Good morning,
The Federal Communications Commission is due to vote today on scrapping the ‘Net Neutrality’ regulations approved in 2015 under President Barack Obama. Barring some unforeseen drama, the Commission will vote 3-2 along party lines, and the efforts of Tom Wheeler to regulate the infrastructure of the Internet more like a utility will pass into history.
There’s been no shortage of commentary on the initiative, much of it generating more heat than light, and most of it dressing up what boils down to naked self-interest. Some noteworthy exceptions to that include this excellent primer (for those who still need one) by Fortune’s Andrew Nusca, and this piece which we published online yesterday by Michael Wade and Heidi Gutschi of the Global Centre for Digital Business Transformation, which argues persuasively against the temptation to view the issue in terms of heroes and villains.
Also to be recommended is this piece for The Wall Street Journal by Jon Leibowitz, a former Democratic commissioner at the Federal Trade Commission, which is a useful reminder that the U.S. still has an antitrust framework capable of handling any competitive distortions that arise from Ajit Pai’s deregulation.
Ultimately, the debate is about how best to finance the upgrade in infrastructure that will be needed to cope with an inconceivable rise in data traffic over the next few years, as digitization and mobile technologies permeate every area of household and commercial life. While there are arguments for treating it such infrastructure as a natural monopoly, and the Internet in general as a public good, there are obvious risks in freezing regulation at a point in 2015 and excluding market forces from a sector that is evolving at a breakneck pace.
Today’s vote won’t and shouldn’t be the last word—a thought which, one can hope, will take some of the shrillness and invective out of the process.
News below. (Alan Murray really will be back tomorrow.)
| Geoffrey Smith | |
| @alansmurray | |
| geoffrey.smith@fortune.com |
Top News
• Republicans Close In on Tax Deal
Senate and House Republicans agreed a compromise under which the top individual tax rate falls to 37% from 39.6%, while the statutory corporate income tax rate would fall to 21%, according to The Wall Street Journal’s sources. While that’s slightly higher than the 20% included in the original drafts, and a smidgeon above President Trump’s ‘red line’ of 20%, it will come into force in 2018, rather than 2019 as foreseen by the Senate bill. The WSJ also said the final agreement will eliminate the corporate alternative minimum tax. The WSJ said it’s unclear how the final changes will be reconciled with the goal of keeping the overall tax cut over 10 years to $1.5 trillion. WSJ, subscription required
• While Disney Closes in on Fox
Walt Disney confirmed its deal for most of 21st Century Fox’s film, television and international businesses. It will pay $52.4 billion in an all-stock offer and assume $13.7 billion of net debt in the process. Fox shareholders will get around 25% of the combined company. The deal also includes the third sequel in the “Bob Iger Postpones Retirement” franchise: he’ll now stay at the company through 2021. It appears, by contrast, that there will be no place for Fox CEO James Murdoch in the expanded Disney. Fortune
• IBM Reels in More Big Names for Quantum Computing
IBM has signed big-name partners including JPMorgan Chase, Barclays, and Samsung to participate in its experimental quantum-computing project. Big Blue said several other companies and universities have joined its initiative to create practical uses for quantum computing, a nascent technology that researchers believe could eventually surpass conventional computers in speed and power. Fortune
• T-Mobile’s Flucht nach vorne
T-Mobile wants to break into the $100 billion TV business. To that end, it’s buying a startup TV service called Layer3 and will use it as the technological platform for a nationwide services to be launched next year, one that will be a hybrid of a traditional cable TV subscription and an Internet-based service a la Dish’s Sling TV. It also aims to integrate third-party services like Netflix and Hulu. It’s not easy to see T-Mobile succeeding in a market that both Google and Verizon have failed to crack in the past, but it will be hoping to capitalize on opportunities created by an epochal disruption of the sector. With its strategic options narrowing in its traditional wireless business, T-Mobile has to do something to justify its existence: this looks like what its German parent company would call a ‘Flucht nach vorne’—fleeing forwards. Fortune
Around the Water Cooler
• The Fed Doesn’t Think Much of the Tax Cuts
The Federal Reserve raised its key interest rate and indicated it expects to raise three more times in 2018 (validating consensus forecasts and proving me wrong in the process—but let’s check in again at the end of next year). The Fed’s projections appear to suggest that it doesn’t think the GOP tax cuts will have much of an effect on growth (it raised its GDP forecast for 2018 up to only 2.5% from 2.1%, and even that partly reflects momentum from a better-than-expected 2017. The Fed’s continued insouciance will allow the ECB and Bank of England to avoid being bounced into premature tightening at their own policy meetings today. Fortune
• May Humbled by Brexit Rebels
Theresa May suffered a bruising defeat at the hands of pro-EU members of her Conservative Party. The rebels, backed by a conspicuously solid coalition opposition, forced through an amendment to May’s EU Withdrawal Bill that will guarantee parliament a meaningful vote on the deal the government thrashes out with the EU over the terms of Brexit. That is the intended consequence. The unintended one is that the dam of party discipline has been broken and that the chances of May keeping her government together for any length of time have fallen accordingly. BBC
• UBS Counts on Its Blessing
UBS, banker to over half of the world’s billionaires by its own account, has appointed Martin Blessing to run its $1.3 trillion wealth management unit. Blessing, a scion of one of Germany’s most prominent banking dynasties, has run the bank’s retail and commercial operations in Switzerland. His new job is a karmic reward on Earth for his sufferings as CEO of Germany’s Commerzbank in the wake of the financial crisis. UBS gave no indication why Jürg Zeltner, 50, who had been tipped as a potential successor to CEO Sergio Ermotti, was leaving the bank. FT, metered access
• Target Delivers
Target responded to the strategic challenge of same-day delivery by buying tech start-up Shipt for $550 million, its biggest acquisition in recent history. When customers place an order on Shipt’s marketplace, the service sends one of its 20,000 “shoppers” to the store to grab the items and then deliver them. Shipt, founded in 2014 in Alabama, charges $99 a year for unlimited deliveries. Shipt already has partnerships with Kroger and Costco. The move builds on Target’s acquisition earlier this fall of Grand Junction, a San Francisco-based startup that connects retailers and other distributors to a network of more than 700 carriers across North America. Fortune
Summaries by Geoffrey Smith; geoffrey.smith@fortune.com
@geoffreytsmith
