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Sue Marek You may recognize a new byline at FierceCable today. Daniel Frankel has joined the FierceMarkets editorial team as editor of FierceCable. Frankel's name may be familiar to you as he has been covering the entertainment and pay-TV market for more than a decade for new sites and publications such as GigaOM/paidContent, TheWrap and Variety.

Frankel will be based in Los Angeles and will be providing FierceCable readers with the latest news and analysis about evolving pay-TV market. You can reach him at dfrankel@fiercemarkets.com. Please welcome him to the team.--Sue

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Today's Top News

1. Why AT&T is pushing DirecTV to renew its NFL deal: It's the broadband potential, analysts say

By Daniel Frankel

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2. Verizon to work with Ericsson, Samsung, MobiTV and others in Indy race LTE Multicast test

A year ago, DirecTV (NASDAQ: DTV) chairman and CEO Mike White set off a huge wave of speculation regarding the fate of one of the most coveted programming assets in the pay TV industry when he declared "NFL Sunday Ticket" to be a "mature product."

On Monday, speaking to investors about AT&T's (NYSE: T) proposed $49 billion acquisition of DirecTV, White's perspective shifted dramatically on what will undoubtedly be a very expensive deal to renew the pro football games package. With AT&T requiring DirecTV, as a condition of the proposed corporate marriage, to make a concerted effort to renew "NFL Sunday Ticket," White said he was "optimistic" that an agreement will soon be reached.

It's clear that AT&T is the one pushing the satellite carrier to renew a deal that is set to expire after the 2014 football season. And even a quick look at DirecTV's financial considerations--it'll have to pay the NFL as much as 50 percent more to renew a loss-leader asset that already costs $1 billion a year to license--makes it clear why DirecTV has thought long and hard about making a new deal.

The remaining question: Why does AT&T want "Sunday Ticket" so badly? According to BTIG analyst Richard Greenfield, AT&T's broadband assets give it the opportunity to capitalize on the premium subscription product in a way DirecTV cannot as a stand-alone company.

"It is one thing for a one-way, broadcast satellite video platform to have multi-year exclusive rights to the 'NFL Sunday Ticket.' However, it is quite another for AT&T to have these rights following the DirecTV acquisition," Greenfield blogged. "While its unclear how AT&T could leverage exclusive 'Sunday Ticket' rights across its broadband distribution assets, we have to believe their control of 16.5 million wired broadband subscribers and 58 million wireless smartphone subscribers changes the competitive analysis meaningfully."

DirecTV currently touts around 2 million subscribers to the "Sunday Ticket" package. These subscribers pay as much as $250 a month to access live broadcast feeds for every NFL game on the Sunday schedule.

"You can't simply base what the deal is worth to DirecTV on price," noted sports media consultant Neal Pilson. "DirecTV uses the package to secure subsribers and to hold on to existing subscribers."

While "Sunday Ticket" was undoubtedly a growth driver amid DirecTV's surge to around 20 million domestic subscribers over the last decade, its ability to expand the satellite company's North American base isn't what it used to be.

Meanwhile, its value has declined amid further expansion of the NFL's programming reach. The league's far less expensive RedZone product--which costs under $10 a month--lets viewers see live scoring drives from all over the league. Basically, it lets viewers skip the potatoes and get right to the steak. Meanwhile, the migration of one game a week to the Thursday night broadcast TV schedule means one less contest a week for "Sunday Ticket" subscribers.

Then there's the renewal cost, which some analysts predict will climb past the $1.5 billion-a-year plateau now that AT&T is pushing DirecTV to make a deal.

As media analyst Craig Moffett noted, "It's a bizarre situation now. The NFL can ask for the moon."

However, a quick analysis of the available suitors on the open market reveals that the NFL hasn't suffered from any shortage of leverage, so AT&T's impact on the negotiations might be marginal, after all.

As Greenfield noted, Comcast (NASDAQ: CMCSA), Dish Network (NASDAQ: DISH), Verizon (NYSE: VZ) and Google (NASDAQ: GOOG) are all standing by to meet the NFL's terms if DirecTV will not.

"Everyone [else in the market] should be rethinking the importance of these sports rights, not to mention how acquiring 'Sunday Ticket' rights could derail the AT&T-DirecTV transaction."

For more:
- The Los Angeles Times has this story
- The Washington Post has this story
- Reuters has this story

Read more about: DirecTV, Mike White
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By Mike Dano

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3. AT&T's Stephens: DirecTV deal will create synergies in set-top boxes, advertising and content

Verizon Wireless (NYSE: VZ) said it will conduct the first commercial test of what it calls LTE Multicast technology with a live broadcast of this Sunday's IndyCar Series race. The broadcast will incorporate video of the race as well as in-car footage and footage from cameras installed around the track. Verizon also named some of its LTE Multicast technology vendors including Ericsson (NASDAQ: ERIC), Samsung and MobiTV.

The test marks another step of progress in Verizon's deployment of LTE Multicast technology, and also provides a clearer indication of how Verizon plans to make use of the technology in the future.

"Large audiences in specific locations who want to watch high-definition video can present a challenge; but with LTE Multicast, a specific channel of spectrum is assigned to this purpose, making the video experience--and ultimately the overall wireless experience of others in the same location--high quality," the carrier noted in its announcement. Verizon earlier this year demonstrated its LTE Multicast service at another live sports event, the Super Bowl.

In the test, Verizon said it will use network equipment from Ericsson and "enhanced" Samsung Galaxy Note 3 smartphones with LTE Multicast-capable chipsets. Verizon also said it will use multimedia services from Qualcomm (NASDAQ:QCOM) and Sequans demo tablets with Expway middleware. Verizon said MobiTV provided application development, content management and delivery across multiple devices.

Verizon announced earlier this year a multi-year agreement with IndyCar that will rename the racing championship the Verizon IndyCar Series. At the time, Verizon said it would "deploy its LTE Multicast solution at racetracks in the future to complement the Verizon INDYCAR 14 app and indycar.com, the official website of INDYCAR."

Earlier this year, Verizon executives said the carrier was talking to consumer electronics manufacturers about integrating LTE Multicast with connected TV devices. However, the carrier has yet to announce any commercial devices with the service installed. Verizon executives have said the carrier will introduce later this year devices that will support LTE Multicast, which requires new computer chips and middleware. CFO Fran Shammo said in March that it will take "a year or two before the chipsets are in the handsets and that gets proliferated throughout the marketplace."

There exists "a lot of ability with Multicast to really generate additional revenue for the industry," Shammo said at the time, but added that "the ecosystem will have to develop here."

Verizon isn't alone in eyeing technology that would make video broadcasting more network efficient. In an FCC filing earlier this year, AT&T (NYSE: T) reiterated its interest in LTE Broadcast technology using the eMBMS standard. But the carrier did not confirm that it would launch the service, only that it was "exploring the possibility of offering eMBMS services."

Using the eMBMS standard, LTE Broadcast technology allows the same content to be sent to a large number of subscribers at the same time, resulting in a more efficient use of network resources than each user requesting the same content and then having the content unicast to each user. Verizon refers to the technology as LTE Multicast.

For more:
- see this Verizon release

Read more about: eMBMS
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By Sue Marek

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4. Wheeler expresses concern about programmers blocking websites during carriage fights

AT&T's (NYSE: T) proposed $48.5 billion acquisition of DirecTV (NASDAQ: DTV) is not just about streamlining content costs and creating a platform for delivering video content to multiple screens. According to a top AT&T executive, the deal will also create synergies in advertising, set-top box development, billing and more.

Stephens

Speaking at the J.P. Morgan Global Technology, Media and Telecom Conference, AT&T CFO John Stephens said that the DirecTV deal will provide the two companies with the opportunity to deliver a superior video product by giving them the chance to streamline set-top box development and improve the quality of the user interface. Stephens didn't provide specifics about the video product that AT&T is envisioning, but said that the company would try to take the best of AT&T's U-verse product and DirecTV's satellite product and create an offering that makes both products better. "We have the opportunity to leverage the talent of both companies and bring it together," he said.

He also said the deal will provide both companies with more leverage, particularly when it comes to negotiating content deals.

Stephens emphasized that DirecTV's current negotiations with the NFL for its exclusive rights to the NFL Sunday Ticket will be handled by solely by DirecTV because the two companies are still obligated to operate as separate entities until the merger is approved by the FCC and the Department of Justice, which is not likely to happen for at least 12 months. However, he added that he believes the combined company will have tremendous leverage when it comes to future content negotiations as it will be able to provide content owners with the ability to reach 70 million new customers. "We will go to the content guys and the new factor is 60 million or so tablets or smartphone customers and 10 million broadcast customers that don't get subscription video from AT&T," Stephens said. "We are going to give them with the opportunity to reach 70 million new customers."

Interestingly, Stephens said that the reason the company didn't consider acquiring Dish Network (NASDAQ: DISH) was because it believed that Dish would invoke more regulatory scrutiny because of the spectrum that it owns and because it has clearly stated its intentions to be a broadband company. "Dish has spectrum. And that spectrum would raise additional regulatory scrutiny and questions at a time when some FCC spectrum auctions are scheduled," Stephens noted.

Expect AT&T executives to continue to tout the benefits of this proposed acquisition. The deal is undergoing scrutiny from analysts and not all are in favor of the deal. In a research note from Neil Begley, senior vice president of Moody's, he was critical of the deal, noting that AT&T's wireline network and the DirecTV satellite network will not be able to be integrated and AT&T's wireline network will require more fiber optic investment in the last mile to be competitive in the long-term.

In addition, he speculated that DirecTV could lose its exclusive rights to the NFL Sunday Ticket package. He said he didn't think it would lose all rights to the content but could opt to go the non-exclusive route in order to reduce its costs.

For more:
- listen to this webcast

Read more about: John Stephens, acquisition
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By Daniel Frankel

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5. Cablevision hires Samsung, Sprint Nextel veteran Packingham

Federal Communications Commission Chairman Tom Wheeler on Tuesday told congressional lawmakers that the trend among programmers to block access to their websites during carriage disputes with pay TV companies is "something we should all worry about."

Wheeler was speaking to representatives at an FCC oversight hearing conducted by the Energy and Commerce Committee's subcommittee on communications and technology. As the Los Angeles Times noted Wednesday, programmers are now regularly blocking access to subscribers who get their video and broadband services from pay TV providers, for which carriage agreements can't be reached.

For example, Viacom is currently restricting online video access to MTV and Comedy Central for customers of Cable One, which is at a negotiating impasse with the media conglomerate over fees.

"Cable One has chosen to no longer carry Viacom programming and, as a result, it is no longer available to Cable One customers in any form," a Viacom spokesperson told the Times.

And last summer, CBS blocked Time Warner Cable (NYSE: TWC) broadband subscribers--even those who didn't pay TWC for cable service--from accessing its sites

Fox was the first programmer to employ the strategy five years ago, when it blocked Cablevision (NYSE: CVC) customers from viewing its online content during a carriage dispute. Fox eventually caved to pressure from media watchdog groups.

Separately, Wheeler received somewhat of a grilling from the lawmakers, concerned about his pending mandates for net neutrality, pay TV consolidation and spectrum auctions.

For example, California Democrat Anna Eshoo noted that Wheeler's recently published proposal for revising Internet neutrality laws--which include controversial allowances for peering--will enable "some giant company blocking content."

Meanwhile, Texas Republican Joe Barton quipped, "The question before the committee today is, are we soon going to be calling him Mr. Wheeler Dealer?"

Amid the barrage, Wheeler tried to hold his ground. "When the consumer buys access to the Internet, they are buying access to the full Internet; and that's what our rules attempt to protect," he told the subcommittee.

For more:
- The Los Angeles Times has this story
- Bloomberg has this story
- ACA issued this earlier statement

Read more about: Tom Wheeler
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By Daniel Frankel

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