT platforms such as Roku, Amazon Fire TV or Apple TV. Among the rules that should go, NCTA said, are those governing cable leased set-top boxes and children’s advertising.

NCTA has been arguing that limiting the competitive landscape to a minority of available services would be like assessing automotive competition by only looking at high-end sports cars.

The battleground is the FCC’s request for input on its biennial report to Congress on the state of competition in the communications marketplace. Under that directive, the FCC must assess whether laws, regulations or “demonstrated marketplace practices” pose a barrier to competitive entry or the expansion of existing competition.

NCTA Pushes for Parity

In recent comments and a follow-up letter this month, NCTA made its case for some regulatory parity. It told the commission that given the unprecedented amount of content available on an array or retail devices, “it is clear that the marketplace for equipment used to access video service is fully competitive.”

If the FCC’s goal in regulating leased set-tops was because there was an anemic market for retail video access devices — and it was — NCTA argues it is essentially game over, given the rise of OTT. The FCC’s next competition report needs to recognize ”the need for regulatory parity and the shift in how consumers are accessing video programming,” NCTA said. 

It points out that Roku recently said it has more accounts than all the subscriptions of the top cable operators combined (see box). Then there are devices such as Apple TV, Google’s Chromecast and Amazon’s Fire TV. 

NCTA argued OTT should not get a free pass when it comes to public-service obligations. “Entities that compete in the provision of like services should not face different public-interest or customer-service obligations,” the trade group said, calling that disparity arbitrary and capricious, which if a court concluded that were the case would make that differential treatment illegal.

For example, it said, the FCC should review its children’s TV ad rules given that “none of the myriad new online video providers that target children — such as YouTube, Netflix or Amazon — are burdened by FCC restrictions on advertising. Since at least 2018, NCTA has pointed out that OTT video has displaced traditional cable and broadcast as the top source of children’s video content. 

Given that, cable operators said the FCC should jettison the prohibition on including links to commercial websites in children’s programming and limits on promotional matter.

Not only are cable operators hamstrung in their competition with online video providers for children’s ad dollars, they can’t even steer them to that online video content. “Mere mention of the Apple App Store or Google Play in a promotion during children’s programming can turn that promotion into an ad under the commission’s rules,” it told the FCC in its initial comments on the report. “That means promotions directing children to the App Store to download enriching or high-quality content can fall under the restrictions.”

Defining Moment

NCTA has other bones to pick with the edge providers and computer companies. In comments on the competition report, Google Fiber and trade group INCOMPAS, whose members include Amazon and Netflix, want the FCC to restrict its definition of high-speed broadband only to symmetrical service — the same speed for uploads and downloads, and only service capable of delivering service at 1 Giagabit per second. 

No surprise there, since they argue that definition would spur more deployment of fiber and that symmetrical upload and download speeds were necessary to accommodate the COVID-19 driven volume of videoconferencing, which the FCC itself uses for its monthly public meetings.

NCTA calls the computer companies’ definition of high speed a “transparent effort to game the commission’s analysis by excluding options that millions of consumers purchase.” Gigabit speeds are hardly necessary for those videoconferences, the association said, offering up statistics based on the system requirements of five different videoconferencing companies (see chart), with the highest recommended speed Zoom’s 1.8 megabits per second for 1080p HD. Every cable operator that offers internet access can support those services, NCTA said, typically offering upload speeds of at least 3 Mbps and frequently 5 Mbps.

The video marketplace has undergone a sea change, NCTA general counsel Neal Goldberg told the FCC this month. “The upcoming Communications Marketplace Report and the commission’s video regulations should reflect that,” he said.

WASHINGTON — The Federal Communications Commission plans to pre-empt a San Francisco ordinance on mandatory sharing of in-home broadband wiring that it says undermines the “quality” of broadband service.

That comes in a Declaratory Ruling the FCC plans to vote on at its July 10 meeting. The ruling accompanies a Notice of Proposed Rulemaking that seeks comment on various aspects of competition for broadband service to Multiple Tenant Environments (MTEs). The notice ranges far and wide, with questions about “the impact that revenue-sharing agreements between building owners and broadband providers, exclusivity agreements regarding rooftop facilities and exclusive wiring arrangements have on broadband competition and deployment.”

But the declaratory ruling is very specific, pre-empting a city ordinance (Article 52) that the FCC said appeared to require mandatory access by competitors to an incumbent’s used (lit) as well as unused inside wiring, something the FCC has declined to require in the past and isn’t likely to under the current watch.

The FCC questions whether or not access to unused wiring should be mandated, too, as the San Francisco ordinance clearly does, but confines the pre-emption to the degree it mandates it for wires in use by an incumbent. “Requiring the sharing of in-use facilities reduces investment, slows the deployment of new facilities in MTEs, poses significant technical issues, and undermines the quality of communications services.”

Chairman Ajit Pai almost certainly has the votes, among his Republican majority at least, for pre-emption.

WASHINGTON — It has been two years, plus two government shutdowns, since then-senior Republican Federal Communications Commission member Ajit Pai was tapped by President Donald Trump to head the agency as chairman.

Since then, Pai has unwound network-neutrality regulations that he and his fellow Republicans argue were based in archaic law, taken steps to deregulate broadcasters and, for the first time, published in advance the texts of items to be voted on at public meetings. His generally deregulatory course is now being hammered by newly-empowered House Democrats who’ve pledged muscular oversight.

Pai has taken some shoves from those Democrats — he pushed back in this exclusive interview with Multichannel News — and despite taking personal heat over the rollback of the 2015 Open Internet Order, he said he has not soured on the town, the job or what he sees as his ongoing mission to close the digital divide and serve the public interest. Oh, and regrets over what he concedes can be a tough job, he doesn’t seem to have even a few, as he is unable to identify anything substantive he wanted to get accomplished that either hasn’t gotten done or isn’t in progress.

Raised in the Midwest and educated at Harvard, Pai is a fierce optimist in the face of often harsh criticism. Here’s an edited transcript of the first extensive interview on his tenure two years in.

MCN:Broadband has been billed as a magical connection — and of course it is — where doctors can diagnose you and cars can keep from running into each other. But that free flow of data has also been driving us apart through hate speech, Russian interference, political divides exacerbated by social media, privacy violations and algorithmic discrimination. Should the government be doing more to get at the dark side of the web?
Ajit Pai: That is an area that the FCC doesn’t currently regulate. There has been a lot of discussion on Capitol Hill about what, if anything, should be done about the laws to reflect some of those concerns. I would certainly defer to our elected officials on that front.

But I will say that, as someone who believes in the First Amendment, we have to make sure that we protect that core constitutional freedom of Americans to speak and to publish and to associate and, of course, that is something that has distinguished our democracy for many years. As the world goes digital, those constitutional freedoms are important. And it is an important conversation to have, but not one that is currently the FCC’s bailiwick.

MCN:But you have said in the past that there needs to be a serious conversation about whether the time has come to get edge providers to abide by transparency obligations and regulations. Do you think that time has come?
AP: It has long since come.

A year and a half ago, when I gave a speech outlining these issues, I highlighted the fact that there wasn’t transparency and privacy was a concern. And I think that, if anything, the steady drumbeat of stories we get only reinforces that view.

I think what you see in Washington now and across the country is a bipartisan concern over the lack of transparency from some of these Silicon Valley tech giants, and whether it results in legislation or Federal Trade Commission action or something else, I don’t know. But what I do know is that American consumers are increasingly worried that their personal information may be used in ways they find repugnant. I think that is something for everyone to have a conversation about.

MCN:What oversight of broadband does the FCC have after the Restoring Internet Freedom order? Your critics have used terms like “abdication” to describe the FCC and net neutrality.
AP: We maintain oversight both through our transparency rule, which requires broadband providers to disclose various business practices, network-management practices and the like on their websites or the FCC’s website. We also require them to submit all kinds of forms — form 477, for example, detailing how they are deploying broadband — so we can measure how it is or is not progressing.

The notion that we have abdicated our responsibility in this area [broadband] is completely false, but it is par for the course for those for whom political motivations more than policy considerations have long been the primary draw.

MCN:Did the FCC either obstruct investigations into bogus net neutrality comments or fail to investigate them sufficiently?
AP: No. We haven’t obstructed anything and I have been very consistent about that.

MCN:You have signaled you would welcome Congress’s clarification of what the FCC’s authority over net neutrality is. Are you OK with Congress restoring the rules under clarified FCC authority if compromise legislation emerges?
AP: Whatever Congress decides, we are duty-bound to administer. Of course, I stand willing and able to work with Congress on what the terms of that legislation should be. But I think it is time for us to take a look at updating these rules.

It’s an eon ago in terms of the dynamic digital sector that we have, and so I think it would be useful for them to speak with a bipartisan voice on how to update the rules of the digital road to provide certainty and to provide consistency across the board. Do we want every player in the internet economy to face a similar regulatory landscape? We don’t want patchwork quilts of regulations state to state that create asymmetries. It would be useful for Congress to look at this.

MCN:But you would obviously prefer Congress not “clarify” that new rules should be Title II-based?
AP: Absolutely. I think the market-based approach is the right one and I think that President Clinton and his successors got it right when they said that we want to have a more marketplace approach, rather than a more government-based approach [common-carrier regulations under Title II of the Communications Act] that originated in the 1930s to regulate Ma Bell.

And I think if you ask anybody on the street which technology they think is innovative, the wired telephone or the internet, they would clearly say the internet. Part of the reason is that we have had more of a free-market approach and that approach has produced tremendous benefits for consumers over the past generations, benefits that were probably unthinkable even to those who established this framework back in the 1990s.

MCN:The new FCC appropriations bill said that many markets are “struggling” with market modification petitions [which allow satellite operators to import TV stations into so-called orphan counties, or areas where viewers don’t receive in-state programming because of their media market], and directed the agency to make sure it was following the wishes of Congress in the STELAR legislation to help those counties. Have there been issues with how you review or resolve those petitions?
AP: We definitely take those petitions very seriously and we try to work with people who express an interest in doing so.

For example, when Sen. Cory Gardner raised the issues about La Plata and Montezuma Counties in Colorado, I was one of the first back when I was a commissioner to highlight the need for us to make sure that these requests for market modifications were taken seriously and that we were trying to link communities with the information that came from states or regions that were of interest to them.

I do think it is important, especially when you are talking about public-safety information or state and local government, things like that, that there is a community of interest that may not be reflected in the information viewers are getting. So we definitely want to work together with Congress to make sure we are doing what we can to assist them in that regard. I field a lot of questions about this when I am on the road or testifying before Congress, and we do take it very seriously.

MCN:Democratic Sens. Ed Markey, Richard Blumenthal and Ron Wyden have called on you to investigate whether carriers were throttling and prioritizing traffic and not being transparent about it. Are you investigating that?
AP: I can’t comment on any investigations that may arise or may in fact be underway.

MCN:However you decide the C-band spectrum reallocation item, what can you say to assuage cable operators and broadcasters concerned their transmissions will not be sufficiently protected?
AP: Look, this is a very complicated issue. What I can say is we understand the concerns that have been expressed by those who rely on some of the spectrum in the C-band for delivery of their programming. That is one of the factors that the FCC will take into account as we deliberate on how best to proceed.

MCN:So no resolution yet?
AP: We’ve not prejudged any particular course of action. At this point, we are still studying the issue, meeting with stakeholders and taking feedback. So we continue to look forward to hearing from broadcast companies, cable companies and others who might have a view on how the FCC should proceed.

MCN:Coming up on the midpoint of your chairmanship, what do you view as your major accomplishments?
AP: It has been an exciting two years. We’ve had a pretty aggressive agenda on some of our core priorities — closing the digital divide, promoting innovation, protecting consumers and modernizing our regulations.

Particularly on that first point, closing the digital divide, I have been proud of the accomplishments we have been able to achieve, including a successful Connect America Fund auction in which we are allocating approximately $1.5 billion for rural broadband across 45 states. We are also making sure we are updating our regulations to make 4G LTE more available in parts of the country that don’t enjoy it today.

We have much more to do in the next two years but I am really grateful to the terrific FCC staff for the work that they have done to enable us to advance the ball on behalf of the public.

MCN:What has been your biggest disappointment, either something you didn’t get done or something about the job you didn’t expect?
AP: In terms of the substance, I can’t say that there are any. We have been able to execute on a lot of our agenda. I can’t say that there is anything that we have been able to push across the table that we regret or haven’t been able to push across the table yet that we won’t be able to accomplish.

In terms of the unexpected, I think that any FCC chairman would tell you that after two years on the job, it is a difficult and demanding position, but having a chance to lead this agency and set an agenda that delivers on the public interest and brings more people into the digital economy is a tremendous honor.

I can’t wait to get started on the next two years.

MCN:We thought you might have said the net-neutrality debate that got so personal and ugly and even scary. [Pai was the target of online attacks, including death threats and racial slurs.]
AP: Certainly, that was not a pleasant aspect of the job, but nonetheless at the end of the day perhaps it is the optimistic Kansan in me, the intrinsic willingness I have to look at the good that is in most people. I choose to think that they are much more concerned about the positive work that we’re doing in terms of closing the digital divide. So, when I think about the last few years, I don’t think about those negative attacks that were veering on personal attacks on me and my family.

What I do think about is the eighth grader in New Mexico who told me that, for the first time, she has broadband in her school. I think about the doctors in Moab, Utah, who told me that now, thanks to broadband, they can do things with telemedicine that they were never able to do in the analog age. I think about the school in Scottsville, Kentucky, that is now able to keep kids healthier because of a broadband connection with Vanderbilt. I think of the teams up in Pembroke, New Hampshire, that I visited that are better able to do their jobs of installing wireless infrastructure in the mountains of New Hampshire in part because of our regulatory modernization, which is enabling them to build the towers that will connect more people.

To me, that is really where the rubber meets the road. It’s not in the 280-character snarky tweet. It’s not in the politician that is gratuitously attacking us. It’s in the work we are doing for the American people. And, at the end of the day, that’s why I get up in the morning.

MCN:You have said you are going to finish your term. How about after that? Any political aspirations?
AP: I am going to be serving in this position for the next two years — barring my being drafted by the Kansas City Chiefs, which is always a possibility even at 46 years old. But, whatever comes after that will take care of itself. I am focused on doing the best job I possibly can here at the FCC.

MCN:On diversity, you got pushback from Democrats over eliminating one EEO form but not resolving an issue with another that could restart broadcast reporting of staff diversity. Any reason for doing the midterm EEO report deregulation first? And talk about your diversity efforts more broadly.
AP: I am very excited about the things we have done in terms of promoting diversity. For one thing, I am proud that we brought back the Advisory Committee on Diversity and Digital Empowerment, an advisory group that had previously been disbanded but, when I came into office, it was important to me for the FCC to stand up for a communications sector that reflected the diversity of this country.

MCN:What has the committee done?
AP: It has been very active on a variety of fronts — promoting broadcast diversity, for example. Also, for the first time I wanted them to focus on the lack of diversity in Silicon Valley. That is one of the issues they have been talking about and that now has some very broad support here in Washington, so that advisory committee is critical.

Additionally, I am very proud that in 2018 we finally set up an incubator program to encourage new entry into the broadcast business. This is an idea that had been discussed for so long — I believe it was first proposed when I was back in high school. We finally have a concrete framework for small, aspiring broadcast-station owners to pair with more established broadcasters to help them with training, financing and industry connections. I hope that through this program and those relationships, we will be able to see more diversity and competition in broadcasting. Diversity is a very important consideration.

MCN:But what is the holdup in the EEO diversity reporting form?
AP: The record was clear that the [midterm] form 397 was duplicative and didn’t really have continuing relevance when much of this information is available online. So, we made a very targeted decision to repeal that form. I look forward to working with my colleagues on the other issues they have raised and if they have ideas about how to proceed I am always here with an open door and an open mind to hear them out.

WASHINGTON — The Federal Communications Commission is currently making its periodic assessment of just how competitive the market for communications services is, with an added impetus from Capitol Hill.

There is a lot riding on the answer, particularly in an increasingly over-the-top video marketplace. Comcast’s $38 billion-plus purchase of control of Sky, for example, is being billed more as about assembling a collection of programming assets that can be combined with other over-the-top offerings than it is about a satellite video service, MoffettNathanson principal and senior analyst Craig Moffett said.

At stake in the inquiry is how much regulatory power the FCC can wield over internet service providers, and how much the wired and wireless broadband markets can consolidate without running afoul of antitrust laws.

The FCC, even under the deregulatory Republican chairman Ajit Pai, has not rushed to declare that the competitive broadband marketplace includes both wired and wireless service — not for a lack of trying by both of those constituencies.

Two-Track Inquiry

But the agency is taking comments from stakeholders as part of a dual-track inquiry. The first track is the annual Section 706 report on whether advanced communications are being deployed in a reasonable and timely manner, conducted per a longstanding congressional directive.

The other is a new report mandated by the FCC’s recent reauthorization legislation that requires a report on the state of competition in the communications marketplace by year-end. That report must be published on the agency’s website and sent to Congress.

Cable and telco broadband providers have argued that their respective markets — fixed and mobile wireless broadband — are already competitive. They also argue that they’re competing with each other, and that will be even more the case with the advent of the 5G wireless specification and its increased data-delivery speeds.

The FCC has yet to concede that wireless is a substitute for wired broadband, given slower wireless speeds, but that’s only a tentative conclusion until all the comments are in and the reports are released.

If the FCC does not conclude that advanced services are being deployed to all Americans in a reasonable and timely manner, Congress has given the agency the power to achieve that end — including by regulating price and conditions. If it concludes that either the fixed or wireless markets are not competitive, industry players will have a harder time justifying mergers that reduce the number of competitors.

By contrast, an FCC finding that wireless and fixed broadband providers are market competitors enlarges the market and makes it easier to combine companies.

While the newly created report on market competition the FCC is producing is focused on competitiveness in the fixed broadband marketplace, NCTA–The Internet & Television Association saw no problem in pitching the agency on including wireless in those market calculations.

In fact, NCTA said the FCC has missed the mark by narrowing the inquiry. “Although the Notice only asks for information regarding fixed broadband services, RAY BAUM’s Act has no such limitation and, in fact, requires the commission to prepare a comprehensive analysis that addresses all facets of the communications marketplace.” (RAY BAUM’s Act, or the Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018, is the FCC reauthorization legislation passed earlier this year.)

The specific language of the act does require the FCC to “consider all forms of competition, including the effect of intermodal competition, facilities-based competition, and competition from new and emergent communications services, including the provision of content and communications using the Internet.”

USTelecom, representing Verizon Communications, AT&T and other mobile broadband providers, agreed. “The commission should not limit analysis narrowly to ‘fixed’ broadband, because mobile technology is increasingly competing for fixed broadband business and traditional notions of fixed broadband are changing,” the trade group told the FCC.

Given that charter, cable operators said, the FCC needs to look at the over-the-top competition as well, given that Google, Facebook and Amazon “are among the largest, most dominant companies in the world.”

Add the so-called FAANG companies (Facebook, Apple, Amazon, Netflix and Google) and wireless behemoths like Verizon and AT&T to the relevant competitive market for broadband and cable services, and there would arguably be plenty of room for further consolidation.

The NCTA even argues that the more ISPs increase their network reach, the stronger competitors that edge providers will become in provisioning video and data. That’s because they are riding on network buildouts to build their audiences.

“As broadband providers continue to increase the reach and capability of their networks, these online service offerings will only become more potent competitors to regulated voice and video services,” the NCTA told the commission.

Edge providers are showing up just about everywhere ISPs are talking to the government about the current regulatory landscape.

Cable operators and other service providers are tired of being targeted as the snake in the internet garden, and want the FAANG companies to be recognized as 800-pound competitive gorillas. Even Congressional Democrats, who’ve long talked up thegarage-innovator status of edge providers, are starting to see them that way.

Now it will be up to the FCC to help decide who is competitive with whom.

WASHINGTON — New chairman Ajit Pai has a lot on his to-undo list as he takes the reins of the Federal Communications Commission, and he has already started to whack back at what he signaled were last-minute efforts by the previous administration to make some political hay while the sun was still shining.

Internet-service providers, after years of being slammed as the broadband bottleneck in need of government regulation to force them to build out their high-speed networks — and prevent them from using that bottleneck power to nip the burgeoning Web in the bud — now have a booster in the FCC’s big chair.

Pai, a deregulatory-minded Republican commissioner since 2012, has spent almost five years heading up the loyal opposition to then-chairman Tom Wheeler’s regulatory agenda, from a Title II-based Open Internet order to a set-top box remake to the broadband privacy framework.

The clock ran out on set-tops and Pai officially drove a nail into Wheeler’s proposal, taking it out of circulation, where his predecessor had left it.

He also pulled a business broadband regulatory revamp proposal that would have allowed for new rate regulations on cable broadband and other competitors to large telco incumbents.

After the Media Bureau in late December signaled that the zero-rating plans offered by AT&T and Verizon Wireless appeared to be anticompetitive violations of the Open Internet order, Pai fired back: “Any unilateral action taken by the Wireless Telecommunications Bureau at the chairman’s direction in the next 49 days can quickly be undone by that same bureau after Jan. 20, 2017.”

That undo came two weeks ago when the Wireless Bureau rescinded the report and essentially told ISPs to forget about it.

“Going forward, the Federal Communications Commission will not focus on denying Americans free data. Instead, we will concentrate on expanding broadband deployment and encouraging innovative service offerings,” Pai said, drawing cheers from ISPs and jeers from public-interest groups and some Democrats in Congress.

The chairman’s new acting Media Bureau chief also quickly reversed a December decision on noncommercial TV-station reporting requirements, which Pai had disagreed with and thought should have been handled by commissioners. Now it will be.

MFN AND ADM, OH MY

Among the major regulatory overhangs from the last administration, net neutrality and the associated broadband privacy decisions are the biggest. There’s also the question of what to do about the FCC’s proposal to limit most favored nation (MFN) and alternate delivery method (ADM) clauses in programming contracts.

Cable operators are divided over the issue, but Pai is unlikely to push that notice of proposed rulemaking onto the agenda as an order in its present form, though cable critic Sen. Claire McCaskill (D-Mo.) last week was pushing him to do so. He dissented from the proposal in September, calling it an attempt by the FCC to exact regulatory tribute. He said it gave the commission “carte blanche to regulate programming contracts,” something he saw no evidence that Congress intended.

Few doubt Pai’s desire to take a weed whacker to unnecessary regulations. Pai did not break it out on day one, though, instead focusing his first stakeholder meetings and his address to FCC staffers on closing the digital divide. Chairman Tom Wheeler focused on that as well, by using the FCC’s authority under Section 706 of the Telecommunications Act of 1996 (to ensure deployment of advanced telecommunications in a reasonable and timely manner to all Americans), a tool to regulate ISPs as the “gatekeepers” to the home.

The new chairman has been highly critical of that interpretation of FCC authority. He talked about the FCC under a Republican administration at a Free State Foundation event following President Donald Trump’s election.

“I’m optimistic that the FCC will once again respect the limits that Congress has placed on our authority,” Pai said at the FSF event. “We can’t simply enact whatever we think is good public policy. We also have to make sure that we have the power to do so. But the commission hasn’t done a very good job of that recently.”

Pai has also been critical of FCC reports that either fail to draw conclusions — or draw ones that strike Pai and many in the industry as politically motivated. Under Democratic FCC chairs, he FCC’s report on competition has not drawn any conclusions about the competitiveness of the marketplace.

The so-called 706 report on the state of advanced telecommunications deployment has repeatedly concluded that such services were not being deployed in a reasonable and timely fashion because deployment was not universal, which was then used to justify further regulation.

Pai has nixed the draft of the latest 706 report, drawn up under his predecessor, a spokesman for the chairman confirmed, though he added of that and other items pulled from circulation: “All items removed will be reviewed and could be recirculated with modifications.”

“The goalposts kept moving, so that the commission somehow could avoid finding broadband deployment reasonable,” Randolph May, executive director of think tank the Free State Foundation and himself a former FCC official, said. “I suspect that under chairman Pai, the Section 706 reports will be grounded in marketplace realities rather than in preconceived notions.

Added Scott Cleland of NetCompetition, an ISP-backed group: “An important undo is stopping the FCC from serially ducking its responsibility as an expert agency to report to Congress what the FCC’s expert conclusions are on the state of wireless and video competition. What good is a so-called ‘expert’ agency if it won’t or can’t make necessary, customary and expected, expert conclusions?”

Pai will have encouragement, and help, from Capitol Hill. House GOP leaders pushed him to close the docket on the set-top proposal and have been trying to undo regulation of the Internet as a telecom service under Title II of the Communications Act legislatively, though Sen. John Thune (R-S.D) said recently that they “are not there yet.”

‘I’M HERE’

The new chairman essentially had to announce his own appointment to the new position as the Trump administration was “drinking from the firehose,” as one lobbyist put it, in dealing with the enormity of staffing a new administration.

He moved quickly to demonstrate a political canniness that should serve him well.

While various network neutrality groups were slamming Pai with headlines like “worst-case scenario” and warnings that he will be a net neutrality “killer” — Demand Progress called the pick awful and used it to solicit money from supporters for a new network-neutrality campaign — Pai was talking about an issue everyone could agree on: Getting broadband to all Americans, particularly in rural areas such as his native Kansas.

Rather than doubling down on his promises to revisit Title II regulation of broadband and telecom and TV providers’ zero-rating plans and broadband privacy, all of which he has signaled are in his sights, he accentuated the positive. He said closing the digital divide was a priority — as it was for Wheeler — and backed that up with meetings on the issue with stakeholders. He also launched some process reforms and test reforms aimed at making the agency rulemaking process more transparent.

But it didn’t take long for the forest of Wheeler-era decisions to start falling, including access to political advertising files, the zero-rating report and even a not-so-11th-hour March 2014 advisory on how the FCC would handle joint sales agreements.

Adonis Hoffman, chairman of Business in the Public Interest and former chief of staff to the current lone FCC Democrat, Mignon Clyburn, sees Pai’s approach as more than political savvy. “Those who paint a one-dimensional picture of chairman Pai will miss the mark,” Hoffman said. “With his first words addressing the digital divide, Pai signaled a broader agenda than expected. His record speaks to this trend — AM revitalization; encouraging private-sector initiatives to increase minority ownership; standing up for small businesses; and protecting the rights of independent music artists, which has earned him props from the rappers. Of course, that also comes with a healthy dose of less-is-better regulation on most business issues.”

While he has a 2-1 Republican majority, the aforementioned Democrat Mignon Clyburn still has some power to at least hold up commission-level votes intended to undo the Democratic agenda she generally supported — that is, until the FCC is at full strength. It takes three votes for an item on circulation to put the other commissioners on the clock to vote on it, or see it eventually approved without their vote. Until the commission is at five members, the two-person majority can only approve items at a public meeting.

One example: Pai quickly circulated, and fellow Republican Michael O’Reilly voted to support, extending the waiver that lets smaller cable operators avoid the Open Internet order’s enhanced transparency reporting requirements. But it would have taken Clyburn’s vote, which she had yet to cast, to make it official since it did not have three votes. Pai has now placed the item on the public meeting agenda — but even then, if Clyburn chooses not to show up for the meeting, Republicans would be stymied again, because such meetings require a quorum.

Pai’s flurry of actions to undo progress reports and decisions were all at the bureau level, under delegated authority, so no public votes were needed.

Clyburn was not pleased, branding the actions illegal. “It is a basic principle of administrative procedure that actions must be accompanied by reasons for that action, else that action is unlawful,” she said, “yet that is exactly what multiple bureaus have done.”

It remains to be seen how assiduously President Trump respects the independence of the FCC. He appears not to be shy about expressing his wants and desires: witness his reported call to the National Park Service on his first day in office to talk about inauguration crowd estimates.

Pai has shown himself to be a fan of keeping plenty of separation between the FCC chairman and the White House, taking the Obama administration to task for the president’s public push for Title II and calling it the Obama plan.

If the new chairman succeeds in rolling back that reclassification, he will likely not mind having his name on whatever emerges.

SIDEBAR: The Life of Pai

Biographical facts about the FCC’s new chairman

• FCC chairman since Jan. 20, 2017; commissioner since May 7, 2012. Partner, Jenner & Block, 2011-2012
• FCC deputy general counsel, associate general counsel, and special adviser to the general counsel, 2007-2011
• Chief counsel to Sam Brownback (R-Kan.), chairman of the Senate Judiciary Committee Subcommittee on the Constitution, Civil Rights, and Property Rights, 2005-2007
• Senior counsel, Office of Legal Policy, U.S. Department of Justice, 2004-2005
• Deputy chief counsel to Sen. Jeff Sessions (R-Ala.), chairman of the Senate Judiciary Committee Subcommittee on Administrative Oversight and the Court, 2003-2004
• Associate general counsel, Verizon Communications; 2001-2003
• Trial attorney, Antitrust Division, Telecommunications Task Force, Department of Justice, 1998-2001
• Clerk, Judge Martin L.C. Feldman, U.S. District Court for the Eastern District of Louisiana. 1997-1998.
• Graduated with honors, Harvard University, 1994; University of Chicago Law School, 1997.

SIDEBAR: ‘Undo’ Influence

Here are just some of the Wheeler FCC bureau decisions that have been reversed or invalidated by chairman Ajit Pai’s new acting or permanent media bureaus. Most of them were issued during former chairman Tom Wheeler’s waning days at the agency, and Pai characterized most as “controversial orders and reports” objected to by the leadership of the FCC’s oversight committees (that would be Republicans) and two of the four commissioners (they would be the Republicans).

In these moves, Pai had cover from the chair of the House Energy and Commerce Committee, Rep. Greg Walden (R-Ore.), and the House Communications Subcommittee, Rep. Marsha Blackburn (R-Tenn.).

“We commend chairman Pai for yet another step toward much-needed reform at the FCC. For too long, the commission has used the ability to delegate authority to its bureaus as a way to bypass the hard work of coming to consensus on difficult issues,” Walden and Blackburn said following the mass rescissions.

• The Wireline Competition chief in December wrote Comcast a letter “inquiring” about its Stream TV service. Pai’s bureau chief told Comcast the inquiry, such as it was, is closed, and “any conclusions, preliminary or otherwise, expressed during the course of the inquiry will have no legal or other meaning or effect going forward.”

• The Media Bureau had admonished one TV station, an official black mark, and warned others about how they had (or in this case hadn’t) informed viewers about the sponsors of political ads. Forget about it, Pai’s acting bureau chief said. The guidance the FCC provided was rescinded.

• The same acting bureau chief rescinded March 12, 2014, guidance on how the FCC would treat joint sales agreements, guidance that broadcasters said was an effective prohibition on some of those agreements.

• In a report issued less than two weeks before his Jan. 20 exit, Wheeler’s Wireless Bureau had warned AT&T that its DirecTV Now sponsored data plan was probably a violation of net neutrality rules, and advised Verizon that its FreeBee service probably was, too. Pai’s acting bureau chief rescinded the order and Pai said he thought the plans were pro-consumer.

• On Jan. 18, the Wireline Bureau released a report on the E-rate schools and libraries subsidy. The report was withdrawn and “will have no legal or other effect or meaning going forward.”

• On Jan. 17, the FCC’s Office of Strategic Planning and Policy Analysis released a report, “Improving the Nation’s Digital Infrastructure.” Pai’s new management invalidated it, and “any and all guidance, determinations, recommendations, and conclusions contained therein.” It has no legal meaning.”

• The acting chief of the Wireline Bureau rescinded the approval of a handful of companies for Lifeline advance telecommunications subsidies so it could further consider a challenge to those designations (which had been granted in December and January), saying that it was to “promote program integrity by providing the Bureau with additional time to consider measures that might be necessary to prevent further waste, fraud, and abuse in the Lifeline program.”
— John Eggerton

The Big Two

The Federal Communiciations Commission under Ajit Pai and the Republican-controlled House and Senate appear to be on the same page when it comes to rolling back Democratic initiatives, at the FCC and elsewhere. Here is how they could divvy up the duties on some prime rollback real estate.

Network neutrality: The chairman could take a bite out of the Open Internet order immediately by not enforcing the general conduct standard and announcing that unlike the FCC Wireless Bureau, the current commission is not casting aspersions on zero-rating plans.

Pai has already signaled that the FCC would not be enforcing the Open Internet enhanced transparency rules against smaller cable operators, and separately has circulated a waiver renewal that will eventually take effect whether or not Democrat Mignon Clyburn votes the item.

Longer-term, he will need to build a legal case for reversing the reclassification of Internet-service providers under Title II since a court upheld the FCC process that led to that decision.

Congress could also step in to defund implementation or invalidate it using the Congressional Review Act, a weapon they have threatened to use liberally if necessary. Republicans are working on what they pitch as a bipartisan approach, but last week Democrats led by Senate Minority Leader Chuck Schumer (D-N.Y.) announced they were teaming with public advocacy groups to fight back against Republican efforts to roll back the rule.

Broadband Privacy Framework. Cable operators and others have asked the FCC to reconsider the decision — on a partisan vote, with Republicans dissenting — to implement a broadband privacy framework that differs from that imposed by the Federal Trade Commission on edge providers such as Netflix or Google. The Pai FCC could reverse that decision on reconsideration, Congress could reverse it with the Congressional Review Act or it could fall of its own weight if Pai tackles Title II classification, since that is how the FCC deeded itself authority over broadband privacy.

NCTA: The Internet & Television Association, the American Cable Association and other ISP groups have called on Congress to use the CRA to undo Wheeler’s proposal.

SIDEBAR: The Pai Principles

Here are FCC chairman Ajit Pai’s guiding regulatory — or, more appropriately, deregulatory — principles:

• Consumers benefit most from competition, not pre-emptive regulation. Free markets have delivered more value to American consumers than highly regulated ones.
• No regulatory system should indulge arbitrage; regulators should be skeptical of pleas to regulate rivals, dispense favors, or otherwise afford special treatment.
• Particularly given how rapidly the communications sector is changing, the FCC should do everything it can to ensure that its rules reflect the realities of the current marketplace and basic principles of economics.
• As a creature of Congress, the FCC must respect the law as set forth by the legislature.
• The FCC is at its best when it proceeds on the basis of consensus; good communications policy knows no partisan affiliation.

SOURCE : Federal Communications Commission

Since Donald Trump won the U.S. presidential election, pundits have been predicting what his win will mean for everything from tax reform to immigration policies. While uncertainty is still the name of the game, recent announcements about the president-elect’s transition team and members of his cabinet have provided some hints as to how his policy agenda may unfold.

One area where we have heard very little from Trump — minus one or two tweets over the past few years — is the telecommunications industry and the agenda pursued by the Obama administration and Federal Communications Commission chairman Tom Wheeler. Many of the Wheeler FCC’s key rules were passed on party-line, 3-2 votes with strong GOP opposition. The assumption is that with a Republican president and a GOP-led FCC, many of those rules and policies will be reversed. The announcement that Jeffrey Eisenach, Roslyn Layton and Mark Jamison — all vocal critics of current FCC policies — would lead the Trump FCC transition team has done little to dispel this assumption.

While a change in policies at the FCC appears to be in the cards, how that gets carried out is a little more complicated. Two of Wheeler’s landmark rules at the FCC — the network-neutrality rule and the recently passed broadband privacy rule — would be a target of a GOP-led FCC, but would require a formal rulemaking process to “reverse.” This means going through the Administrative Procedures Act process of a notice of proposed rulemaking, a public comment period and an FCC vote to approve any changes.  

A GOP-led FCC would have the votes to change the rules, but the rulemaking process would be played out in the public with strong opposition from those that originally supported them. This politically charged rulemaking environment may draw attention away from the Trump administration’s higher-priority issues.  

Another less drastic — and less political — mechanism a GOP-led FCC could use to lighten the impact of the rules is to take a more laissez-faire approach to enforcement. The net-neutrality rule has been in effect for nearly two years and was recently upheld by the U.S. Court of Appeals for the D.C. Circuit. While the FCC has sent letters of inquiry to several companies about whether their practices might violate Net Neutrality, no significant enforcement actions have been brought. A GOP-led FCC could take an even more hands-off approach to enforcement of the rule.

The broadband privacy rule has a staggered effective date over the next 18 months, with initial elements going into effect in six months. It has been criticized as creating an unlevel playing field between entities subject to the FCC rule and those subject to the Federal Trade Commission’s more-lenient rule.  Once again, a GOP-led FCC could take a lax enforcement approach to the rule, but the rule is in the books and the FCC would have to enforce any clear violations. Amending the rule to address the discrepancy between the FCC and FTC approaches can only be accomplished through the rulemaking process noted above.

A legislative solution is another much-discussed option to roll back the impact of the net neutrality and privacy rules. Over the past several years, there have been several proposals from the GOP to put some type of net-neutrality requirement into law, but at the same time remove the FCC’s ability to regulate broadband under Title II of the Communications Act. All of those proposals were pulled under the threat of an Obama veto.  

With a Republican in the White House, the GOP may decide to press ahead again with a legislative solution which would address both net neutrality and privacy. Both rules are based on the FCC’s decision to reclassify broadband providers as common carriers, subject to regulation under Title II.  Without the Title II reclassification, both rules would be without statutory authority. New legislation undoing reclassification would potentially remove the legal underpinning of both rules and the FCC’s Title II oversight of broadband. This would also put the FTC back in the role of the primary privacy supervisor for broadband providers, once again leveling the privacy playing field.

Could such legislation pass? This does not appear to be a high priority for the GOP or the Trump administration, which are are focused on tax reform, trade policy, immigration and health care as priority areas early in the president’s first term. The GOP also does not have the 60 votes needed in the Senate to break a filibuster, so it might be difficult to pass legislation unless there is some Democratic support, which may arrive if there is a view that a compromise is the only way to maintain Net Neutrality. The other strategy for the GOP may be to wait until after 2018, when 10 Senate Democrats are up for re-election. The GOP could potentially have a filibuster-breaking majority after 2018, when they could push through the legislation they want.  

It seems clear that change is coming for how the telecommunications industry will be regulated. As with every change of party in the White House, the Trump administration will want to put its imprint on the industry. It is just not clear at this point on what that mark will be or how long it will take.  

David Sapin is technology, media and telecommunications risk and regulatory leader at PwC.

Dish Network chairman and CEO Charlie Ergen told analysts and reporters Wednesday that he hopes  President-elect Donald Trump will take a softer approach to regulatory issues in the communications business, adding that given his voter base, the new Administration could help bring greater connectivity to rural parts of the country.

Trump won a stunning upset Tuesday over Democrat Hillary Clinton and has spoken critically of big media mergers during the campaign – he said he would block the AT&T-Time Warner merger and said the Comcast-NBC Universal merger concentrated too much power. While his ultimate stance on big media and mergers will depend on who he picks to head key regulatory agencies like the Dept. of Justice and the Federal Communications Commission, Ergen said that position could change with time.

“You always have to take it seriously what someone who is running for President says,” Ergen said on a conference call with analysts and reporters to discuss third quarter results. “Any candidate would reserve the right to change their mind if they had different facts. The regulatory process is probably as unknown as it was before the election.”  

Ergen added he expects Trump to tread lightly on regulatory issues like Net Neutrality.

“In general I think the Republican leadership, both in the Congress and the Executive Branch and potentially the Supreme Court will have a lighter hand with regulation,” Ergen said. “You may see Net Neutrality challenged or weakened going forward. The same people that voted in the election are going to say ‘I want to be treated fairly’ and ‘I don’t want to be gouged.’ You’re going to see a balance there.”

That voter base – a large percentage of which is in rural areas that have less access to broadband, might also benefit from Trump’s Administration.

“You’ve got a lot of potential policy positives for business in general,” Ergen said. “Those companies that might have capex, whether it be satellites or networks or connectivity to Rural America or connectivity to inner cities.Dish is positioned in those areas should this Administration decide to go that route, which I think there is a  high likelihood they will. This was an election about the haves and the have-nots. The have-nots voted for Donald Trump. Rural America doesn’t have much connectivity.”           

On March 31, the Federal Communications Commission (FCC) approved the latest in a string of proposed rulemakings, one which could have a significant impact on the business and operations of communications companies and edge players.

FCC chairman Tom Wheeler’s proposal to establish privacy rules for Internet service providers followed closely on the heels of the FCC’s proposal to “unlock” the cable set-top box (see "PwC’s 3things: Unlocking the Set-Top Box"). All of this comes a year after the controversial Open Internet Order (OIO), which reclassified broadband Internet access as a “telecommunication service” under Title II of the Communications Act, allowing the FCC to impose its “Open Internet” regulations.

While neither of the FCC’s two proposed rules are finalized – and the OIO is still being challenged in court – the fact is that the tide of regulatory-driven change is rising. Understanding and managing legislative and regulatory change is now a daily part of any business and has the attention of the highest levels of nearly every organization. Firms that have the ability to effectively manage – or even embrace – the impact of regulation can gain a competitive advantage.

Lessons Learned From the Wave of Dodd-Frank Regulation

Our experience with financial services firms addressing the rise of global financial reform regulation coming out of the financial crisis (e.g. the Dodd-Frank Act in the U.S.) found that the “winners” in the new regulatory environment were those firms that evolved their approach to proactively manage the impact of regulatory change. As Dodd-Frank’s proposed rules emerged, many banks took a combative stance and adopted a “wait and see” approach to preparing for the impact of the final rules. This approach left many unprepared and in a reactive mode when the rules were finalized. There was no time to think through the strategic or operational impact as they struggled to implement the required changes within the regulatory deadlines.

As banks later accepted the inevitable of the post-crisis regulatory environment and gained experience in addressing new and evolving regulations, a new model arose. Banks continued their lobbying efforts to shape proposed rules, but they also began to game plan the scenarios that might unfold.

Applying the Strategic Approach: The FCC’s Set-Top Box Proposal

The Dodd-Frank lessons learned from the financial services industry can be applied across most other industries facing regulatory-driven change. The FCC’s recent Set-Top Box proposal is a prime example. The FCC believes that the proposed rule meets their obligation under the Communications Act of 1996 to ensure a competitive market for navigation devices for live and video programming. Those opposing the proposal argue that it is unnecessary because the market is already innovating and providing customers with sufficient choices to access their content. The official 30-day comment period for the proposed rule will close on April 22, so, while late, there is still an opportunity to apply a proactive strategic approach (see graphic representation below) to address its potential impact.

At the most basic level, there are three potential outcomes for the proposed rule:

1. The rule is passed largely as proposed, so multichannel video programming distributors (MVPDs) would have to make the three information flows (Service Discovery, Entitlement and Content) available to third party navigation devices according to the rule’s requirements.
2. The rule passes but gets held up in court similar to the OIO, leaving the industry in a limbo state of regulatory uncertainty.
3. The rule does not pass, so the status quo remains.

MVPDs, technology and media companies should consider conducting an impact assessment based on each outcome. Many MVPDs are already innovating the ways in which consumers access their content through apps and other IP-based approaches or are working with third-party device companies to share content. They should be evaluating how their progress on this front could help them address some or all of the proposed rule’s requirements. At a minimum, this exercise would inform their response to, and formal comment on, the proposed rule. It may also provide them with insights that would allow them to benefit from any early adopter advantages.

With a proposed compliance date of two years after the final rule is approved, firms would have time to implement the types of strategic changes that this analysis might identify. The two-year window also makes it likely that the second scenario (legal challenge) would have little impact on a business’ strategy, other than providing an extended window for the more reactive firms to further delay potential changes to their strategy or business model. If the third scenario occurs and the rule does not pass, how would that impact the response of impacted firms? Most agree that the market for accessing video content is advancing rapidly with the evolution of Over-the-Top and digital offerings. With or without a final rule, firms will have to evolve and the analysis performed in preparing for the Set-top Box rule will help them formulate their evolution strategy.

In this era where change comes from all angles (including regulation) and disruption occurs at an accelerating pace, those firms that adopt a proactive approach and embrace regulatory-driven change can create a distinct competitive advantage.

David Sapin is Technology, Information, Communications and Entertainment (TICE) Risk & Regulatory Leader at PwC. Follow him on Twitter.

WASHINGTON — The Senate Permanent Subcommittee on Investigations is sending subpoenas to cable operators and other multichannel video programming distributors (MVPDs) seeking information, including program contract information, related to over-the-top video service, according to multiple sources.

The Senate panel is the subcommittee with sweeping jurisdiction; its past investigations have included everything from trying to weed out Communists under chairman Joe McCarthy in the 1950s to rooting out the cause of Enron’s financial collapse in the early 2000s.

The information sought this time includes data on video pricing, one industry source said. That would make sense, given the presence of a pair of longtime cable price critics on the panel: Sen. John McCain (R-Ariz.), a member of the majority, and ranking member Sen. Claire McCaskill (D-Mo). McCaskill has criticized cable operators in the past over a variety of issues, and has asked for anecdotal evidence from constituents and others about their cable complaints.

Subpoenas for documents and records can be issued by any member of the subcommittee, so long as the request is authorized by the chairman and notice is provided to the ranking member — and in this case, that would be McCaskill.

Multiple sources said they understood McCaskill was a driving force behind the subpoenas. A McCaskill spokesperson declined comment, as did Matt Owen, chief counsel for the subcommittee.

LETTERS IN THE MAIL

An industry source who said the letters had gone to cable operators did not know whether they went to telco or satellite video operators as well. Another source said some cable operators and at least one satellite operator had received notices. All the major players were expected to receive them, that source said.

A spokesperson for Comcast, the largest U.S. cable operator, had no comment. The National Cable & Telecommunications Association and American Cable Association, the cable industry’s two main trade groups, declined comment as well.

The Senate is widely expected to take the lead on video issues in Congress’s planned bicameral review of communications laws, and over-the-top video is expected to figure prominently in that review. The government is puzzling over how it should treat over-the-top video providers and how Internet-service providers — many of whom are also cable operators with traditional video offerings and their own OTT products — should treat them.

The Federal Communications Commission has made it clear that affording broadband access to competing over-the-top video providers will be a key factor in its reviews of proposed mergers among and between telco and cable ISPs, as well as with program distributors.

Programmers are coming off a federal court victory in which the U.S. Court of Appeals for the D.C. Circuit held that the FCC could not avail third parties to massive amounts of sensitive contract data in the Comcast- Time Warner Cable merger-review process. (That merger has since been scuttled.)

They now face the potential that such documents could be put in the hands of a committee that has had a history of strategic leaks, or that could produce those documents in the context of a hearing.

The investigation could take months as the targets of the subpoenas first try to figure out exactly what the subcommittee needs, in the interest of refining what they must provide. Senate staffers must then vet the information.

It is unclear how that information might be used — say, in upcoming hearings — or how the subcommittee will ensure that sensitive information is not shared (or hacked).

‘RATHER AGGRESSIVE’

One Washington, D.C.-based cable executive speaking not for attribution said the document requests could take a long time. And coming from the Investigations subcommittee, the source added, the move appeared more hostile than a matter of simple fact-finding for a planned Communications Act rewrite.

The source called the subpoenas a “rather aggressive” move.

The process, the source explained, is basically that the subpoenas are issued, then the targets — in this case, the MVPDs — start negotiating over which documents the subcommittee specifically needs, to try to understand what lawmakers really want and avoid over-delivering boxes of sensitive information. Then the Senate staff will have to absorb it.

Given what was understood to be the broad scope of the request, the source said, the subpoenas appear to be a lot of fishing for information — and what becomes of the info will depend on what the panel finds.

It was unclear what role the programmer side of those contracts would have in the process.

One unintended consequence of the request is that it could make industry players less amenable to frank discussions in planned Communications Act rewrite hearings in other committees, such as the Senate Commerce Committee, the cable executive said. It could also turn cable executives from friendly witnesses into ones in litigation mode, since they would no longer just be called to testify but would have to do so knowing members of Congress have highly confidential documents. He said it could make those executives less forthcoming, given they would have to calculate what they are saying in the context of what Congress already knows.

WASHINGTON — According to the House Energy & Commerce Committee, it has struck an "agreement" with Federal Communications Commission chairman Tom Wheeler that will keep 15 of the agency's 24 field offices open.

The chairman's budget plan had included closing 16 of the 24 offices, saying that was a way to save money without adversely impacting interference monitoring, but various House members, including ones in districts where offices were closing, were not convinced, and broadcasters were concerned given the interference monitoring the FCC will have to do when it repacks stations and wireless operators after the incentive auction.

“Communities across America will continue to be served even as the commission becomes more efficient – it’s a win-win,” said full committee Chairman Fred Upton (R-Mich.) in announcing the agreement. “It also demonstrates how much we can accomplish when we work together to tackle the many tough issues we face.”

"These changes will keep field offices open in strategic locations and help ensure that the commission can fulfill its responsibilities to the public and public safety communities," added Communications Subcommittee Chairman Greg Walden (R-Ore.).

In addition to keeping 15 field offices open, the revised FCC budget plan will "ensure better rapid response capabilities for the west, provide a mechanism for escalating interference complaints, improve enforcement of the FCC’s rules against pirate radio operators, and prevent the commission from transferring field office jobs to the FCC’s Washington, D.C. headquarters."

Walden and Upton registered their concerns about the plan in a letter to Wheeler in April.

Wheeler spent some time defending the closures to broadcasters in his speech to the NAB convention back in April. Wheeler has said the FCC found it had more trucks than employees and one manager for every four in the offices, so there was room for finding new efficiencies by taking a "strike force" approach. He said centralizing the process would save costs and that there were currently too many people doing too few things.

The announcement of the agreement by the House Republicans, including the ramped-up efforts targeting pirate radio stations, comes the same day that 33 members of the New York and New Jersey congressional delegations wrote the FCC asking it to crack down on pirate radio stations in the region, including by staffing up its New York regional office and boosting enforcement.

The deal was a victory for the National Association of Broadcasters, which had challenged the closures.

"NAB thanks the many members of Congress who expressed concern over proposed cuts in FCC field offices," said NAB spokesman Dennis Wharton, "and we applaud Chairman Wheeler and his staff for resolving this issue in a manner that better protects against airwave interference. We also salute Chairman Wheeler's willingness to address the rampant growth of pirate radio, which creates significant interference challenges for radio listeners who rely daily on their legally-licensed hometown stations."

In fact, Wheeler gave NAB a shout-out for its help in informing the shift.

“Today, I circulated to my fellow Commissioners a modified plan to modernize our field offices," said Wheeler in a statement. "These changes create the opportunity for the FCC to be more efficient with its resources while actually improving 21st Century field activities. This updated plan represents the best of both worlds: rigorous management analysis combined with extensive stakeholder and Congressional input. Chairman Walden, Chairman Upton and other lawmakers have contributed to this effort through their thoughtful engagement," he confirmed. "Input from industry and public safety stakeholders has further informed the modifications, and I appreciate the important role played by the National Association of Broadcasters in getting to a constructive result. I urge my colleagues to approve this revised plan with dispatch so that we may get on with improving the agency’s productivity.”

Needham & Co. media analyst Laura Martin lowered her rating on Time Warner Cable to “underperform” Monday, adding in a note to clients that pressures from Title II regulations could affect its broadband business.

Martin wrote that Title II brings valuation risks including increased legal costs (TWC is likely to sue along with other cable companies to block the regulation); a higher discount rate for the stock price given the uncertainty of free cash flow streams as a result of higher taxes, price regulation or universal service fees; a lower terminal multiple given Federal Communications Commission chairman Tom Wheeler has said over time either new competition has to enter the market to drive down prices or the agency will intervene to assure all consumers have access to broadband.

“By implication, risk is rising that ROICs on broadband will be less profitable over the next 10 years than the past 10 years when only economics determined investment levels,” Martin wrote. “We calculate that the value of TWC falls 10-20% assuming Title II is upheld by the courts.”

Martin also warned that if the Comcast merger is not completed, Charter Communications, which had pursued TWC before Comcast trumped its $132.50 per share bid in February, will probably make a lower offer in the next go round.

Time Warner Cable stack was unaffected at least in early trading Monday – its shares were up 63 cents (0.4%) each to $154.68 per share at about 10:43 a.m.

WASHINGTON — The Federal Communications Commission will give the industry and public a little more time to comment on the proposal to classify linear over-the-top video providers as multichannel video programming distributors (MVPDs), at least for the purposes of nondiscriminatory access to programming — just not as much of it as they had requested.

Several parties, including the National Association of Broadcasters and Telecommunications for the Deaf and Hard of Hearing (with the support of the American Cable Association), had pointed to the complexity of the issues involved and asked for an extra 30 days to comment.

"The commission’s general policy is not to grant extensions of time routinely," Media Bureau chief Bill Lake said in granting an extension, "but we find that given the complex issues involved here, the public interest warrants an extension of the comment and reply comment deadlines. Although the parties seek a 30-day extension, we believe that a two-week extension will give the public enough time to respond to the NPRM."

Comments are now due by March 3; reply comments must be filed by March 18. (The NAB and the other parties had sought deadlines of March 19 and April 3).

The FCC voted last December to propose giving linear OVDs nondiscriminatory access to cable-affiliated programming and local-TV station broadcasts, regardless of whether or not the distribution is facilities-based. That decision raises lots of questions about how to apply that definition and the ramifications of doing so.

The idea is to help promote online video as a competitor to traditional cable and satellite providers. The FCC has said that a technology-neutral definition of MVPD should yield more programming choices.

"Video is no longer tied to a certain transmission technology, so our interpretation of MVPD should not be tied to transmission facilities," FCC chairman Tom Wheeler said when the item was up for a vote.

In the past, the FCC has tentatively concluded that an MVPD must have a distribution facility to meet that classification.

Sen. Ted Cruz (R-Tex.) has posted a YouTube video explaining why internet service providers should not be regulated under Title II.

In the video, of a speech on the issue in Austin, Tex., last week, Cruz says that smart phones should be outside of Title II, and uses black rotary phone and cell phone to illustrate the difference between calcified public utility regulations and the innovation start-ups and entrepreneurs.

He said the simple message is: "Don't mess with the Internet."

Cruz, who told the crowd his parents were computer programmers back in the 1950s and 1960s, the era of key punches and cards and vacuum tubes, said it is now a whole different world and that the President's call for regulating ISPs under decades- old Title II was the worst thing that could happen. "The government shouldn't be picking winners and losers," he said. He argued that it was regulation that favored "the big guys with armies of lobbyists," rather than the startups and innovators.

Cruz is also the former chair of the Internet Task Force at the Federal Trade Commission, he pointed out.

"The worst thing you want is for five unelected bureaucrats in Washington to take charge of regulating the Internet as a public utility," he said.

Cruz also said 'net freedom is a speech issue and an empowerment issue and an entrepreneurship issue, and that that freedom depends on not "messing with the Internet" by imposing the "plague" of excessive regulation. He said that includes no Internet sales tax--there is a bill that could be voted on in the lame duck session, the Mainstreet Fairness Act  that would impose a sales tax on 'net transactions by eliminating the requirement that a business be connected by brick and mortar with a taxing jurisdiction.

He also argued for the U.S. not handing domain name registering over to international stakeholders.

The FCC is currently considering numerous approaches to restoring network neutrality rules, including using Sec. 706 authority to promote broadband deployment, Title II authority to regulate monopoly markets--treating ISPs as so-called "terminating monopolies" of Internet access--or some combination of the two.

Cable stocks continued to regain the ground they lost in the wake of President Obama’s message to move closer toward Title II regulation of broadband, with shares of all the major cable operators rising in Wednesday trading.

The stocks took a beating on Monday after the President said in a video message that he would prefer the Federal Communications Commission move closer to Title II regulation to ensure an open Internet. That news sent cable stocks into a tailspin – shares of the top MSOs were down between 3% and 6% for the day – as investors feared more onerous regulation would stifle growth.

The stocks fared better on Tuesday, with Comcast and Charter posting tiny gains (1 cent and six cents per share, respectively) while other stocks in the space tempered their losses.

On Wednesday, the sector began its long climb back, with Comcast, Charter, Time Warner Cable, Cablevision Systems and Liberty Broadband all reporting increases.

Liberty Broadband, the tracking stock that includes Liberty Media’s 26% interest in Charter Communications, was the big gainer for the day, rising as much as 4% in earlier trading before closing at $47.15 each, up 3.2% ($1.46 per share). Liberty Broadband was followed closely by Time Warner Cable, up as much as 3% before settling to close at $136.38 (up 1.2% or $1.60 each), Charter Communications, up 2.4% before closing at $149.01 (a 1.6% increase) and Comcast, up 2% before closing at $53.60 per share, a gain of 1.2%. Rounding out the sector was Cablevision Systems, which rose as high as 1% (up 14 cents each) to $18.23 before closing at $18.15, up 0.3% or 6 cents each.

Cable stocks took a pounding in the hours after news broke that President Obama favored Title II regulation for multichannel video programming distributors, with Comcast and Time Warner Cable taking the biggest hits.

President Obama’s message that he would prefer the Federal Communications Commission reclassify MVPDs under Title II regulation (which would treat them like common telecommunications carriers) came just days after FCC Chairman Tom Wheeler proposed a hybrid approach, which would regulate edge providers’ access to individual subscribers via Internet service providers as a one-to-one telecommunications service under Title II, but regulate subscribers’ access to all those edge providers and services via their ISP as an information service under Section 706.

MVPDs have warned that a move toward Title II would stifle investment in the broadband infrastructure.

Comcast and Time Warner Cable, currently awaiting FCC approval for their pending $69 billion merger, understandably took a big hit, with TWC shares dropping as much as 7.2% ($10.34 per share) to $133.26 each in early trading Monday. By the early afternoon, TWC had regained some of that ground and closed at $136.50, down $7.10 each or 5% per share. Comcast shares fared slightly better – they were down as much as 6.1% ($3.36 each) to $51.79 before clawing back to close at $52.95 per share (down 4% or $2.20 per share).

Charter Communications stock also fell on the news, falling as low as $145.68 (down $10.69, or 6.8% each) in early trading, but regaining ground to close at $146.62 each (down $9.75 each or 6.2%) later in the day.

Liberty Broadband, the tracking stock created by Liberty Media Nov. 4 that includes its 26%  interest in Charter, also took a beating, dropping as much as 6% ($2.95 each) to $46.57 per share, before closing at $46.73 each, down 5.6%, or $2.79 per share. 

Cablevision Systems stock was hit the least, down as much as 60 cents each (3.2%) to $18.32 per share earlier in the day. The stock closed at $18.60 per dshare down 32 cents, or  about 1.7% each.

Analyst were puzzled at the President’s stance, especially since it came so soon after Wheeler’s call for a compromise on the issue.

In a research note, Elevation Partners analysts Stephen Sweeney said that full-blown Title II has little chance of passing regulatory muster, especially in the wake of the Republican Party taking control of the U.S. Senate in the recent mid-term elections.

“The FCC has jurisdiction over Net Neutrality and Democrats do have the edge 3-2 at the FCC, but we are very skeptical that Chairman Wheeler would yield to Obama’s pressure on this,” Sweeney wrote. “First, Wheeler would not have allowed his hybrid proposal to be leaked in the press if he wasn’t serious about pushing it forward. But after the mid-terms, we are not sure how much clout Obama has at all left to influence policy outside the use of executive orders.”

Cable operators began voicing their opposition to Title II, with Charter stating that a return to "1930's-era rotary telephone" telecom regulation is not the answer to an open Internet.

"Charter Communications unambiguously supports an open Internet, which is vital for consumers and central to our continued success," Charter said in a statement. "The extraordinary growth of broadband service in the United States, which now reaches more than 70 million households, has largely been the result of the current regulatory environment. For these reasons, we strongly oppose the reclassification of broadband as a Title II service under the Telecommunications Act. Efforts to reclassify broadband ignore the fact that the current rules have encouraged billions of dollars of investment in our broadband infrastructure and Americans' access to open, fast, and reliable service has never been greater.  Applying 1930's-era, rotary telephone legislation to a 21st century computer technology comes with significant risks to consumers. It is a solution in search of a problem and threatens to undermine continued investment to improve and expand our nation's broadband infrastructure."

Suddenlink Communications chairman and CEO Jerry Kent, in the midst of its own $250 million broadband upgrade dubbbed "Operation Gigaspeed," said a return to Title II would squelch any investment in the telecom infrastructure.

"To date, the bipartisan approach to the Internet of a light regulatory touch has resulted in  billions of dollars of investments and the creation of new jobs," Kent said in a statement. "In fact, this light regulatory approach was considered in our recent decision to invest nearly a quarter of a billion dollars in Operation GigaSpeed, which will bring 1 Gigabit service to households across our footprint. If the government changes course now, abandoning its light regulatory approach, it will threaten not only our planned investments, but the investments planned by many others.  Now is not the time – with an economic recovery that is tentative, at best – to discourage private sector companies from making new investments and creating jobs."

Cable stocks, fueled by a consolidation frenzy over the past few years, are beginning to run out of gas.

The euphoria associated with the expected deal bonanza in the wake of the Comcast-Time Warner Cable merger has been increasingly overshadowed by fears of onerous regulation and increased compet it ion from over-the-top video service providers.

Cable operator stocks were down slightly for the third quarter — 0.5% — as investors found out they had to wait a bit longer for the Comcast-TWC closing (now expected in early 2015 instead of by the end of the year) and learned that over-the-top video offerings from Sony, Dish and Verizon are coming closer to reality.

OTT LINEUPS TAKE SHAPE

Sony signed up Viacom’s 22 cable networks — including MTV, Comedy Central, Nickelodeon and VH1 — in August for its over-the-top service, and more are expected to join the list.

Dish Network has already signed The Walt Disney Co. and A+E Networks to its OTT offering — which could be called nuTV — slated for an early 2015 release, and Verizon Communication is readying its own over-the-top service, expected by mid-2015, based on Intel Media’s former OnCue service.

Although distribution stocks are still up by about 8% year-to-date, it seems like a slowdown compared to the 35% gain the stocks enjoyed in the first nine months of 2013 and the 50% gain they experienced in the full year.

For the most part, cable distribution stocks were fairly stable — the highs weren’t too high and the lows weren’t too low.

In the third quarter, Comcast and Cablevision Systems showed slight gains — Comcast was up 2% to $54.86 per share, and Cablevision was up 2.3% to $18.05 each.

Charter, Time Warner Cable and Liberty Global all fell slightly during the period, but the declines were well under 1%.

MoffettNathanson principal and senior analyst Craig Moffett said in an interview that cable stock performance in the quarter wasn’t the result of one factor but a series of them. And though the sector is still in positive territory for the first nine months of the year, he said he fears investors may not be taking the larger picture into account.

“I think the bigger issue is that the level of regulatory uncertainty has just ratcheted higher,” Moffett said. “It’s hard to make a big new commitment to the sector when you’re waiting to find out what’s going to happen with Title II and merger conditions and a laundry list of regulatory items.”

Moffett said investors are keeping an eye on regulatory possibilities, but are not as wary of other issues.

“What people are worried about is regulation,” Moffett said. “They’re not worried about OTT. I don’t think OTT is very top-of-mind, and arguably it should be. It’s easy to imagine a scenario where [cable operators’] ability to respond through usage-based pricing or higher interconnection charges are limited by regulation.”

Moffett also wasn’t sure whether the stocks would rebound in the fourth quarter. He said he doesn’t expect to see any strong positive signs until the early part of 2015.

“Eventually it all comes down to how much cash fl ow you can generate,” Moffett said. The cash-fl ow picture for these guys is pretty good.”

While distributors were stable, their programmer counterparts as a whole were down about 1.7% in the quarter and are down 4.5% for the year.

Although the sector got an early lift in the quarter when 21st Century Fox revealed it had made an $80 billion unsolicited off er for Time Warner Inc. (whose shares rose 23% on the news), it retreated just as quickly when Fox withdrew that off er in August, adding that there were no other merger targets on its radar.

The content consolidation wave, which was supposed to happen in response to Comcast-TWC and DirecTVAT& T, doesn’t look like it’s going to happen — at least in the near term.

That leaves investors to worry about an increasingly competitive advertising market, and possible regulatory backlash from retransmission consent and high programming costs.

Pivotal Research Group media analyst Brian Wieser said negative sentiment comes partly from a sluggish upfront and a fear that advertisers are shifting dollars away from television and into digital.

That showed in the performance of some top companies in the sector — CBS dropped 11.7% ($7.29 per share) in the quarter and Viacom, which has been at the center of affiliate fee controversies over the years, dipped 9.9% ($8.60 per share).

‘LAST YEAR WAS TOO STRONG’

Some bright spots emerged: Time Warner Inc. was up about 8.5% in the quarter ($5.95 each) and 13.8% for the year. But most of those gains were residual effects from the aborted Fox takeover attempt.

Disney also maintained a healthy growth clip — up 4.3% for the quarter and 17% for the year — while Starz, Liberty Media and Discovery Communications remained relatively stable.

Wieser said he believes fears that the TV ad market is drying up are mostly unfounded and that the problem lies in comparisons with last year.

“The problem is that last year was too strong,” he said. The sector outperformed his estimates by about 2 percentage points in 2013.

This year the ad market is on track, and Internet ad spending is actually declining.

While Wieser conceded that the upfront was sluggish and that most advertisers overestimated the strength of this year, he said he sees signs of a rebound.

He pointed to recent reports that automotive ad spending is expected to increase next year and that videogame maker Activision will spend about $500 million to develop, market and promote its latest game release, “Destiny.”

“What drives total market growth is the creation, introduction and execution of spending by new brands and new marketers,” Wieser said. “If the economy fails to produce new marketers, then you should worry.”