Broadband Cable Association of Pennsylvania

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July 26, 2013

The unveiling of a three-year, $34 million, 32-county network designed to bridge the "digital divide" by bringing Internet to the most rural, underserved and underpopulated parts of the state is 29 days away. This is according to Frank Yoder, Broadband services manager with the Pennsylvania State Police, who addressed a special meeting of the North Central Pennsylvania Regional Planning and Development Commission on Wednesday, hailing the project as "a leveling of the playing field for citizens and businesses."

Businesses like the Gateway Lodge in Cook Forest, where owner Deb Adams needed three satellites fixed to her roof just to check her email in the morning. Under the network, Adams would have access to high speed, reliable Internet to her door. Built using $28.8 million in federal stimulus money and $5 million in state tax dollars, the middle mile project will expand the state's "existing microwave network" currently used in supporting police and emergency responder radio traffic to bring Broadband Internet access to the most remote corners of the Commonwealth.

It does so by moving a wireless signal from strategically positioned vantage points like that of a 340 feet tall, 1920's era fire tower in Cook Forest repurposed as a signal router. It redirects the signal to a tower atop a nearby mountain in Jefferson County, which redirects it to a third tower, and so on. In reality, the "middle mile" is itself simply a means of transmitting massive streams of data that are then able to be tapped into making "last mile connections," a telecommunications term used in reference to the technology needed to connecting a customer's home or business directly to cable TV or Internet network. With too few customers to support private investment in rural Internet, Yoder said the middle mile project aims to solve the long-standing problem of under investment in rural last mile service.

As a result, he considers the middle mile project as a public service rather than financial investment. Yoder likens it to the rural electrification campaign of the 1920's which used federal loans to hook rural outposts into an emerging national power grid. "That farmer living down a mile long lane, should he not have electricity because his farm is down there?" Yoder asked. "No. So who's going to spend the money to bring that electricity to that farmer down the lane? Not the private sector because it's only one guy. So I see this as a similar intersection of a government solving a society's needs."

Yoder is quick to rebuff characterizations of this project and government involvement in the Internet industry as "Dot-communism," arguing that it does not represent an overlap of public and private sectors but rather the public sector filling a gap in the market that the private industry wanted no part of. "Publicly traded corporations who have to show a large profit aren't going to invest," Yoder said. "We're filling in that very real hole, we're helping ourselves." "I look at this a libertarism, not dot-communisim because we are helping ourselves. We got an $85 million dollar investment for $5 million. That's a pretty good investment." With so little money to be made in providing rural Internet service, for now non-profits like North Central will be assuming the role of Internet Service Provider or ISP, billing those customers of the network on average $30 to $45 compared with the average $50 satellite Internet bill. That last mile fee is up to the individual service provider, Yoder said, and will be based on "what the market will bear."

Those private companies that once shunned rural Internet will not be excluded. They will also be able to use the network through a revenue sharing agreement, meaning they pay the state only if they make money off the network. "Our state is willing to share the initial business risk and the way we did that simply and elegantly is with revenue sharing agreement. You don't make any money, you don't pay us any money," Yoder said. Yoder is quick to point out that 71 percent of the state is considered rural, with the network to serve 32 counties north of Interstate 80, among them McKean, Elk, Potter and Cameron counties. "Sometimes it takes the government to bring the high cost long distance infrastructure to solve local problems," Yoder said. Bradford Era

Combined control over TV stations in several markets, including St. Louis, is at the heart of a battle between some of the country's largest cable and satellite TV providers and station owners.

Time Warner Cable, DirecTV and the American Cable Association filed a petition with the Federal Communications Commission Wednesday seeking to block or put conditions on Gannett Co.'s $2.2 billion purchase of Belo Corp. The companies argue that the combination would drive up retransmission fees and ultimately lead to higher costs for consumers in the St. Louis, Phoenix and Tucson, Ariz., television markets. Local broadcast networks charge cable and satellite operators retransmission consent fees for the use of their signal. In June, McLean, Va.-based Gannett, which owns KSDK (Channel 5), the NBC affiliate in St. Louis, said it plans to buy Dallas-based Belo, which owns KMOV (Channel 4), the local CBS affiliate. The acquisition, which is pending regulatory approval, would increase Gannett's TV station portfolio from 23 to 43.

To satisfy FCC rules that prohibit ownership of more than one of the top four TV stations in a given market, Gannett said it will spin off five of Belo's broadcast properties to new ownership while providing some services to those stations. One of the five stations is KMOV, which Gannett plans to sell to Jack Sander of Phoenix, a former Belo executive. Gannett has stressed that the spun-off stations will be operated independently and that the deal follows FCC rules. "This transaction is entirely consistent with all FCC rules, policies and precedent, and will bring substantial benefits to the public," Gannett said in a statement Thursday. But critics contend the spin-offs would not be truly independent.

"What Gannett and Belo are doing is trying to do an end-run around the law so that they can collude on retransmission consent fees," said Matt Polka, president and CEO of the American Cable Association, a Pittsburgh-based group whose members include independent cable operators. If Gannett's purchase of Belo moves forward, it would create duopolies and lead to coordinated retransmission consent negotiations in St. Louis, Phoenix and Tucson, Ariz., according to the FCC petition to block consent for the license changes. "As a result, Gannett - which would become the fourth-largest owner of television stations nationwide - would enjoy a significant increase in negotiating leverage based solely on its aggregation of market power," the petition states.

If the FCC won't block the deal, the ACA, Time Warner and DirecTV are asking for conditions to be put in place that prohibit Gannett from jointly negotiating retransmission consent agreements with the third-party owners of spun-off Belo stations. For consumers, higher fees will translate into higher prices, ACA's Polka said. "When you have the ability to control more of the No. 1, prime, must-have services, you can demand more for it, that's what happens in a monopoly," he said, "and that's ultimately passed on to consumers." Fights over retransmission fees have led to blackouts in markets across the country, where cable or satellite providers stop carrying local stations over fee disputes. "Any blackout threats made by Gannett in St. Louis or Phoenix presumably would pack a double punch by implicating both top four-rated stations under its control ... thereby exacerbating the already harmful effects on consumers," according to the petition.

The ACA last filed a petition with the FCC in 2011 to block the transfer of a license in a Kansas, but the FCC ultimately approved the sale of KTKA, the ABC affiliate in Topeka, to PBC Broadcasting. Also on Wednesday, several other organizations filed a separate petition with the FCC. They want the federal regulator to block the assignment of licenses to KMOV and other stations that will be spun off under the Gannett-Belo deal. The groups, which include Free Press, a Washington-based nonprofit group that supports diverse media ownership, contend the change in licenses will lead to job losses and fewer news sources. St. Louis Post-Dispatch

U.S. Sen. Pat Toomey's political-action committee wasted no time this week getting behind the candidacy of Senate Minority Leader Mitch McConnell, a Republican from Kentucky now facing a tea-party challenger in the 2014 primary election. We asked about Toomey's support for two reasons: - He unsuccessfully challenged U.S. Sen. Arlen Specter in the 2004 Republican primary. Toomey complained then that Specter was not conservative enough. - The team that managed and communicated for Toomey's successful 2010 Senate run is now working for Matt Bevin, the tea partier challenging McConnell. "I support Mitch McConnell, and I support his re-election in 2014," Toomey said in a news release sent to us 14 minutes after we asked the question this week.

Speaking of the 2010 Toomey team, another member just became Pennsylvania director for the Republican National Committee. Nick Trainer's new job was announced Wednesday by RNC chairman Reince Priebus as one of 12 new state directors. "We're building the most expansive field program the GOP has ever seen, and we're doing it earlier than ever before," Priebus said, his focus clearly on the 2016 presidential election. While Pennsylvania's General Assembly is firmly in the hands of a Republican majority, the GOP hasn't won a presidential election here in a quarter-century. Philadelphia Daily News

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