The Facebook creation of a 2000-person-strong snowball fight in Dupont Circle is a good moment for social networks.  It’s hard not to love #snowpocalypse and #snowmageddon. I remember “snow-lympics” that my generation held in DC, but we probably arranged that by plodding one-off phone calls.  (I also remember the managing partner of my law firm dispairingly saying after that week-long closure:  “What happened to all those hours?  Did the clients just not need the work?”)  My favorite new tag is #snoverkill.

Meanwhile, in Ann Arbor, nothing.  Not that I’m complaining.

NBCU is one of the country’s top four media and entertainment companies.  It owns NBC, Telemundo, broadcast stations in some of the country’s largest markets, some very popular cable channels, and a 30% interest in hulu.com.

Yesterday’s House Energy & Commerce and Senate Judiciary hearings on the Comcast/NBCU transaction included testimony from Colleen Abdoulah of WOW!, a multi-channel video distributor in the Midwest.  WOW! needs access to popular content at reasonable prices in order to survive in the cable marketplace.  (WOW! also provides excellent customer service.)

Abdoulah makes some strong statements about current practices by dominant content providers, and suggests that this bad behavior will become far worse if Comcast is allowed to join forces with NBCU:

• Not all programming content is equal.  Content providers package programming in take-it-all-or-leave-it bundles.  MVPDs need the high-value content in order to compete and have to buy the bundles.  This forces MVPDs to use up channels for programming consumers don’t really want, and makes them use channels for cable content rather than high-speed Internet access.  Allowing Comcast to join its must-have sports content with NBC’s must-have channels will make this bundling and supra-competitive pricing even more destructive to Comcast’s competitors.
• Dominant content providers can already claim to be providing access to their must-have content while, in reality, slow-rolling negotiations, setting artificial market prices in cahoots with friendly distributors, and generally doing all they can to make de facto discrimination possible.  The joint venture will use all of these tricks and more.
• Even the remedies for contesting slow-rolling and discriminatory treatment in the program access world are tilted in favor of the dominant content providers.  It is enormously expensive and draining to fight; in many cases, it’s just not worth it.

Abdoulah said all Comcast-NBCU programming should be available on a non-discriminatory basis.  A la carte.  No more tying and bundling.  The remedies should be fixed - third party review plus binding arbitration plus the ability to continue carrying programming during pendency of the review would make sense.  Her testimony suggests that it would be good for DOJ to consider structural/divestiture remedies, as in Ticketmaster.

From the Comcast/NBCU testimony:

“The formation of the new NBCU will remove negotiation impediments by providing Comcast with control of a rich program library and extensive production capabilities that Comcast can use to develop novel video products and services that will be offered to consumers across an array of distribution platforms.”

WOW! and ACA’s point is that dominant content providers - and Comcast/NBCU would be an enormous actor in this area - have already “removed negotiation impediments.”  The negotiation appears to be simple: take it or leave it.

Last week’s session between President Obama and the House Republicans was astonishing.  But it shouldn’t be a one-off.  They should do this more often.  We need regular public question-and-answer engagements - open dialogues between the President and the opposition party - as a country.

Here’s the Facebook page and the site.  Please sign the petition and let your friends know about this effort.

1.  The transaction would give Comcast, the nation’s largest cable operator, control of one of the five large US content providers and about 30% control of Hulu.com.  If the transaction is approved, Comcast will be behind about one out of every five viewing hours in the U.S.  We are a nation of living-room watchers, and Comcast will be there.

2.  Comcast is smart to be using control over content to guarantee dominance in broadband.  There are fewer competitors in broadband - usually two in any locality, a cable company and a telco - than there are in video.  Cable is already doing better than VZ/AT&T, and prices for high-speed Internet access are staying high and bundled.  NCTA says that cable modem service is “available” to 92% of homes.  We won’t be seeing VZ or AT&T fiber reaching more than 40% of households over the next few years.  Cable has a bright future.

3.  Comcast says that this is a vertical transaction that should not trigger competition concerns.  They point out that both the Comcast and NBCU cable networks together will add up to just 12% of national cable advertising and affiliate revenue.  (Comcast wants the NBCU cable networks (CNBC, Bravo, Oxygen), which generate 60% of NBCU’s earnings.)  They also say that online video content is so wildly competitive that this deal will have no impact.

Here are questions that may come up tomorrow:

• What power will Comcast have to shape the future of online video (or “Internet TV”)?  This transaction may make it less likely that people will cut the cord and disintermediate their cable provider, moving their online video-watching from their PCs to their large living room screens.  Comcast will have no incentive to make its content available online to non-subscribers.
• Online video/Internet TV is a new market.  Right now, it’s relatively small and confined to PC-viewing.  Comcast says we shouldn’t consider potential harms to a future market.  Is that right?
• What effect will this transaction have on the prices consumers pay for cable subscriptions and high speed Internet access?

Although Comcast asserts that the media market should be considered separately from the conduit market, the interdependencies of these sectors will shape the evolution of online video.  Comcast is right that the questions being raised aren’t the traditional “media consolidation” issues.  In the old days, we were worried about separate single-purpose media distribution networks (newspapers, broadcast, cable) being jointly owned.  Now we’re in an era in which gentle broadband duopoly competition doesn’t appear to constrain what the providers want to do and broadband is the essential gateway conduit.  Comcast may want to use exclusive access to highly-valued content to ensure its place in the twosome.

We’ll find out more on Thursday.

“This is something we’re committed to. We’re getting pushback, obviously, from some of the bigger carriers who would like to be able to charge more fees and extract more money from wealthier customers. But we think that runs counter to the whole spirit of openness that has made the Internet such a powerful engine for not only economic growth, but also for the generation of ideas and creativity.”

Watch here.

The Comcast attorney wanted to point the panel in the direction of the administrative law issue here:  was there sufficient certainty in the rules to give Comcast fair notice?  Was the Commission’s 2005 Internet Policy Statement enforceable?  Authority isn’t the central question for Comcast - the company would rather keep that question open for the future.

Judge Tatel didn’t want to focus on notice or process:

Q. “[I]sn’t it possible that the Commission’s order could stand on the basis of its ancillary jurisdiction if it could be linked to come statutory authority the Commission has?”

Judge Tatel persisted in his questioning on this point, asking Comcast’s lawyer several times to respond on the ancillary jurisdiction issue and citing the relevant cases.

The other members of the panel chimed in on jurisdiction.  Judge Sentelle asked Comcast which question should necessarily come first for the Court’s decision - if the process was wrong, the court doesn’t have to reach the jurisdictional question; if there was no jurisdiction, the court doesn’t have to reach process.  Judge Randolph suggested that the whole idea of ancillary jurisdiction was old-fashioned.

Finally, the Comcast lawyer had to leave her process points and agree.  She agreed that if Congress had meant to delegate authority to the FCC in this area it would have said so - “But to suggest that by stitching together policy provisions, and on, and on, that Congress spoke to this. . ”

Here’s what’s going on:  During the Bush era, the FCC decided that it wanted to deregulate high-speed Internet access, and remove unbundling, interconnection, and nondiscrimination obligations imposed on providers by Title II of the Communications Act.  But it didn’t want to get rid of all possible rules for providers, and so it declared that it could re-regulate them under Title I ancillary authority - asserting that the Commission had broad authority to issue whatever rules it needed to under a general housekeeping section of that Title. The Commission also reserved the authority to re-regulate them under Title II later.

These regulatory gymnastics seemed ridiculous to Justice Scalia in BrandX:

“[W]hat the Commission hath given [deregulation], the Commission may well take away – unless it doesn’t.”

The sheer political chutzpah of (a) removing longstanding obligations for general-purpose communications transport companies in order to (b) serve the interests of high-speed Internet access providers - while (c) retaining the power to impose some obligations later under an inapplicable portion of the statute - has come back to haunt everyone concerned.  That’s the “stitching together” to which Comcast is referring.  It’s a Title I house of cards.

The FCC needs to consider going back to the basics of Title II regulation - interconnection, nondiscrimination, unbundling - while signaling that it will “forbear” with respect to ratemaking.  If it doesn’t, it’s not clear where its power to say anything with respect to high-speed Internet access comes from.  The DC Circuit is apparently not convinced that “ancillary jurisdiction” is meaningful.

This is a tumultuous moment in telecommunications policy.  Public Knowledge has filed a petition asking the FCC to reclassify high-speed Internet access under Title II.  Everyone’s talking about reclassification.  Just ask Justice Scalia - it can be done.

The speech wasn’t an isolated event, of course.  Thanks to the flexibility and political savvy of a gifted Secretary and the prior experience and skills of her staff, the State Department has been rolling out great talking points and technology-focused actions from the beginning of the administration.

Yes, Secy. Clinton had to say that she was worried about anonymous speech, about IP piracy, and about cybersecurity.  She had to point to existing committees and efforts, like the Global Internet Freedom Task Force and the Global Network Initiative, which won’t necessarily be meaningful to ordinary Americans. She didn’t announce a particular enforcement initiative.  This is all about persuasion and words, not definitive actions.

Words are important, though, and you could hear US leadership in what the Secretary had to say.

• “We stand for a single internet where all of humanity has equal access to knowledge and ideas.”
• “These actions [electronic barriers, censorship, privacy violations] contravene the Universal Declaration on Human Rights.”
• “In many cases, the internet, mobile phones, and other connection technologies can do for economic growth what the green revolution did for agriculture.  You can now generate significant yields from very modest inputs.”
• “Unfettered access to search engine technology is so important.”
• “Countries that censor news and information must recognize that, from an economic standpoint, there is no distinction between censoring political speech and commercial speech. . . . countries that restrict free access to information or violate the basic rights of internet users risk walling themselves off from the progress of the next century.”
• “The internet is a network that magnifies the power and potential of all other[ networks].”

This kind of rhetoric takes courage.  We could be deferring to China’s sovereign authority to manage its own ISPs in its very large and attractive market.  We could be thinking wistfully of our own ability to wage economic war and differentiate the treatment of information online.  We could be embarrassed about our own privacy failures and worry about the hypocrises that will continue to be revealed.

It’s better, though, to say that we stand for “internet freedom” as a country.  That’s memorable, worthwhile, actionable, and human.

1.  This means that competitors of vertically-integrated cablecos can claim that (for example) exclusive contracts for programming regional sports networks are unfair - and they’ll be supported by the presumption that these contracts are indeed unfair.

2.  This also means that the Commission is taking a hard look at the 1992 Cable Act and making sure that the Commission’s actions are serving competition.  Section 628(b) provides that it shall be unlawful for a cable operator to “engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers,” and the Commission is saying that this language gives it the authority to require cable operators to share terrestrially-delivered programming.

3.  This is a substantial step that has implications for the Comcast/NBCU deal - Comcast doesn’t allow DirectTV or Dish Network to have access to its exclusive Philadelphia fiber-delivered regional sports network, which has had a big impact on satellite subscriptions.  The fact that FCC is taking this on now indicates that this issue won’t be a chit that Comcast can use later.  Much more will be on the table in the months to come, and predictions are that spectrum access will be up for negotiation.

4.  Expect litigation - the statute provides for “program access” to cable programming delivered by satellite and doesn’t say anything about fiber feeds.  (But why should the medium make any difference?)

5.  It’s good to look back at the 1992 Act, which includes the idea that vertically-integrated conduits shouldn’t control content.

“If a state is getting consensus [supporting its grant application] but doing it by driving the status quo, we won’t be that interested,” he said in a telebriefing. “But we’re confident that we’re going to have a set of states that are able both to push a strong reform agenda and get all the adults working together. Those are the states we’re going to invest in.”

The states (and, now, districts) that want the money have to sign up to get more of their students into college.  They also have to rationalize the evaluation of teachers, tying their pay to student progress, andmake it possible to gather standardized data about students.  The states are scrambling to participate in this competitive grant program, and that’s driving reform.  It’s a big deal that these aren’t block grants handed out evenly to each state actor.

2.  It’s also great to see the second stage of the competitive broadband grants program run by the Department of Commerce and the Department of Agriculture going public.  DOC’s NTIA will be prioritizing “projects that will deploy middle mile broadband infrastructure with a commitment to offer new or substantially upgraded service to community anchor institutions.”  This is the “comprehensive communities” emphasis.  Ag’s RUS will be focusing on funding last mile projects.  Total for this round:  $4.8 billion.

3.  Massachusetts: it’s just one seat.

It’s great news.  The Obama administration is signaling that it supports ending the antitrust exemption enjoyed by health insurers.  (Here’s a NYT blog post explaining the issue.)

Right now, only health insurance companies and Major League Baseball are protected from federal antitrust enforcement.  There’s been enormous consolidation in the health insurance industry, costs are surging four times faster than wages (more than doubling in the last nine years), and 94% of insurance markets in the United States are now highly concentrated.

So why protect these players from federal laws prohibiting collusion, bid-rigging, and market allocation?  It’s hard to come up with any sensible reason to keep this exemption in place.  Some key Senators think so too.