An Ignoble Experiment

2. Willner tapped as CEO of new Comcast-Charter SpinCo venture

The Federal Communications Commission, in a three-to-two vote, is moving ahead to implement new rules that would open the way for Internet service providers to charge websites for faster and higher-quality delivery of content to consumers. The plan has all kinds of implications for how online content is delivered, how much it will cost, and which companies have deep enough pockets to compete.

Democratic Commissioner Jessica Rosenworcel voted against the proposed rules, saying the commission shouldn't allow for clear, fast lanes for the most privileged companies. Instead, she supported the idea of allowing the FCC to consider questions on how it could prevent some websites from being blocked.

FCC Chairman Thomas Wheeler, who floated the proposed regulations earlier this week, said the rules are the fastest way to ensure the Internet remains open while addressing the legal issues raised by courts that have struck down two previous attempts by the FCC to pen net neutrality rules.

"There is one Internet. It must be fast, it must be robust, and it must be open," he said during the hearing on Thursday. "The prospect of a gatekeeper choosing winners and losers on the Internet is unacceptable."

More than 100 people protested at the FCC on Thursday, according to Tribune News Service. Signs reading "Liberate the Internet" and "Keep the Internet Free" were scattered liberally throughout the crowd. Three audience members were escorted from the meeting room for shouting protests.

For more:
- the Washington Post has this story
- The Wall Street Journal has this coverage
- the Chicago Tribune has this story

This week's sponsor is Digital Adware.

By K.C. Neel

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3. Layer3 TV moves to Denver, promises 'smarter' cable offering

Former Insight Communications CEO Michael Willner will serve as chief executive of the new cable company to be owned by Comcast (NASDAQ: CMCSA) and Charter Communications (NASDAQ: CHTR) following Comcast's merger with Time Warner Cable (NYSE: TWC).

Wilner

Willner is intimately familiar with many of the properties that will serve some 2.5 million cable customers in Alabama, Indiana, Kentucky, Michigan, Minnesota, Tennessee and Wisconsin, including former Insight territories.

The new company will have a nine-member board of directors, three of whom will be appointed by Charter, including Charter CEO Tom Rutledge, who will be non-executive chairman, the companies said in a release. Comcast will pick three of the remaining six members of the board, and will choose three more from a list provided by Charter.

These six board members will be independent of both Charter and Comcast, the companies said. Charter also will have a services agreement with the new company.

Willner is one of the most respected cable executives among his peers as well as in Wall Street and Capitol Hill circles. He has been involved in the cable industry since 1974, forming Insight in 1985. He ran that company until he sold it to Time Warner in 2012. He has served as NCTA chairman twice, steering the industry through some rocky periods of reregulation in the 1990s. He convinced other MSOs to adopt customer service standards after Congress punished the industry with reregulation for price and service abuses, a move that mollified irked regulators and helped pave the way for new rules in 1996.

He was also one of the first MSO executives to reach out directly to customers and employees with a blog he personally wrote almost every day, a move that endeared him to both constiuentcies. Most recently Willner was president/CEO of software licensing company Penthera Partners. He will remain on that board in the wake of this new gig.

"A skilled operator with an impressive track record of success, Michael has been a pillar of leadership and an active ambassador for the Industry," Rutledge said in the release. "Michael's expertise, strategic vision, and knowledge from his years at Insight will be invaluable to the customers, employees and shareholders of SpinCo. Having him on board now--and leading the new business post-transaction--will be extremely advantageous."

Comcast CEO Brian Roberts echoed Rutledge's sentiments. "His deep knowledge of the cable business, combined with his experience and focus on technology, will enable him to drive growth and product innovation for customers and position SpinCo as a competitor in the industry," Roberts said in a prepared statement.

For more:
- see the press release
- Multichannel News has this story
- Deadline.com has this story
- Bloomberg has this story

Read more about: Comcast, Insight Communications
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By K.C. Neel

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4. Media deals drive lift in M&A prices

Layer3 TV, a startup that founders and long-time cable veterans Jeff Binder and David Fellows promise will be a "smarter" cable television offering, will move its corporate headquarters to Denver from its original location in Boston this summer.

Backed by $21 million in funding, Binder said the company is creating a pay TV offering that will bring together a variety of existing products and services including Netflix, social media networks and Internet-connected devices such as smart home appliances.

"It's not that there isn't a lot of great products in the market, we just think that as a young company we've got a little bit different take on how to synthesize all of these technologies into something that's a little bit more interesting," Binder told The Denver Post. "We are doing things differently, but we are doing it in the context of the existing entertainment ecosystem."

The two founders were a little short on details during the company's press conference announcing the move, but they said the company will sell its service directly to consumers and will be industry friendly. In other words, the company likely won't alienate the industry as Aereo has done with the broadcast community.

Binder founded Broadbus Technologies, which developed video-on-demand and DVR technologies for set-top boxes. Broadbus was acquired by Motorola in 2006 for $200 million. Fellows is a former CTO at Comcast (NASDAQ: CMCSA).

For more:
- see this Denver Post article
- see this Multichannel article
- see this KDVR article

Read more about: Layer3TV, Layer3
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By K.C. Neel

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5. Cisco beats Wall Street estimates, but struggles for growth

Comcast's (NASDAQ: CMCSA) proposed $45 billion acquisition of Time Warner Cable (NYSE: TWC) is not necessarily expected to punch up the volume of dealmaking this year, but it is expected to boost prices, according to a new study by PricewaterhouseCoopers.

The volume of dealmaking over the last year actually dropped a bit, according to PwC. However, the average size of those deals grew by 80 percent, with the 209 deals announced in the first three months of this year valued at $74 billion compared to $41 billion to start last year.

PwC attributed this to four megadeals including Comcast-TWC, Facebook's (NASDAQ: FB) $19 million acquisition of WhatsApp, Lenovo's purchase of Motorola Mobility, and Media General's purchase of LIN Media. Other mega-deals are expected including AT&T's (NYSE: T) possible acquisition of DirecTV (NASDAQ: DTV), which could reach $50 billion. Dish Network (NASDAQ: DISH) is said to be courting suitors and there are several wireless pairings that could come to fruition this year as well, experts said.

So what's driving this renewed frenzy toward big deals? Goldman Sachs attributes it to CEO confidence. Bankers are having more dialogue with CEO about dealmaking than any time before 2007, when the wheels on the M&A bus started to slow down pre-recession, Gregg Lemkau, Goldman Sachs head of global M&A told Reuters.

The Conference Board and PwC's measure of CEO confidence hit 63 in the first quarter, up from 60 in quarter. At the same time, a TD Bank survey of chief financial officers released on May 8 showed that nearly 60 percent of them are optimistic about U.S. economic growth this year, up from 46 percent in 2013.

"While the Comcast/TWC deal was the trigger, the backdrop of a slow macro economy, new competitors, shifts in technology and consumer habits all come together and force the need for more scale," Highmark Capital Management fund manager Todd Lowenstein told Bloomberg.

Competitors understand that scale matters, and the Comcast-TWC merger is a perfect example of that. The evolution of delivering video via the Internet is forcing all media businesses to reevaluate their business models or seek mergers, Walt Piecyk, an analyst at BTIG LLC, told Bloomberg.

Competitors such as DirecTV and Dish Network Corp. recognize that a combined Comcast-Time Warner Cable will have the ability to move aggressively into delivering video through the Internet, which may soon supplant cable and satellite technologies, Piecyk said.

That evolution is forcing incumbent businesses to evaluate their models, or seek mergers, Piecyk said.

For more:
- The Wrap has this story
- Reuters has this story
- CNN Money has this story
- Bloomberg has this story

Read more about: Dish Network, Motorola Mobility
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By K.C. Neel

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