AT&T countered Netflix's allegations that AT&T's proposed purchase of DirecTV would invite discrimination against online video distributors (OVDs), and urged the FCC to reject any related conditions. In a filing responding to Netflix's allegations (see 1505050028) posted Thursday to docket 14-90, AT&T tweaked Netflix for opposing the AT&T/DirecTV deal after previously saying it would be a "plus for Netflix." AT&T disputed the contention that Netflix would be harmed unless AT&T is barred from charging content providers seeking to connect to its networks. The FCC "should reject any such condition, especially when imposed on only one company in a hotly-contested broadband marketplace dominated by incumbent cable companies," said the telco. It said Netflix overlooked its agreement to gain long-term direct access to AT&T's network "on terms that will allow Netflix to continue to thrive in the marketplace." AT&T said Netflix enjoyed "spectacular" growth since 2013, even when it encountered network congestion, and AT&T cited reports that Netflix commented that recent interconnection deals, such as with AT&T, wouldn't hurt its margins. AT&T included information about its Netflix contract with the specifics redacted. AT&T said Netflix ignored two technological and economic realities: "AT&T could not effectively and persistently degrade any OVD without degrading all OVDs and degrading any single OVD, much less all OVDs, would risk significant loss of broadband and bundle customers while saving few, if any, video customers." It would be self-defeating for it to degrade OVD performance because it could lose broadband profit and "much greater double and triple-play revenues and profits, which include video profits," said the telco. "It makes no economic or business sense for AT&T to pursue the hypothetical OVD degradation strategy put forth by Netflix, either before or after the transaction."

FCC Commissioner Ajit Pai said the FCC's net neutrality order to "adopt President [Barack] Obama's plan to regulate the Internet" is having unintended consequences by harming small broadband providers and rural broadband deployment. He said the FCC should stay its own order but doubts it will happen. In a Thursday release, Pai noted that in his dissent he had predicted that thousands of small ISPs lacked the means "to withstand a regulatory onslaught," with smaller rural competitors to be particularly affected. "Just last week," he said, "many small broadband operators declared under penalty of perjury that this is in fact the case -- that they are cutting back on investments because of the FCC's decision." He cited six examples, including KWISP Internet, which has 475 customers in northern Illinois. Because of the regulatory uncertainty and costs arising from the FCC decision, KWISP was delaying a network upgrade from 3 Mbps to 20 Mbps, other capacity upgrades to reduce congestion, and new tower construction, he said. Pai also said Wisper ISP with 8,000 customers around St. Louis estimates that its compliance costs will be equal to 10 percent of its operating revenue, and has put plans for new base stations on hold. The Small Business Administration has warned that small businesses would be unduly burdened, he said, "The FCC still has a chance to heed these calls and stay the effect of President Obama’s plan to regulate the Internet. But I doubt this will happen. That’s because moving forward with this plan isn’t about logic, the law, or marketplace facts. It’s about fulfilling a political imperative."

Simulations run by the Expanding Opportunities for Broadcasters Coalition suggest the FCC can reallocate at least 126 MHz of TV spectrum in New York and Los Angeles in the incentive auction “especially if it adopts the Coalition’s improved pricing formula,” the group said in a series of meetings at the agency Tuesday. “The initial clearing target should reflect this, reallocating as much unimpaired spectrum as possible in those two markets,” said an ex parte filing by the group, posted in docket 14-252. “This approach will maximize the value of spectrum in the forward auction and lead to the most efficient reallocation of spectrum nationwide.” The group argued that broadcasters and carriers broadly oppose dynamic reserve pricing (DRP), as proposed by the FCC. “By continuing to lower prices after a station should be frozen, DRP undermines broadcaster confidence in the integrity of the auction. Necessary impairment of the flexible use spectrum will be unavoidable in a limited number of border markets,” EOBC said. DRP is a “value destroying unnecessary impairment in a penny-wise/pound foolish attempt to save a few Dollars,” the group said.

The FTC will let confidential documents be filed electronically starting May 12, the agency said Tuesday. The changes reflect the agency’s decision to adopt revisions to its rules of practice, which were published in Wednesday's Federal Register, the agency said. Changes to Part 4 rules include removing the requirement that confidential documents only be filed in paper form along with a copy on a CD or DVD; the deadline for filing electronic documents is until 11:59 p.m. Eastern time, while paper documents must be filed by 5 p.m. Eastern; and parties in administrative litigation may be served electronically in some cases, the FTC said. Semantic changes were made to Part 3 rules to conform to the changes to Part 4, the agency said. Commissioners voted unanimously to issue the revisions.

The FCC rejects almost all requests for reconsideration on the service rules for the TV incentive auction, approved by the FCC last May (see 1405160030), in a draft order circulated for commissioner consideration Wednesday, an FCC official said. A few technical changes are proposed in the draft order, but no major changes, the official said. “Procedurally, it’s an important step,” the official said. “It clears the deck” and lets the FCC focus on the auction procedures public notice, the official said. More than 30 parties filed requests for reconsideration and every request is addressed in the order, the official said. Carriers, broadcasters and other parties sought reconsideration of the order.

Public Knowledge and other consumer advocates filed in opposition to an April 27 request by Daniel Berninger, founder of the Voice Communications Exchange Committee, that the FCC stay its order imposing net neutrality rules and reclassifying broadband Internet access as a Title II telecom service under the Communications Act. A stay of the order would deny consumers open Internet guarantees and cause uncertainty for consumers and companies, the groups said. Berninger failed to show that his petition met any of the four factors considered in stay requests: likelihood of succeeding on the merits, suffering irreparable harm, harm to other parties, and public-interest considerations. “Mr. Berninger argues that protecting consumer access to the Open Internet should wait while telephone and cable companies fight these protections in the courts," said Harold Feld, Public Knowledge senior vice president, in a release that has a link to the opposition filing. "Mr. Berninger thinks it would be better for himself and his business if broadband companies could prioritize his services over those of rivals, and claims to suffer irreparable harm from his inability to negotiate such business arrangements. ... It might benefit Mr. Berninger and a few privileged others for telephone and cable companies to pick winners and losers on the Internet. But a universe that allows AT&T or Comcast to pick Berninger as the winner is a world where all the rest of us lose.” AT&T, CenturyLink, CTIA, USTelecom and the Wireless ISP Association filed Friday for a partial stay (see 1505010059). The American Cable Association and the NCTA also filed for a stay of the order pending judicial review. Telecom industry officials have said they doubt the FCC will stay its order, though the petitioners can also seek a court stay.

FCC Chairman Tom Wheeler reappointed Debra Berlyn, representing the National Consumers League, chairwoman of the agency’s Consumer Advisory Committee, said a public notice Tuesday. The newly reconstituted CAC scheduled its first meeting June 12 starting at 9 a.m. at FCC headquarters, the agency said. Thirty-seven people have been named to the committee (see 1505050029), the FCC said. Of these, 21 represent general consumer organizations/academia, two represent disability organizations, eight represent industry, four represent regulators, one represents seniors, and one represents unions.

Netflix pressed concerns to the FCC about AT&T's planned buy of DirecTV and the deal's potential market fallout. The combined company would have "increased incentive and ability to harm online video distributors (OVDs) and other edge-based Internet content" that it sees as competitive threats to its broadband and video services, Netflix said in a Monday ex parte filing about a meeting Thursday. Netflix said the FCC should reject the deal "as currently proposed," without making recommendations for conditions. Many believe the deal is likely to be approved by the FCC and the Department of Justice (see 1504270065), and AT&T said it expects the transaction to be completed this quarter (see 1504220069). With the abandonment of Comcast/Time Warner Cable, Netflix said AT&T would become the largest multichannel video programming distributor and, after making further investments, the largest ISP. "These two dynamics create a powerful incentive for AT&T to protect its investment in DirecTV's bundled programming by using its ability to harm OVDs to prevent or delay cord-cutting and cord-shaving," Netflix said. Netflix said AT&T has shown it can damage OVDs by "leveraging its control over interconnection to degrade its own customers' access to Netflix's service." AT&T also seems interested in using data caps and usage-based pricing methods, which it could apply "discriminatorily" to favor its own services, Netflix said. If AT&T can exploit interconnection or data caps to slow OVD development and the shift away from traditional video/broadband bundles, it could preserve its market advantage, Netflix said. Netflix disputed AT&T's April 21 filing that said the telco lacks incentives to harm competitors. AT&T's planned $48 billion purchase of a DirecTV satellite-TV business that profits by selling programming bundles "will result in a powerful incentive to protect that model from a shift by consumers toward on-demand, over-the-top content," Netflix said. AT&T declined to comment. Its April 21 filing blamed network congestion on Netflix and its backbone provider Cogent, not on AT&T capacity limits. "Netflix insisted on funneling its traffic to AT&T through only a handful of peers, including Cogent, because, as Netflix has stated, these few providers offered the best bids in terms of price and service," AT&T said. "As one network analyst has explained, 'Netflix chose to create, and use paths that [it] knew were congested, simply because they were cheaper than using paths that were less congested.' This strategy apparently overwhelmed Netflix’s chosen low price providers, causing congestion and impacting service quality for its customers." The American Cable Association and the Writers Guild of America, West also expressed various concerns about, and recommended conditions for, AT&T/DirecTV (here and here).

Wireless broadband in the U.S. is the best in the world, but the nation still lags in offering wired connections at blazing speeds, Gigi Sohn, counsel to FCC Chairman Tom Wheeler, said in a speech Monday to the “Moving Forward Toward a Gigabit State” conference in New Haven, Connecticut. International rankings “consistently score the U.S. outside the top 10 in broadband speeds” and “Americans aren’t content with being outside the top 10 in anything that matters,” she said in prepared remarks posted by the FCC. According to Akamai, the average fixed broadband connection in America is about 12 Mbps, Sohn said. “That’s fine if you live alone, and all you’re doing online is minimal browsing each night while streaming a movie on Netflix. But broadband can enable so much more.” The FCC wants to see speeds of 50 Mbps, then 100 Mbps and “and eventually even 1 Gigabit per second,” she said. “When you achieve those speeds … you remove bandwidth as a constraint on innovation.” About 10 million Americans can’t get broadband at any speed, Sohn said. “The costs of digital exclusion are staggering,” she said. “I hear anecdotal evidence all the time about how young people in towns that are offline feel compelled to move elsewhere for fear that there’s no future for them in a town without broadband.” Sohn said projects like Connecticut’s CT Gig Project are critical, especially in areas where commercial operators aren’t stepping up. “When commercial providers don’t step up to serve a community’s needs, we should embrace the great American tradition of citizens stepping up to take action collectively,” she said. “Across America, communities have concluded that existing private sector broadband offerings are not meeting their needs and the only solution is to become directly involved in broadband deployment.”

The FCC OK'd Pandora's request for a declaratory ruling, letting it be up to 49.99 percent foreign owned. The company had also sought to buy KXMZ(FM), Box Elder, South Dakota, from Connoisseur Media, and the American Society of Composers, Authors and Publishers (ASCAP) sought to block that deal and opposed Pandora's petition. "We take no action at this time on the Assignment Application and related pleadings," said an order Monday approved by commissioners, with Commissioner Ajit Pai concurring. He called parts of the process "absurd," and noted that Pandora's request to buy KXMZ has been pending for two years. Pandora's "difficulties" to "prove that foreign entities do not beneficially own or vote more than 25 percent of its shares" are "far from unique," wrote Commissioner Mike O'Rielly. Connoisseur and Pandora lobbied the FCC last week to OK the deal (see 1505040031). Buying KXMZ would qualify Pandora for the same Radio Music License Committee license "under the same terms as our competitors," noted Dave Grimaldi, the company's director of public affairs. "This move makes sense to us beyond the licensing parity alone. Pandora excels in personalizing music discovery, and terrestrial radio is experienced in integrating with a local community." ASCAP had no immediate comment.