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Minorities should seek a bigger slice of new media pie

The digital divide argument, that there is a disparity between non-whites and whites when it comes to broadband access, is losing its mojo for me. While broadband access for minority households via hard line may fall behind that of white households, since the mid 2000s, access via mobile wireless devices by minorities has been on par or exceeded that of whites. Stroll into the Starbucks near I-285 and Cascade Road and see every Black American patron connecting their lap tops to WiFi while checking messages on their smart phones. Even our kids have at least two wireless devices and we parents brace ourselves annually for our teenager’s request for the latest phone even when the one they currently own is still pristine.

Plenty of politicians and civil rights groups have been pushing for greater access to high speed broadband, making the argument that more broadband facilities should be deployed in communities of color especially since Black Americans and Latinos have been spearheading the “cut the cord” movement and going 100% wireless over the past 15 years or so. Minority leadership is demonstrating, however, that it has not been paying attention to changes in business models that would provide entrepreneurs in communities of color exposure to more lucrative opportunities versus following the same consumption of end-use product model that has been plaguing communities of color for decades.

Broadband access providers such as AT&T, Comcast, and Verizon are leveraging their customer data in order to attract advertising dollars. Verizon’s recent disclosure that it lost 307,000 subscribers in the first quarter of 2017 in part due to competition from Sprint and T-Mobile has some analysts on Wall Street wondering if Verizon is up for merger. Bloomberg has reported that the wireless company has considered Comcast, Walt Disney, or CBS for corporate marriage.  Ironically the aforementioned companies are content providers who could probably do well leveraging Verizon’s wireless infrastructure to get content out including use of the company’s spectrum.

While Black Americans and Latinos are, unfortunately, known primarily for providing entertainment content, both communities should consider exploring creating and investing in content storage and content delivery systems. Constructing these facilities in neighborhoods with large numbers of Blacks or Latinos means access to short term and long term employment. High tech labor will be needed to design, construct, and operate server farms and other facilities that result from the decision to do more than buy another cell phone or activate some unlit fiber from the old MCI days.

This is an opportunity for a young Black or Latino entrepreneur or engineer to break from the herd mentality and not wait for permission from the Jesse Jackson posse on whether or not it should be done. One would think that the old heads from the civil rights movement would have the capital or access to capital that would assist outside-the-box minority entrepreneurs in getting capital, but since these leaders have not demonstrated that they even understand the emerging business models in communications, this may be a closed avenue.

In the end, the minority entrepreneur should be prepared to abandon the collective mindset that has communities of color thinking only about the next smartphone and form new, smaller, leaner, profit seeking collectives that generate ideas of value and use these ideas to create their own data and media companies.

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What I wanted to ask the commissioners ….

It was pretty cool seeing Federal Communications Commission members Mignon Clyburn, Jessica Rosenworcel, Ajit Pai, and Michael O’Rielly at the Minority Media Telecommunications Council Access to Capital breakfast earlier this morning.  For the MMTC it was historic having four commissioners on the same panel.

Chairman Wheeler piped in later in the morning via a video.

The Four Horsemen talked about E-rate, spectrum auction, the spectrum auction participation waiver for Grain Management, and net neutrality as well as on diversity in media overall.  I expected the commissioners to take questions from the audience but time allegedly did not permit.  I was ticked, for I had two-part question that I wanted them each to answer.  Here is the question:

“Capital abhors a vacuum.  It moves to activities that provide the greatest returns and in technology that means activities that disrupt the current business model.  The FCC regulates broadband and media markets.  Do you have any insights on trends and innovation that may attract new capital to the broadband and media markets?  Also, what should be the FCC’s role in market disruption?”

I did have a second question which Commissioner Pai answered when I caught up with him at the elevator as he was heading back to the FCC.  I asked the Commissioner how he thought the Chiefs were going to do this year and with a smile he said we’d have to wait and see.”

Anyway, if the commissioners read this blog hopefully the’ll take a few moments and answer….

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How do we get more spectrum to underserved entrepreneurs

Earlier this week the Minority Media and Telecommunications Council released a white paper describing a number of policy actions recommended for the Federal Communications Commission to use when addressing distribution of spectrum to minority or women-owned business enterprises.  The MMTC has extensively documented the problem minority or women-owned enterprises face when attempting to enter the media markets as owners of radio or television stations.  This problem of ownership also extends to ownership of wireless facilities and the licenses necessary for accessing spectrum; the electromagnetic waves that connect cell towers, broadcast stations, televisions, and smartphones.

Going up against well capitalized firms such as AT&T and Verizon is like David going up against a Goliath that has the added advantage of having sucked down some steroids.  Raising capital in order to successfully bid on licenses that grant access to spectrum is difficult and that financial barrier works to keep many minority entrepreneurs out of the market to own wireless facilities.  And the FCC has not been very passionate about re-igniting old policies like tax certificates or designated entity-specific auctions that could help lower barriers to media market entry.

Financial capital today is pretty cheap thanks to current monetary policy combined with absent at best or dysfunctional at worst fiscal policy.  That won’t last for long as 2014 may be the year that our friends at the Federal Reserve may start considering when to stop buying assets and letting interest rates rise.  That increasingly probable scenario could be problematic for minority owned business already pushing up on constraints, whether financial or societal, to capital access.

One alternative to broadcast spectrum may be unlicensed spectrum.  Not only would access to and use of unlicensed spectrum get minority or women-owned firms into, say online media, much faster, successful use of unlicensed spectrum could be used as leverage for future licensed spectrum acquisitions.

Minority or women-owned firms could use or build Wi-Fi networks that consumers could use to access content, hopefully content owned or produced by the aforementioned minority or women-owned firms.  Minority firms can build out networks providing health monitoring and other data services.  We could see more minority and women-owned firms entering the market to provide devices and networks that offer broadband on the go.  The NCTA has provided an informative graphic that you can see here.

The downside to unlicensed spectrum is that, if you are strictly pursuing a wireless communications business model, there may be issues of reliability primarily due to signal interference.  Reliability issues may give financiers reason for pause.

While minority or women-owned businesses should not take their eyes off of the prize of wireless communications market entry, giving some priority to building and owning networks and devices for use in the unlicensed spectrum space may provide a successful pathway that can be leveraged in the future for market entry.

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What conditions from Comcast-NBC Universal would regulate Comcast-Time Warner

During a conference call today between Comcast, Time Warner Cable, and analysts from the investment industry, David L. Cohen, executive vice-president for Comcast, reiterated that conditions from the Comcast-NBC Universal merger would govern the transaction and that net neutrality principles would be adhered to.  Let’s take a look at those conditions from the merger back in January 2010.  The following is taken from the Federal Communications Commission’s order in In the Matter of Comcast Corporation, General Electric Company, and NBC Universal, Inc., MB Docket No. 10-56.

Ensuring Reasonable Access to Comcast-NBCU Programming for Multichannel Distribution.  Building on successful requirements adopted in prior, similar transactions, we make available to rival multichannel video programming distributors (“MVPDs”) an improved commercial arbitration process for resolving disputes about prices, terms, and conditions for licensing Comcast-NBCU’s video programming.  We believe that this remedy, designed to prevent harms from integrating content and distribution market power, will be even more effective and less costly than previous procedures.  We apply the arbitration and standstill remedies to all Comcast-NBCU affiliated programming.” 

I don’t see where this condition would be violated by a merger between Comcast and Time Warner.  Time Warner has been receiving access to Comcast-NBCU programming as a stand alone video distributor and as part of a merged Comcast-Time Warner, access to Comcast-NBCU programming should continue.  It would make no business sense for Comcast to allow access to some of its customers, say in Atlanta, while restricting access to its customers in New York.

Protecting the Development of Online CompetitionRecognizing the danger this transaction could present to the development of innovative online video distribution, we adopt conditions designed to guarantee bona fide online distributors the ability to obtain Comcast-NBCU programming in appropriate circumstances.  These conditions respond directly to the concerns voiced by commenters—including consumer advocates, online video distributors (“OVDs”) and MVPDs—while respecting the legitimate business interests of the Applicants.  Among other things, the Commission:

    • Requires Comcast-NBCU to provide to all MVPDs, at fair market value and non-discriminatory prices, terms, and conditions, any affiliated content that Comcast makes available online to its own subscribers or to other MVPD subscribers.
    • Requires Comcast-NBCU to offer its video programming to any requesting OVD on the same terms and conditions that would be available to an MVPD.
    • Obligates Comcast-NBCU to make comparable programming available on economically comparable prices, terms, and conditions to an OVD that has entered into an arrangement to distribute programming from one or more of Comcast-NBCU’s peers.
    • Restricts Comcast-NBCU’s ability to enter into agreements to hamper online distribution of its own video programming or programming of other providers.
    • Requires the continued offering of standalone broadband Internet access services at reasonable prices and of sufficient bandwidth so that customers can access online video services without the need to purchase a cable television subscription from Comcast.
    • Prevents Comcast from disadvantaging rival online video distribution through its broadband Internet access services and/or set-top boxes.
    • Addresses threats to Hulu, an emerging OVD to which NBCU provides programming, that arise from the transaction.”

Unless Comcast expects to exit New York City and any other of Time Warner’s service territories after the merger, online distributors of content such as Hulu and Netflix will still be able to connect with their subscribers.  Given wireless broadband providers such as AT&T and Verizon will still be available for consumers to choose from, Hulu, Netflix, and other edge providers will still be able to transmit their entertainment and other content.

Access to Comcast’s Distribution SystemsIn light of the significant additional programming Comcast will control—programming that may compete with third-party programming Comcast carries on its MVPD service—we require that Comcast not discriminate in video programming distribution on the basis of affiliation or non-affiliation with Comcast-NBCU.  Moreover, we require that, if Comcast “neighborhoods” its news (including business news) channels, it must include all unaffiliated news (or business news) channels in that neighborhood.  We also adopt as a condition of the transaction Comcast’s voluntary commitment to provide 10 new independent channels within eight years on its digital tier.”

I don’t see Comcast not distributing programming to itself.  This will probably be the easiest of conditions the company will be able to meet.

The real issue facing Comcast and Time Warner Cable will involve anti-trust and while this transaction does not involve the elimination of a competitor, I expect Free Press and the U.S. Department of Justice to ask Comcast why they simply don’t follow the examples of AT&T and Verizon and build competing systems in Time Warner Cable’s territories.  That would be the other avenue to protecting competition while providing consumers with additional choice.  Comcast could still hold on to its economies of scale argument; that it needs to be bigger in order to negotiate more reasonable costs for acquiring programming.

The only issue would be how expensive would a truly competitive approach be and would the benefits outweigh the cost of that approach to expansion.



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Media diversity may start with the Federal Reserve vs. FCC

I just finished reading a post by the Cato Institute’s Steve H. Hanke where Mr. Hanke argues that the Federal Reserve’s target of zero to one quarter of a percent federal funds rate is actually exacerbating the credit crunch still faced today by small and medium sized businesses. The federal funds rate is the rate banks charge each other for overnight loans. A bank may have some excess funds in their reserve accounts and lending out money to another bank helps bring in additional interest revenue.

At least that is how it was before the Federal Reserve embarked on its in-the-cellar federal funds rate policy. At rates scraping the bottom of the pond, banks find themselves in the federal funds rate trap where they have no incentive to lend their reserves overnight (There is no altruism in lending). If banks aren’t lending each other money, this means there are fewer funds available for a bank in need to lend to its customers, specifically small and medium sized business customers.

This is where the impact on minority and woman owned businesses come in. Almost no minority-owned businesses are publicly traded on Wall Street so access to equity financing does not exist. These firms have to go to the banks, but with the Federal Reserve refusing to start the ripple effect of lending by increasing its federal funds rate, minority-owned firms are foreclosed from an opportunity to access credit.

You may ask why would minority-owned firms want to borrow at an increased rate and my answer is they may not want to unless they are confident they will experience the returns to be profitable while paying back the loan. The market, specifically investors, want to see a money pricing system that reflects the risk involved in lending to smaller businesses that may also be low on collateral or other assets. A zero rate simply does not do that.