With the telecom reform bill in Congress all but dead for this session, the telcos have resumed their battle positions to get video franchising legislation through the various state legislatures. The National Journal’s Miguel Martinez has this concise wrap-up piece on the status of various state-level bills that would grant phone companies some relief from the community-by-community contracts that they need to negotiate to offer video services.
The potential shift in power to Democrats could, however, jeopardize the telcos’ plans to get aggressive at the state level next year. Verizon is eyeing New York, Pennsylvania and possibly Massachusetts as prime candidates for new video franchising legislation.
However, (and it’s kind of odd that Martinez would cite a partisan blogger, Matt Stoller of MyDD, as his reference for this point) at this stage it looks the gubernatorial races in both states will favor the Democratic candidate. I guess I’ll give up arguing about how I don’t see a partisan angle to the video franchising issue.
Update: Over at Verizon’s PoliBlog, David Fish confirms that the telco won’t likely pursue federal reform legislation next year and will focus instead on the states.
Posted by Cynthia Brumfield at 5:49 PM | Print | Comments (0)The FCC has put out for public comment the proposed conditions that AT&T has agreed to meet if the Commission acts quickly in approving its merger with BellSouth. The telco’s proposal to meet certain requirements came as a last-ditch effort to gain the support of Democractic commissioners who are giving Chairman Kevin Martin a hard time about approval the deal with no conditions whatsoever.
The document submitted by AT&T reflects phone conversations that company lobbyists and lawyers held with FCC staff last Thursday in a bid to push through the merger approval before a special meeting on Friday called to vote on the merger. When word of these discussions hit the press, it was all over.
The Democractic commissioners, Jonathan Adelstein and Michael Copps, demanded the FCC put out these deal points for public comment and postpone a vote on the merger. The Commission will now hold a meeting on November 3 to vote on the deal.
The conditions are interesting indeed. The biggest bottom-line concession is AT&T’s promise to build out broadband service to 100% of residential living units in the AT&T/BellSouth territories by year-end 2007. AT&T says that 85% of all residences will have wireline broadband available, with the remaining 15% served by satellite and WiMax fixed wireless service.
Right now AT&T offers DSL service to about 80% of the homes in its territory via wireline technology. So, with this proposal the telco is promising to extend the hard-wired option to an additional 5% of homes.
The company announced earlier this year that it will launch, with satellite provider WildBlue, a satellite broadband option for rural areas, and it will test WiMax service in certain markets in Texas and Nevada. AT&T, then, is not promising something that it didn’t plan to do anyway, but it is promising to meet a deadline of year-end 2007, which presumably speeds up the plans already in place.
But those are not the most interesting parts of this condition. AT&T further promises that it will give at no charge ADSL modems to all its dial-up residential customers within the new wireline build-out area if they upgrade to DSL service during 2007. Plus, any new broadband customer in the build-out areas will get a cut-rate service price — $10/month — for DSL service up to 768 kbps.
Other requirements that AT&T said it will meet once the Commission grants the merger approval:
—The telco will not impose any rate hikes on unbundled network elements that it leases to competitors, although negotiated increases are permissable.
—AT&T will make its disaster recovery facilities available to facilitate restoration of service in the event of a disaster. The company will further contribute $1 million to a non-profit for the purpose of promoting public safety.
—AT&T will measure the quality of special access services it provides to other carriers, won’t raise the rates for such providers and won’t cut itself any better deals for special access services than it gives to other carriers.
—The company will start ten new trials of WiMax broadband service in 2007, with at least five new trials in BellSouth’s territory.
—Within twelve months of the merger’s close, AT&T will offer “naked” DSL service within its service territories, i.e. the company won’t require customers to buy phone service in order to purchase DSL service.
The letter, signed by AT&T Federal and Regulatory SVP Robert Quinn Jr., also notes that the company further discussed other conditions, such as network neutrality non-discrimination, but doesn’t elaborate further.
I’d say that the Democrats have done good by postponing the merger approval vote, squeezing some goodies out of the telco that it would not otherwise have delivered. And there’s probably a few more concessions that they can wring out of AT&T.
But it would not be a good thing to up-end the AT&T-BellSouth merger altogether. If an independent regulatory agency (one that really doesn’t have merger approval power in the first place — that’s strictly the province of the FTC and the DOJ — but that’s another story) could trip up a deal this big and important during its home stretch, investors would get spooked and massive litigation would no doubt ensue. The chilling effect on other deals might freeze the development of the communications industry for quite some time.
Update: Courtesy of Jeff Pulver, this Business Week piece on the “pound of flesh” being extracted by the Dems.
Posted by Cynthia Brumfield at 3:24 PM | Print | Comments (0)
The New York Times’ Gary Rivlin has this cautionary tale for all the Web 2.0 companies out there that are hoping for YouTube-like acquisition dollars. Friendster, which popularized social networking before MySpace was even a gleam in its co-founders’ eyes, was once the hot Silicon Valley start-up embraced by VCs (too closely, as the article suggests) that turned down a $30 million buy-out offer from Google in hopes of growing into the next Yahoo! or YouTube.
But Friendster is now the buzzword for failure.
Roughly once a week, David L. Sze, a venture capitalist at Greylock Partners, hears from entrepreneurs who say they have the next MySpace, the copycat social networking site that has trounced Friendster. “The counter to that is, ‘Tell me why you aren’t going to be the next Friendster,’ ” Mr. Sze said. “It’s become the iconic case of failure.”
In three short years, Friendster has fallen so low that it ranks 14th among all social neworking sites — it pitifully falls below even MyYearbook.com, a site started last year by a high school student. What happened? According to Rivlin, Friendster was laid low by a mixture of arrogance (Friendster co-founder Jonathan Abrams was just a little bit too into himself), greed (holding out for bigger buyout bucks) and a VC-populated board composed of old (50+) white men who didn’t grok social networking.
Those are all factors, of course, but the real demise can be traced back to the failure of Friendster to fix its technical problems (pages sometimes took 40 seconds to load) and its lack of appreciation for rising competition, namely MySpace.
“I was giving people regular updates on MySpace,” said Jim Scheinman, who served as Friendster’s head of business development from October 2003 until leaving in May 2005 to work at a social networking rival, Bebo.com. “But a lot of people refused to take them seriously.”
Many people working at Friendster sneered at MySpace. The holy grail at Friendster — and the cause of most of its technical problems — was its closed system: users at Friendster could view only the profiles of those on a relatively short chain of acquaintances. By contrast, MySpace was open, and therefore much simpler from a technological standpoint; anybody could look at anyone else’s profile.
Friendster’s object lesson is one that would be well worth studying (and is, in fact, the subject of a case study at Harvard Business School) for the the batch of Web 2.0 companies still hoping for their pay-offs. Mark Evans takes a good crack at figuring out who’s next in the big buy-out game. His list of contenders are all worthy candidates, but nothing on the magnitude of YouTube…or Friendster in better days.
Posted by Cynthia Brumfield at 11:14 AM | Print | Comments (1)
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