Wednesday, July 24, 2013

The Corporate State Of Alaska - And Now GCI and ACS Officially Create AWN

[This post has been sitting here partially written as I travel around and play grandpa, visit my mom, and I don't seem to have the time to get it done right.  Then there was more redistricting.  I didn't quite understand all the implications of this, but the potential negatives were being sent to me by my friend Jeremy Lansman who is one of the best informed people on radio, television, and other electronic technologies of communication.  I was going to claim my 'blogger's license' (a relative of poetic license) and just post it in draft form because I thought the issue important and I didn't see a lot of coverage elsewhere.  But it appears to be a done deal now so I'm putting this up as it was last March, with the addition of part of the Begich press release I got this morning.]

From a press release I got via email today:
"U.S. Sen. Mark Begich offered his support following today’s announcement from Alaska Communication Systems (ACS) and General Communications Inc. (GCI) that the two companies closed a transaction to create the Alaska Wireless Network (AWN), after receiving approval from the Federal Communications Commission (FCC).  AWN is a wireless infrastructure joint venture that will combine the wireless networks of ACS and GCI.

“I applaud ACS and GCI for their willingness to be innovative and aggressive in the telecom sector,” said Sen. Begich. “They will not only be working together to build this robust wireless network, but they will also continue to compete for customers. It is critical for Alaskan companies to find ways to attract customers as big businesses, like Verizon Wireless, enter into the Alaskan marketplace.”

This begins the long rambling background to what's been sitting in my draft post file since last March 23:

One of the arguments for Alaska Statehood was to gain sovereignty and control over Alaska resources. Alaska had been essentially a colony that was exploited by different corporate interests like fishing, timber, and copper.  Decisions about Alaska resources were made by corporations operating Outside the state.

Today again, after only six years since the first political corruption trials began and about a dozen Alaskan politicians and businessmen were convicted of various forms of abuse of public trust, the Republicans have regained full control of the Senate, House, and Governor's office and things are in full swing.

We have a governor - a former Conoco-Philips lobbyist - who has been using the governor's office to try to give the oil companies about $2 billion a year tax cuts - while arguing we don't have enough money to take  care of relocating Alaska native villages that are threatened by the effects of oil on the climate. [Since I wrote this, the bill was passed and the referendum to repeal the bill has gotten enough signatures to get on the 2014 ballot.]

Fishing is still a murky mix of Alaska fisherman and international fishing companies.

Providence Hospital is already the largest private employer in the state, charges a lot more for health care than the rest of the US, and I'm guessing a lot of that money goes to the Providence mother ship Outside. 

The Governor has also helped get rid of coastal communities' rights to have a say on development that affects their livelihood and way of life by helping to destroy the coastal zone management act.  So that now the state with the most coastline is the only coastal state without a Coastal Zone Management Act.  This is part of the process of getting rid of any obstacles to big business development, any bumps along the way where the public can stand up and demand some sort of accountability. 

The Citizen Initiative to keep cruise lines from dumping their wastes in Alaska waters (among many other things) has now been gutted.  

In each case, the common theme is that large, Outside corporate interests, supported by the governor and the Republican leadership in the House and Senate, have worked to overturn protections for the Alaskan environment and people.  And most Alaskans either think this is good, don't know anything about it, or feel helpless to do anything, or they just buy new apps to distract themselves from all this.

GCI-ACS Merger

Now let's look at one more situation that is happening more quietly behind the scenes.  GCI (General Communications Inc.) has submitted a request to the Federal Trade Commission (FCC) to share facilities in rural Alaska with ACS (Anchorage Communications Service).  GCI has also is seeking to buy a CBS affiliate and an NBC affiliate.

[Note:  ACS was ATS, Anchorage Telephone Service, a telephone utility that was owned by the Municipality of Anchorage.  The City sold the telephone service and it is now a private company.  GCI is an Alaska based company that began as a private company offering competing telephone service, cable, and internet.]

This is noteworthy because GCI now controls about 70% of cable.  It's also noteworthy to remember that Ted Stevens was flying on a GCI plane with GCI executives to a GCI retreat that he regularly attended when he and others died when the plane crashed.  (Yes, the US Senator should know people from all sectors, and Stevens did.  But it's clear that those with big bucks who can host our politicians on sweet fishing junkets have more say than those of us who can't.  Not because their message is more right, but because they have more access and influence.)

Jeremy Lansman, the owner of Fireweed Communications, including KYES, Anchorage Channel 5, has submitted comments to the FCC.  (I'd note that KYES is one independent  locally owned televisions left in the United States.)  Unfortunately, the arguments are fairly abstract and complex.  There are a whole lot of issues intertwined from costs to consumers in dollars, to accessibility of programming, to democracy itself.  Here's an example from Fireweed's initial filing:
Part VI: Risks of Monopoly
The Federal Trade Commission (FTC) has stated that in enforcement of the Sherman Anti-Trust and Heart-Scott-Rodino act is necessary to look beyond the situation of the present moment to see if a monopolist might have power to increase consumers’ costs in the near or far future28.    Furthermore in the area of Information Communication Technology and Broadcasting, that apart from keeping the marketplace working, it is well understood that freedom of the press is a prime condition to enable democratic processes of the forming of opinions.    There are two different, albeit related issues at stake here. Even if a door hinge manufacturing monopolist can charge outrageous prices, hinge technology (for example) would not affect our democracy. However, the nature of Technology that transports news, opinion, and viewpoint would automatically influence the nature of our democracy if in any way the technology were used in a way that might favor one opinion over another. Even entertainment TV drama carries and brings across the normative value system of the scriptwriters and their view of the world in terms of past, present and future. For this reason concentration of control of the technology of media deserves a much higher level of scrutiny than other goods and services.
[Since I wrote this, he's posted more challenges, as have others.]

I contacted Fireweed owner, Jeremy Lansman, a friend of mine, and gave him a set of questions that I though might make this clearer to the public.  Here are the questions and answers:

What Do I Know?   1.  What will be the possible
consequences for the Alaskan consumer?

Lansman:  I can see two extreme  outcomes, and possible shades between the
extremes.  One, especially in the rural areas...   a nasty monopoly.  
In this scenario the two companies, ACS and GCI, would own the only
physical facility Alaska Wireless Network (AWN) in the bush, and would
not be price regulated, and could charge the owners (ACS and GCI) a lot
more than it would had competition continued. ACS and GCI would pass the
monopoly cost along to consumers.  AWN would be very profitable, and
pass the profits back to its owners, who would be rewarding their
investors with monopoly "rents".

In another extreme scenario the common company, AWN, would only charge
its reasonable costs, not have profit, and pass the savings of joint
operation on to ACS and GCI which then would pass the savings on to users.

In the first scenario you might see some resemblance to Aleyaska
Pipeline.  The Alaskan oil pipeline is jointly owned by oil producers,
and charges producers to transport the oil to Valdez. Aleyaska is price
regulated, a big difference.  We found nothing about regulating AWNs
rates. The State of Alaska tax revenue gos up if the oil companies
charge less to transport oil, so the owners have an incentive to raise
prices, in order to reduce taxes. Increased in transport fees are given
back to the owners, so the argument is about what is a fair price for
transport.  As the pipeline is regulated, the tussle over fair pricing
is played out at in public at the regulator, the Regulatory Commission
of Alaska (RCA).  Unless special provisions are put in place, AWN will
not be subject to price regulation.  So all that could take place in

  What Do I Know?  a.  in urban areas

Lansman:  AT&T and soon, if their plans pan out, Verizon, will have physical
facilities (towers) in urban Alaska.  From what I have read, economists
believe the ideal number of mobile phone competitors is three.  Fewer
results in less competition, thus higher prices, while more results in
more physical facility cost, thus higher prices.   This theory is not
iron clad, as one of the highest per minute cost locations in South
Africa with 3 operators, and lowest cost is India with far more than 3. 
Anyway, with AT&T, Verizon, and  GCI maybe combined with ACS we will get
3 or 4 competitors, so the expert forecast might be that the result in
urban AK would be close to ideal.

What Do I Know?   b.  in rural areas

Lansman: I covered that above.

What Do I Know?   2.  Consequences for television
stations in general or KYES and how does that affect the viewer?

Lansman:   As I point out, TV viewing is migrating to various platforms, and
studies show a rapid uptake of use by mobile devices.   I defined TV to
include any audio/video material that is sent to multiple viewers, at
any time.  That makes your videos .. the ones you post.. TV.   So the
question I raise, can AWN, GCI or ACS block your
short TV shows?  THe answer is a conditional yes.  I believe they cannot
on "wireline" internet.  That I think is covered under the new network
neutrality rules.  The same rules do not apply to "wireless".  Wireless
is known as cellular.  However, we see some new services that link to
your mobile device.. which might be a tablet, or cell phone, or laptop
with a cellular dongle. The services might be special wi-fi signals that
operators send out in hot spots, or might be little cell phone base
stations that people are putting into their homes, or may be regular
cell towers. So, I believe that if ACS and GCI live with net neutrality,
all will be well in terms of overt censorship.

On the other hand, GCI will have quite a powerful influence over
conventional TV broadcast.  And a lot of people still use conventional
TV.  The influence GCI has will be due to their cable penetration.   The
leverage will be very powerful.  Until most viewing migrates to other
signal streams.. GCI will be able to determine who wins in the TV game.

What Do I Know?  3.  How could GCI and ACS get the
economies of shared rural facilities yet still protect internet and
television and phone users?

Lansman:  One way?  Make AWN a not-for profit.  You have any ideas?  As for TV,
apply net neutrality to AWN and its users.  As for GCI and the network
affiliates?  Maybe the purchase just cannot be allowed. That is, GCI has
an incentive to shut down competitors.   Think about that.

What Do I Know?: 4.  Could Verizon provide the
competition and thus lower all the internet and phone service?

Lansman:  I doubt it.   It is not efficient to build overlapping rural cell
service... besides GCI and ACS get federal funding, broadband and
Universal Service money for their rural services.   I don't yet know a
lot about how that works.

Those who say government is the problem forget that Business essentially runs government - through lobbies, campaign contributions, and their access to Congress and ability to influence them.

I don't know if this deal is good or bad for Alaska.  We have two locally started companies  in competition with national giants.  Perhaps consolidation makes some sense for Alaska as they compete against the big players.  But I do know that our Anchorage internet access costs more and is much slower than you get Outside and GCI and ACS have been the big players there.  

And media plays a big role in influencing how people vote.  The media that package the news for most Americans is getting more and more consolidated.  

From here.


  1. Republican word association.

    Workers or consumers work together: bad,collusion, union, socialism, communism.

    Competitor businesses work together: the marketplace works, capitalism works, profit is not a dirty word, faceless regulators in Washington D.C.,the reason god made screwdrivers is to turn the screws.

  2. Your history is wrong. As the son of a career employee of the former military ACS (my dad served them first when he was in the Signal Corps in WWII), and as someone who filed comments in several FCC proceedings in the 1970s urging the Commission to open Alaska's telecomm market to competition, I need to correct you...

    ACS started as RCA Alascom, when RCA purchased the former military long distance, telegram, and marine radio system (Alaska Communications System, military acronym ACS) from the Federal government in 1969. Alascom was Alaska's de facto long distance provider until GCI was started ten years later by former employees of the Hammond Administration's Office of Telecommunications to provide competition in long distance service, which Alascom fought tooth and nail (they even filed against Alaska public TV stations' applications for receive-only satellite dishes to receive PBS broadcasts!).

    RCA then sold Alascom to AT&T, which then sold it to Pacific Power and Light, after AT&T bought Cellular One. PP&L was an Oregon utility, which quickly purchased as many local phone companies in Alaska as they could, including the city owned Anchorage phone company, and the formerly locally owned companies in Juneau, Fairbanks, and North Pole that had been purchased by Continental Telephone.

    Alascom executives then purchased the company from PP&L with a leveraged buyout and renamed it ACS. While Alascom was buying local phone companies, GCI bought as many local cable TV companies as it could.

    GCI and ACS both began building wireless networks as soon as they could bid for licenses and build towers.

    Given the poor quality of AT&T's service, especially G3 network service, and their spotty coverage in Juneau, I'm looking forward to Verizon's market entry. AT&T definitely needs competition, and neither GCI nor ACS have provided enough coverage to create adequate competition.

  3. Harpboy, I think there was an old ACS and then a new one formed in 1998 when the Municipality of Anchorage sold the Anchorage Telephone Utlity. Here's a history I found online (it does sound like corporate PR, but the basic facts should be reasonably accurate):

    This is probably the one you are referring to:


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