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Corporate/Koch Brother-Linked Group Asks FCC to Repeal Charter/Spectrum’s Data Cap Prohibition

A conservative group funded by corporate interests and the Koch Brothers has asked FCC chairman Ajit Pai to answer its petition and move expeditiously to cancel the prohibition of data caps/usage-based pricing as a condition for FCC approval of Charter Communications’ acquisition of Time Warner Cable and Bright House Networks.

A number of pro-consumer deal conditions were included as part of the merger transaction’s approval, and won the support of a majority of FCC commissioners under the leadership of former FCC chairman Thomas Wheeler, appointed by President Barack Obama.

The Competitive Enterprise Institute (CEI) is hopeful that with Wheeler out of office and a new Republican majority at the FCC under the Trump Administration means the FCC will end requirements that Charter offer unlimited data plans, discounted internet access for low-income consumers, and start allowing Charter to charge fees to Netflix and other content providers to connect to its broadband customers. CEI has every reason to be hopeful, pointing out Chairman Pai is a fan of data caps on residential broadband service, opposes Net Neutrality, and recently effectively killed a Lifeline program that would have extended inexpensive internet access to the poor.

CEI:

As then-Commissioner Pai wrote in 2016, this condition is neither “fair” nor “progressive.” Instead, he called this “the paradigmatic case of the 99% subsidizing the 1%,” as it encourages Charter to raise prices on all consumers in response to costs stemming from the activities of a “bandwidth-hungry few.” Other problematic conditions include the ban on Charter charging “edge providers” a price for interconnection and the requirement that the company operate a “low-income broadband program” for customers who meet certain criteria.

The group is optimistic Pai will oversee the unwinding of Charter’s deal conditions largely pushed by former FCC chairman Thomas Wheeler, after Pai recently led the charge to revoke another condition required of Charter in return for merger approval – a commitment to expand its cable network to pass at least one million new homes that already receive broadband service from another provider.

Pai also opposed the low-income internet program, calling it “rate regulation.” The CEI claimed the requirement will “undermine Charter’s ability to price its services in an economically rational manner.”

“Hopefully, the FCC’s new leadership will seize this opportunity to take a stand against harmful merger conditions that have nothing to do with the transaction at hand—by granting CEI’s petition,” the group wrote on its blog.

AT&T Schmoozing Lawmakers With Drinks, Tartare, and a Blonde for Its Latest Merger Deal

Phillip Dampier February 8, 2017 Astroturf, AT&T, Public Policy & Gov't No Comments

As your AT&T wireless bill soars to new heights, the phone company is spent your money on an exclusive inside-the-beltway private soirée to help win approval of its merger deal with Time Warner, Inc.

The little people (ordinary Americans and AT&T customers) were barred at the door for AT&T’s “Stars and Stripes Reception,” celebrating the grand opening of the AT&T Forum for Technology, Entertainment, and Policy. The party was heavy on lobbyists, lawyers, executives, and lawmakers that Bloomberg News reported were bathed in cool blue light and amply supplied with drinks and avocado tartare with melon carpaccio. Added bonus: free photos with a blonde in a slinky white gown promoting “Ice,” an AT&T original show seen on DirecTV.

AT&T doesn’t throw parties just to have fun. Its army of 100 lobbyists and a budget of at least $16.4 million to match leaves very little to chance. Only one company – Boeing – spends more time and money influencing lawmakers. But even a household name aerospace company cannot match the success AT&T has had getting its corporate agenda through in Washington, especially when the Republicans hold the majority. The company has spent more than $213 million schmoozing elected officials since 1998 alone.

The smell of power brought some important names to AT&T’s party, among them, Meredith Attwell Baker, former Republican FCC commissioner who accepted a high-paying lobbying job at Comcast just a few months after voting to approve its own merger deal with NBCUniversal. She was photographed by Washington Life magazine with Peter Jacoby, a former longtime AT&T lobbyist now lobbying for UnitedHealth Group, Bryan Cunningham, co-founder and principal at Polaris Consulting, which has advised AT&T on all of its merger deals since 2009 (along with just about every other large cable merger in the last seven years), and Shane Tews, a visiting fellow at the American Enterprise Institute also associated with the Koch Brothers-backed Heartland Institute, and two other DC consultant groups catering to big businesses that need a guide to help navigate and influence Washington.

Having fun: On the right is Republican strategist Ivan Garcia-Hidalgo, Hispanic Communications | Run PAC

In short, AT&T’s Forum is the embodiment of the D.C. “swamp” President Donald Trump has vowed to drain. Yet it confidently opened for business just a few days before his inaugural. Bloomberg News called the event part of AT&T’s search for “friends in high places.”

The phone company remains concerned about Mr. Trump’s rhetoric on the campaign trail that a merger between AT&T and Time Warner, Inc. would concentrate too much power in too few hands and was “an example of the power structure I’m fighting.”

But not concerned enough to believe their $85.4 billion deal is dead. In fact, D.C. insiders predict the transaction is likely to sail to approval with the Trump Administration’s Justice Department. Few believe the likely next head of the agency that reviews corporate mergers on antitrust grounds — Sen. Jeff Sessions (R-Ala.) is going to be too tough on AT&T. The president has yet to appoint an assistant attorney general for antitrust, who will be responsible for most of the transaction’s review. But Trump’s team was still considering Joshua Wright, a law professor that generally believes mergers are pro-consumer and has promoted a strict laissez-faire philosophy on antitrust enforcement, which foreshadows almost no enforcement at all.

So why throw lavish receptions for the important people in Washington?

“All of this outreach, all of this cultivation, is ensuring you have allies,” Meredith McGehee, strategic adviser to the Campaign Legal Center told Bloomberg News. “You get to know people. You invite them. You do the receptions. You start to cultivate champions on the Hill, so if an antitrust action comes about you can turn to those champions and say, ‘Hey I need you to push back. I need you to write letters.’”

Most of that attention will continue to be tilted towards Republicans, which have traditionally been more favorable to AT&T’s interests. AT&T donated 62% of the $2.7 million in campaign contributions to the GOP in the last election. Most of AT&T’s lobbyists are Republicans that took a trip through D.C.’s revolving door between Capitol Hill and K Street — home of the city’s top lobbying firms. Almost 60 of the 100 AT&T lobbyists used to work for Republican lawmakers or affiliated groups. Another 30 come from Democratic backgrounds — most formerly working for the Clinton Administration or Democratic lawmakers.

Since President Trump began emphasizing the need for American jobs and investment, AT&T’s lobbying team has tailored its message accordingly. On inauguration day, AT&T took out a full-page ad in the Washington Post stating: “We employ more than 250,000 people.” AT&T CEO Randall Stephenson also reportedly emphasized AT&T’s investments in its network when he met privately with Mr. Trump in New York.

Virginia Being Scammed With Industry-Ghostwritten Broadband Ban Bill

Del. Kathy Byron (R-Big Telecom)

What is one of the most effective ways to stop competition in its tracks before it can even get off the ground? Reward a state legislator with generous campaign contributions who introduces a bill banning your would-be competitor and get back to business as usual.

Delegate Kathy Byron (R-Campbell County) has broadband, but many of the people who live and work in central and western Virginia near her district don’t. Located in south-central Virginia, the county of 55,000 endures similar broadband availability and quality problems other communities in the western half of the state experience. Located near the Blue Ridge Mountains, the county seat of Rustburg has areas served by DSL, and many other areas that are not. For telecom companies serving mountainous and rural communities in this part of the state, broadband is often not economically viable enough to meet Return On Investment formulas. In fact, the problems are so significant, the southwestern Virginia community of Claudville was selected as the nation’s first testing ground for “white space” wireless broadband, designed to serve sparsely populated rural areas.

Byron’s district in Campbell County is neither wealthy or rich in internet options. Like other communities in the region, the decline of manufacturing and the transition away from tobacco production has created enormous economic challenges. Campbell County is continuing to rely heavily on agriculture while other communities in Virginia and the Carolinas are reinventing themselves to participate in the 21st century knowledge economy. That requires 21st century broadband service, which Campbell County lacks.

Last fall, Campbell County Public Schools assistant superintendent Robert Arnold provided a frank assessment of the area’s broadband problems, telling The News & Advance schoolchildren in his district suffer from a “homework gap,” unable to complete assignments requiring the internet at home because those homes lacked access. A recent trial of “white space” broadband in the area proved unsatisfactory because, in Arnold’s view, it was unreliable.

“We’re not seeing it as a reliable solution to our problems to get internet more readily available to kids that don’t have it in the different parts of our county where there are a lot of dead spots,” Arnold said.

Even wireless providers have not stepped up. Efforts to encourage cellular companies to place antennas on the same towers used for the “white space” broadband experiment have failed as well. The newspaper reports the lack of population makes private providers “squeamish about expanding there.”

The Campbell County school system managed to switch to a fiber optic network, but the only chance students will have that option at home is if local communities choose to offer it themselves and that will never happen if Ms. Byron’s bill becomes law.

Despite the broadband challenges in her district and the failure of private providers to correct them, Byron went ahead this month and introduced the ironically-named “Virginia Broadband Deployment Act,” another bought-and-paid-for industry-ghostwritten municipal broadband ban bill that would grant near-monopoly control to the same providers that have steadfastly refused to improve rural broadband in Virginia.

Her bill, according to The Roanoke Times, is the height of hypocrisy for a Republican claiming to be pro-business development:

Byron’s bill would make it difficult for existing municipal broadband authorities to expand and new ones to get started. Curiously, for a bill sponsored by a Republican, it would create more regulation, by requiring that the state authorize any creation or expansion of a broadband authority (plus lays on other regulations, as well.) For a bill that purports to protect the free market, it actually distrusts the free market: If telecommunications companies were already providing the service the rest of the business community wanted, the business community wouldn’t be clamoring for local governments to step in.

Spent lavishly on Byron – her second largest contributor.

The newspaper shouldn’t be surprised. Politicians willing to introduce these lovingly hand-crafted turf protection bills ask themselves only one question: are the generous corporate campaign contributions that usually accompany these “model bills” still worth it if the voters find out? Even if they do, a well-funded propaganda campaign sponsored by Big Telecom companies slamming municipal broadband as a government internet takeover or a guaranteed economic failure can help give politicians enough cover to avoid being exposed for selling constituents down the river.

It will therefore come as no surprise to regular Stop the Cap! readers that Virginia’s largest telecom companies have spent lavishly on Ms. Byron over the years. Her second largest contributor (next to the Republican Party of Virginia) is Verizon, which spent considerably more on her campaign than other well-heeled companies including Anthem and the Virginia banking lobby. Another major contributor is the Virginia Cable Telecommunications Association (more on that organization later). Others bringing checks include: AT&T, Sprint, CenturyLink, Comcast and the Virginia Telecommunications Association.

The pattern is all too familiar. Politicians take a sudden interest in telecommunications public policy and almost by magic produce a very detailed (and suspiciously similar) piece of legislation designed to make life impossible for public and community broadband projects, while claiming their bill will improve broadband.

In many cases, the politicians introducing these broadband ban bills are surprisingly unprepared to answer detailed questions about their own legislation, counting on local media to not scrutinize their logic too closely. But every so often, the blank stares and subject-changing that occurs when challenges are put to the alleged authors make us question if they actually read their own bill.

We have.

Byron is on ALEC’s Communications and Technology Task Force

Also of concern, Ms. Byron and her bill expose several conflicts of interest she has elected to ignore and hope nobody notices, like her membership on the American Legislative Exchange Council’s Communications and Technology Task Force, notorious for promulgating state bills restricting or banning public broadband. ALEC funding comes, in part, from some of the nation’s largest telecom companies.

We noticed.

The backlash Ms. Byron is now receiving from unhappy rural Virginia communities and local media that have read her bill has apparently surprised her, and in subsequent newspaper letters to the editor, she has taken to playing the victim card. But that has not stopped her from maligning municipal broadband projects, hoping that shaking those shiny keys will distract enough people from focusing on what is actually in her bill.

We put her keys away.

Stop the Cap! has reviewed her bill, also known as House Bill 2108, and what we found astonished us more than usual, and we’ve seen just about every kind of shilling imaginable:

§ 56-484.28. Provision of broadband expansion services.

Notwithstanding any provision of the Virginia Wireless Service Authorities Act (§ 15.2-5431.1 et seq.) or any other provision of law, a locality or any affiliate may own and operate a broadband or Internet communications system, including ownership or lease of fiber optic or other communications lines and facilities, to provide broadband expansion services only if the following conditions are met:

1. The locality or its affiliate has obtained a comprehensive broadband assessment by report or study, by the Center for Innovative Technology, or an independent consulting firm knowledgeable and experienced in analyzing broadband deployment, which report or study is made available to the public and specifically identifies any unserved areas.  The locality or its affiliate shall be responsible for all fees charged by the Center for Innovative Technology or an independent consulting firm for the preparation of such comprehensive broadband assessment report or study.

2. Based upon the comprehensive broadband assessment, the locality or its affiliate formally adopts and publishes specific broadband goals regarding capacity, geography and documented demand for Internet services in the specific unserved areas which the locality or its affiliate desires to address.

3. The locality or its affiliate has issued a request or solicitation for proposals, consistent with the specific broadband goals of the locality previously identified, requesting the capital cost which an existing for-profit local Internet service provider offering communications services with broadband speeds would incur to meet the locality’s specific broadband goals by extending or upgrading such services with broadband speeds to any specific unserved areas of the locality identified in the comprehensive broadband assessment.  Copies of such request or solicitation shall be sent to any franchised cable operator and other known Internet service providers with local facilities offering communications services in the locality at least 180 days in advance of the deadline for the response to the request or solicitation for proposals. The governing body of the locality or its affiliate shall analyze any responses it receives to determine if capital grants or subsidies by the locality to pay for such extension by an existing provider would be more cost effective than construction and operation of a new distribution system by the locality or its affiliate.

4. If no incumbent broadband provider advises the governing body of the locality within six months after the release of the request or solicitation for proposal that it is willing or able to meet the local goals, either without a capital grant or subsidy, or with the capital grant or subsidy or portion thereof proposed by the locality, then the governing body of the locality or its affiliate, after a public hearing, may vote to authorize one or more projects, consistent with the specific broadband goals of the locality previously identified,  to provide broadband expansion services to unserved areas within the locality identified by the comprehensive broadband assessment report or study described above, which report or study shall not be more than one year old at the time of the public hearing.  The chief executive officer of the locality or its affiliate shall certify that the comprehensive broadband assessment report or study identification of unserved areas is still correct based upon information presented at the hearing.

5. Any locality or affiliate project to provide broadband expansion services shall be designed and built or otherwise implemented so that at the time of authorization, the project (i) does not duplicate existing broadband facilities offering broadband speeds to customers, within 90 percent of the geographic area of the project, and (ii) does not duplicate service to customers who already are in a position to connect to an Internet service offering broadband speeds, for 90 percent of the projected residential and commercial customers who will be served by the project or otherwise are within the service area of the project.

6. Any locality or its affiliates seeking to offer or offering broadband expansion services shall, at least 120 days prior to commencement of construction of any project, file with the Virginia Broadband Advisory Council, (i) copies of its report or study from the Center for Innovative Technology, including any updates or supplements thereto, (ii) copies of the minutes of the meeting at which it voted to authorize the offering of broadband expansion services, (iii) a map or description of each project and projected area in which it plans to offer broadband expansion services, (iv) an annual certification by July 1 of each year that any expansion to or changes in its projects or system since the preceding July 1 still qualify as broadband expansion services, and (v) an annual certification that its provision of services meets or in the case of a prospective or an incomplete project shall meet, the requirements of subdivisions 1 through 6 of § 56-484.30.  Any person who believes that any part of such filings is incomplete, incorrect or false and who is in the business of providing Internet services within the locality shall have standing to bring an action in the circuit court for the locality to seek to require the locality to either comply with the substantive and procedural content of the filings required by this section, or cease to provide services, and no bond shall be required for injunctive relief against the locality.

In condensed form, this section claims to help facilitate municipal broadband service in “unserved areas,” but then hamstrings local communities to an extent that makes offering such a service next to impossible. The irony of a Republican legislator advocating detailed and burdensome regulations for a publicly owned provider while concurrently supporting “hands-off” policies for her campaign contributor-provider pals should not be lost on her constituents.

The bill could have been called the “Virginia Duopoly Protection Act,” because it only really allows public broadband development in unserved areas, and only after a community pays for a “broadband assessment” that the bill also mandates be sent to its potential competitors — private cable and telephone companies. Imagine if AT&T was required to send copies of their business plans to Comcast and Charter.

Even worse, phone and cable companies are guaranteed a “heads-up” when a community provider is thinking about providing service, exactly where that service will go, and how much it will cost the community to offer it. Companies on the wrong side of the law used to hire spies to get that information from competitors. Byron’s bill makes Virginia communities pay for the postage required to mail those plans to telecom companies serving their area.

Being given access to what even cable and phone companies would consider highly confidential information isn’t enough. Ms. Byron’s bill allows them to take their time reading it. In fact, her bill gives incumbent providers up to six months to stall, sabotage, or undercut the community effort. They are given the right to underbid the community’s proposal and ironically deliver service in places they have previously refused to serve.

“While it’s good to be specific about what a community plans to do, incumbent providers don’t have to adhere to the same level of transparency,” noted Lisa Gonzalez at the Institute for Local Self-Reliance. “As a result, publicly owned networks are at a disadvantage under such requirements when an incumbent knows where, what, when, and how much a municipality intends to invest to bring service to its community. When incumbents build or upgrade, they are not subject to the same level of exposure. Potential private partners who may consider leasing infrastructure or working with a community in some other capacity could also be put off by drastic transparency rules.”

Any of Virginia’s phone and cable companies could end the demand for municipal broadband tomorrow by simply providing the level of service communities need to participate in the digital economy. That requires connected education and high quality broadband for entrepreneurs and established businesses. Instead of providing that, companies write large campaign contribution checks to state politicians like Ms. Byron to slow down or sabotage any emerging competition. While stalling germinating broadband projects, providers will spend millions to demagogue them in the local media, throw every obstacle in their path, and then point to the delays and cost overruns as evidence municipal broadband is a failure.

In Tennessee, EPB had to face down a deep-pocketed cable industry lawsuit before it could begin offering gigabit internet broadband and television service. EPB eventually won the lawsuit and the service now attracts a substantial market share in Chattanooga, but critics carp it was only successful because it got a federal grant. They ignore the fact it has paid substantial dividends in job growth and enhanced the lives of local citizens, who vote for the service with their wallets.

The fact critical cable and phone companies risk charges of hypocrisy doesn’t seem to move them, even though they are not averse to accepting tax breaks and other government goodies as well. That is why providers instead use well-funded third-party astroturf groups and legislators to do their dirty work. Byron’s bill is more obvious than most, with obstructive sections mandating very short windows for public hearings, blatant protectionism, and a thicket of bureaucratic regulations designed to give ample opportunities for industry mischief with the filing of frivolous motions to run out the clock and run up costs.

§ 56-484.29. Provision of overbuild broadband services.

Any locality or its affiliate that is providing overbuild broadband services as of July 1, 2017, may continue to serve customers within the geographic service area within which it is actually providing such services as of that date; however, except as hereafter provided such locality or its affiliate shall not subsequently expand the geographic scope of its services or expand the nature of the service being offered.  Any locality or its affiliate that is not actually providing overbuild broadband services as of July 1, 2017, or if providing such services, subsequently seeks to expand the geographic territory or nature of services being offered, shall submit a proposal to the Virginia Broadband Advisory Council with a full explanation of the proposed overbuild broadband services, and if recommended by the Virginia Broadband Advisory Council, shall then require the express approval of the General Assembly through legislation approving the offering or expansion of such services by the locality or its affiliate.

Since 2008, Stop the Cap! has reviewed industry-sponsored municipal broadband ban bills, and none to date have illustrated the level of conflict of interest we see here. We call on Virginian officials to carefully investigate the ties Ms. Byron has to cable and phone companies and the ethical concerns raised from her involvement in key state bodies that can make or break rural broadband in Virginia. Byron increasingly exposes an agenda favoring incumbent phone and cable companies that just happen to contribute to her campaign — companies she seems willing to protect at any cost.

In our investigation, we uncovered several disturbing details that suggest questionable behavior from Ms. Byron, primarily from her failure to disclose materially important facts about her bill to fellow elected officials and, more importantly, the public. So far, her only defense to questions raised by the media about her bill is to play the “misunderstood victim” card:

This may be yet another example of media arrogance manifesting itself as a lack of common courtesy. But, I believe the real culprit to be something far more dangerous: the editorial’s author was not going to risk being confused by the facts.

[…] Had someone contacted me, I would have told them about my years of experience serving on Virginia’s Broadband Advisory Council, which I currently serve as chairman. The purpose of the Council is “to advise the Governor on policy and funding priorities to expedite deployment and reduce the cost of broadband access in the Commonwealth.” The Virginia Broadband Deployment Act advances that goal. That’s why legislators serving on the Council support House Bill 2108. And, we’re in good company: The Virginia Chamber of Commerce, the Virginia Association of Realtors and the Northern Virginia Technology Council have all indicated their support for House Bill 2108.

Fixed or Fair? If Byron’s bill becomes law, Ray LaMura, Virginia’s top cable lobbyist, will help decide if municipal providers can expand to compete with cable companies.

In fact, we understand Ms. Byron, her telecom industry benefactors, and the special interests she mentions as supporters only too well. We invite Ms. Byron to refute some of our facts:

While broadband in major Virginia cities is no better or worse than other large cities in the region, there are vast areas in central and western Virginia where inadequate broadband service persists, and private providers have been reluctant or unwilling to change that. As a result, some municipalities are considering offering an alternative. Ms. Byron’s bill doesn’t just deter communities from entering the broadband arena in these areas, it carpet-bombs the entrance out of existence.

The section of her bill detailing requirements for community providers seeking to expand requires them to ask permission from an entity known as the Virginia Broadband Advisory Council, which Byron disturbingly chairs. If the goal of this Council is to pave the road to improved broadband, Byron’s bill is an enormous pothole. Restricting competition won’t help the Council’s goal of winning lower prices for consumers and businesses either, and last time we checked, broadband bills in Virginia are going up, not down.

Ms. Byron’s clear conflict of interest between her bill and the Council’s goals should be grounds for her immediate resignation. It is hard to justify continuing to serve on a Council promoting better broadband while introducing bills that do the opposite. Taking political campaign contributions from the same companies that are directly responsible for the state of Virginia’s broadband today also makes it impossible for the Council to have any credibility as long as she continues to chair it.

Another concern: Ms. Byron fails to disclose the Council she uses for her defense includes “citizen members” that are, in reality, some of the most important telecom industry lobbyists in the state. Ms. Byron’s bill would require communities to seek approval for broadband expansion from the same Council that counts among its members Ray LaMura, president of the Virginia Cable Telecommunications Association, the state’s largest cable industry lobbying group, and Duront Walton, executive director of the Virginia Telecommunications Industry Association, which represents the interests of several telephone companies in the state.

Conflict of Interest?: Another member of Virginia’s Broadband Advisory Council.

Does anyone believe the Virginia Broadband Advisory Council is likely to approve any broadband expansion plan that leads to direct competition with an established cable or phone company, particularly when members like Mr. LaMura write municipal broadband hit pieces prominently linked on his LinkedIn page? Does anyone expect a fair shake from Ms. Byron, who wrote (inaccurately) “the vast majority of municipal broadband systems across the country that have tried to compete with the private sector have failed.”

By all appearances, the fix is in.

While we’re discussing full disclosure, Ms. Byron also failed to mention the Virginia Chamber of Commerce is hardly a dispassionate arbiter of the merits of community broadband — it is a private business lobbying organization. The Virginia Realtors Association is also a political lobbying organization that openly endorsed Ms. Byron’s election campaign, contributed a substantial donation to it, and runs an active Political Action Committee. The Northern Virginia Technology Council is a trade and lobbying organization that counts among its members AT&T, Cox, Comcast, CenturyLink, and Verizon, to name a few. To quote NVTC’s own website: “NVTC members are business leaders focused on the broad business climate of our state and communities.”

We believe Ms. Byron when she said she was in good company. Missing from the cozy gathering are consumers looking for internet access, local governments feeling pressure from their constituents to do something about the problem, and any belief Ms. Byron’s bill will do anything except keep things as they are.

But wait, there is more:

§ 56-484.30. Operating requirements.

The following provisions shall apply to any locality or its affiliate which offers broadband expansion services or overbuild broadband services, after July 1, 2017:

1. A locality or its affiliate shall apply, without discrimination as to itself and any affiliate, including any charges or fees for permits, access or occupancy, the locality’s ordinances, rules, and policies, including those relating to (i) obligation to serve; (ii) access to public rights of way and municipal utility poles and conduits; (iii) permitting; (iv) performance bonding; (v) reporting; and (vi) quality of service.

2. In calculating the rates charged by a locality for any communications service:

 a. The locality or its affiliate shall include within its rates an amount equal to all taxes, fees, and other assessments that would be applicable to a similarly situated private provider of the same communications services, including federal, state, and local taxes; franchise fees; permit fees; pole attachment fees; and any similar fees; and

b. The locality or its affiliate shall not price any of its communications services at a level that is less than the sum of: (i) the actual direct costs of providing the service; (ii) the actual indirect costs of providing the service; and (iii) the amount determined under subdivision 2a.

3. A locality or its affiliate shall keep accurate books and records of any provision of communications services.  A locality or its affiliate shall conduct an annual audit of its books and records associated with any provision of communications services, with such audit to be performed by an independent auditor approved by the Auditor of Public Accounts. Such audit shall include such criteria as the Auditor of Public Accounts deems appropriate and be filed with him, and with copies to be submitted to the Virginia Broadband Advisory Council.  If, after review of such audit, the Auditor of Public Accounts determines that there are violations of this chapter, he shall provide public notice of same, and the locality or its affiliate shall take appropriate corrective action to cure past violations and prevent future violations. […]

§ 56-484.31. Sale or disposal.

Any locality or its affiliate that seeks to sell or dispose of all or any material part of the infrastructure of an internal government services, broadband expansion services, or overbuild broadband services system, or any material portion of any subscriber or service contracts in connection therewith, shall do so by a public sale or auction process after advertisement.

By now, most readers get the point. This bill is a “plan for failure” for municipal broadband.

The ideological pretzel-bending required of Ms. Byron to do the telecom industry’s bidding is a sight to behold. Byron — a Republican — is openly advocating government price regulation, demands municipal providers turn over their books to be reviewed by her Virginia Broadband Advisory Council, which includes cable and telephone company lobbyists, and requires communities that want to abandon networks that fail under this legislative gulag to sell them to the lowest bidder, likely a cable or phone company that helped write the rules.

If this anti-consumer nightmare of a bill becomes law in Virginia, Christmas for Big Telecom will come early this year, and you’re paying… again.

Community Broadband Battle in Savannah Media Pits Local GOP Against Broadband Choice

Savannah, Ga.

The very idea that a city would get involved in selling better broadband service to its residents has sparked a coordinated campaign to sully municipally owned providers and color the results of an ongoing study to determine if Savannah, Ga. is getting the kind of internet access it needs.

While the city and county continue their Broadband Fiber-Optic Feasibility Study and survey residents about incumbent providers including AT&T, Comcast, and Hargray Communications, an organized pressure campaign coordinated by the Chatham County GOP is well underway to undermine any idea the city should compete against the three dominant local internet providers.

“The purpose of this study is to examine how we are currently served with broadband infrastructure, particularly focused on the services available to our community residents, anchor institutions, businesses, and key services like public safety, health and education,” a Savannah city spokesperson told Stop the Cap!

The city’s goal is to: “confirm that residents, anchor institutions and businesses have access to the services they need and that those services are competitively priced.” Incumbent providers are betting the answer to that question will likely be no and have started early opposition to discourage the city from attempting to build its own broadband network. Comcast and AT&T have apparently teamed up with the local Chatham County GOP to defend current providers in suspiciously similar-sounding letters to the editor.

Consider two examples.

About a month ago, Stephen Plunk, executive secretary of the Chatham County Republican Party, liberally sprinkled talking points provided by outside think tanks in an editorial published by the Savannah Morning News:

The Savannah Morning News published this ominous illustration adjacent to a guest editorial from a Chatham County GOP official opposing public broadband.

Only 6,000 residents in Chatham County, out of about 280,000, do not have access to wired internet of any sort. About 90 percent of Savannah residents can choose from two or more wired internet service providers . The city’s current residential providers offer speeds up to 105 mbps, and its 12 business providers offer speeds that are generally between 100 mbps and one gigabit.

Private providers also are making big new investments here. Last year, Hargray Communications announced a plan to offer one gigabit speeds to Lowcountry customers. In March, Comcast announced its intention to offer 10-gigabit speeds to city businesses. Last month, AT&T said it also will begin offering superfast capacity.

Next, let’s look at whether a city should provide service directly to customers. Or, is it wise? To determine that, the city council must ask itself whether it wants to go down the path of Marietta, which ran its own internet company several years ago but was forced to sell that network at a loss when it failed to turn a profit year after year. Marietta’s mayor eventually admitted the city never should have become an ISP. There are government ISPs that do make a profit every year, but they are rare. Chattanooga’s government-run system is often touted as a model, but the city received more than $100 million from the federal government to get its system started.

This morning, Mary Flanders, chairwoman of the Chatham County GOP wrote essentially the same things in an “opposing views” piece published by the Connect Savannah weekly newspaper (and at least cited some of her sources):

They should proceed carefully. Cautionary tales about municipal broadband networks abound.

Consider the situation in Marietta, the sprawling suburb northwest of Atlanta. Marietta started its own municipal network that stretched along a 210-mile long route. After spending $35 million to build out the network, Marietta earned a grand total of 180 customers.

The then-Mayor said the city couldn’t keep pace with the expenses associated with the constant flood of technology upgrades required to manage a broadband network. The city ultimately sold the network in 2004 for a $20 million loss.

Pacific Research Institute, in a report on municipal broadband, found that “Mariettans had decided that they would rather take a $20.33 million loss than continue to subsidize a municipal telecom venture that was sucking their city dry.”

Marietta may be relatively close to home, but it’s not the only example. Provo, Utah spent $40 million to build its network, only to sell it to Google Fiber for the princely sum of $1. In Groton, Connecticut, taxpayers lost $38 million.

City leaders need to consider the downside risk to municipal services if and when the broadband network fails to attract customers and generate case. The shortfall has to be made up somewhere. Where will the money come from? Tax hikes?

Budget cuts to basic services or to the police or fire department? Try explaining that to voters come election time, especially if the crime rate is on the rise.

According to Kelly McCutcheon, President of the Georgia Public Policy Foundation, typically the consultants are the only ones who come out good on these deals. It would be a bitter pill to swallow by Savannah citizens and city leaders alike.

Let’s dig into some of the specifics on Internet needs in Savannah. Of the 280,000 residents in Chatham County, only 6,000 residents do not have access to wired Internet of any kind. About 90% of Savannah residents can choose from two or more wired Internet service providers (ISPs).

The city’s current residential providers offer speeds up to 105 mbps, and its twelve business providers offer speeds that are generally between 100 mbps and one gigabit, which is considered to be very speedy in the Internet world.

Private providers also are making big new investments in the area. Last year, Hargray Communications announced a plan to offer one gigabit speeds to Lowcountry customers. In March, Comcast announced its intention to offer 10-gigabit speeds to city businesses. Last month, AT&T said it also would begin offering incredibly fast capacity to Savannah entrepreneurs.

On track to be profitable by 2006, local politics forced an early sale of the community fiber network that was succeeding.

Most of these talking points have been debunked by Stop the Cap! over our nine-year history. The examples of municipal broadband failures are so few and far between, we’ve come to recognize them, and many of the shop worn examples provided by the Chatham County Republicans are more than five years old.

In Groton, Conn., the emergence of a municipal provider inspired network upgrades and more competition from Comcast while the phone company Southern New England Telephone (later AT&T and today Frontier Communications) did everything possible to keep the publicly owned provider from offering phone services to customers. In the end, Comcast undercut the municipal provider and AT&T’s deployment of U-verse created problems for the then-rosy revenue projections the municipal provider was depending on to recoup its original construction costs. The network was sold five years ago to a private provider and customers still appreciate the quality of the original network today run by Thames Valley Communications, which rates four out of five stars while its competitors Frontier and Comcast rate two. It would be wrong to assume today’s municipal broadband providers have not learned important lessons and now account for incumbents responding to competition with heavily discounted rate retention plans for customers threatening to leave, as well as network upgrades. Revenue projections have become more conservative, both to deal with unexpected construction costs and the revenue likely to be earned in light of cut-rate plans from the competition. But many customers make the switch anyway, persuaded by the quality and reliability of superior fiber networks, rate stability, and a more responsive level of customer service.

The networks in Provo, Utah and Marietta, Ga., are examples of what happens when politicians opposed to the concept of municipal broadband intentionally meddle with them in an effort to prove an ideological argument or to help move along a pre-conceived sale of publicly owned infrastructure to private companies.

In Provo, the fiber to the home network was built and quickly hamstrung by a Utah state law that forbade the city from selling broadband service to the public. Instead, it had to sell wholesale access to private companies it had to attract, who in turn would provide service to the public. Imagine a marketing campaign for a new provider that required customers to deal with two unfamiliar providers just to sign up.

Christopher Mitchell, who studies municipal networks and advocates for community involvement in broadband, wrote a year ago iProvo was facing serious challenges primarily because politicians and industry lobbyists got in the way:

“Industry lobbyists convinced Utah legislators to restrict local authority over municipal networks to ‘protect’ taxpayers and that argument is still frequently used today by groups opposing local internet choice. The law does not actually revoke local authority to invest in networks, it monkeys around with how local governments can finance the networks and requires that municipalities use the wholesale-only model rather than offering services directly.

“However, the debt-financed citywide wholesale-only model has proven to be the riskiest approach of municipal networks. Building a municipal fiber network where the city can ensure a high level of service is hard and can be a challenge to make work financially. Trying to do that while having less control over quality of service and splitting revenues with 3rd parties is much harder.”

Marietta’s experience with municipal broadband failed only because a new mayor unilaterally declared it an ideological failure and sold the network at a loss for political reasons. We covered that debacle ourselves back in 2012:

In Marietta, the public broadband “collapse” was one-part political intrigue and two-parts media myth.

Marietta FiberNet was never built as a fiber-to-the-home service for residential customers.  Instead, it was created as an institutional and business-only fiber network, primarily for the benefit of large companies in northern Cobb County and parts of Atlanta.  The Atlanta-Journal Constitution reported on July 29, 2004 that Marietta FiberNet “lost” $24 million and then sold out at a loss to avoid any further losses.  But in fact, the sloppy journalist simply calculated the “loss” by subtracting the construction costs from the sale price, completely ignoring the revenue the network was generating for several years to pay off the costs to build the network.

In reality, Marietta FiberNet had been generating positive earnings every year since 2001 and was fully on track to be in the black by the first quarter of 2006.

So why did Marietta sell the network?  Politics.

Marietta’s then-candidate for mayor, Bill Dunway, did not want the city competing with private telecommunications companies.  If elected, he promised he would sell the fiber network to the highest bidder.

He won and he did, with telecommunications companies underbidding for a network worth considerably more, knowing full well the mayor treated the asset as “must go at any price.”  The ultimate winner, American Fiber Systems, got the whole network for a song.  Contrary to claims from that the network was a “failure,” AFS retained the entire management of the municipal system and continued following the city’s marketing plan.  So much for the meme government doesn’t know how to operate a broadband business.

While members of the Chatham County GOP took potshots at outside consultants hired to consider whether Savannah should explore offering community broadband, Ms. Flanders was far more sanguine about her sources: the Pacific Research Institute (PRI) and the Georgia Public Policy Foundation.

In fact, the Pacific “Research Institute” doesn’t do independent research and it’s not an institute. It’s a right-wing, dark money-funded think tank with ties to the American Legislative Exchange Council (ALEC) and the Koch Brothers. The Georgia Public Policy Foundation, like PRI, prides itself on not revealing the sources of its funding, but SourceWatch uncovered their financial ties to the Donors Capital Fund, a corporate-“murky money maze” specifically designed to hide corporate contributions and the motives those companies have to send the money. So it isn’t a stretch to assume that when a think tank suddenly takes an interest in municipal broadband, checks from AT&T, Comcast, and others have proven to be helpful motivators.

FCC Chairman Announces Compromise Set-Top Box Reform; Free ‘Apps’ for One and All

explorer 8000[Editor’s Note: Federal Communications Commission chairman Thomas Wheeler today released a compromise proposal hoping to get the cost of set-top box equipment down for millions of Americans forced to lease equipment to watch cable television.

Wheeler originally proposed requiring an open standard for set-top box equipment that would open the market to competition by allowing manufacturers to directly sell equipment to consumers and compete for their business. Cable operators, programmers, and various special interest groups that depend on financial contributions from those operators immediately launched an unprecedented pushback claiming set-top box reform was racist, anti-minority, promoted copyright theft, and was illegal and unconstitutional. Small cable operators claimed they might be driven out of business, and programmers claimed companies like Google might fundamentally change the channel lineup on new equipment that would leave them in a disadvantaged position.

In fact, the hundreds of millions of dollars in annual revenue earned by cable operators charging the same price for equipment fresh out of the box or handed down in beat up condition to the fifth customer in eight years was more likely the driving factor.

Mr. Wheeler capitulated and released a more modest proposal promising cable operators would be forced to offer free “apps” for devices like Roku and Apple TV. But cable operators will likely own and manage those apps and have direct control of authentication methods and anti-piracy measures that are likely to be proprietary. Still, apps like TWC TV which covers Time Warner Cable’s lineup on devices like Roku have allowed consumers to ditch expensive set-top equipment and irritating Digital Adapters that don’t function well and have almost tripled in price since their introduction. Making sure these apps provide comparable functionality with set-top boxes and are released to a variety of devices will be key to whether Wheeler’s proposal, delivered in full below courtesy of the Los Angeles Times, has a measurable impact on cable bills.]

FCC chairman: Here are the new proposed rules for set-top boxes

There’s never been a better time to watch television in America. We have more options than ever, and, with so much competition for eyeballs, studios and artists keep raising the bar for quality content. But when it comes to the set-top-box that delivers our pay-TV subscriptions, we have essentially no options, creating headaches and costing us serious money in rental fees. That makes no sense, which is why I’m sharing a proposal with my fellow commissioners at the Federal Communications Commission to change the system.

Wheeler's compromise

Wheeler’s compromise

Ninety-nine percent of pay-TV subscribers currently lease set-top boxes from their cable, satellite or telecommunications provider, paying an average of $231 a year for the privilege, according to a recent analysis. The collective tab is $20 billion annually in rental fees. In a recent study, 84% of consumers felt their cable bill was too high. What they may not realize is that every bill includes an add-on fee for their set-top boxes. We keep paying these charges even after the cost of the box has been recovered because we have no meaningful alternative.

Pay-TV providers will be required to provide apps — free of charge — that consumers can download to the device of their choosing.
Earlier this year, the FCC launched a process to unlock the set-top-box marketplace. We were motivated by the desire to give consumers relief, but we were also mandated to take action by Congress and the law, which says that consumers should be able to choose their preferred device to access pay-TV programming.
Over the past seven months, the Commission conducted an open proceeding where we heard from pay-TV providers, programmers, device and software manufacturers, consumers groups, and, most important, the American people. We listened.

Now, I am proposing rules that would end the set-top-box stranglehold. If adopted, consumers will no longer have to rent a set-top box, month after month. Instead, pay-TV providers will be required to provide apps – free of charge– that consumers can download to the device of their choosing to access all the programming and features they already paid for.

appletvIf you want to watch Comcast’s content through your Apple TV or Roku, you can. If you want to watch DirectTV’s offerings through your Xbox, you can. If you want to pipe Verizon’s service directly to your smart TV, you can. And if you want to watch your current pay-TV package on your current set-top box, you can do that, too. The choice is yours. No longer will you be forced to rent set-top boxes from your pay-TV provider.

One of the biggest benefits consumers will see is integrated search. The rules would require all pay-TV providers to enable the ability for consumers to search for pay-TV content alongside other sources of content. Just type in the name of a movie, and a list will come up with all the places it is scheduled for broadcast and where it can be streamed (like Amazon Prime or Hulu).

Integrated search also means expanded access to programming created by independent and diverse voices on the same platform as your pay-TV providers. Consumers will more easily find content even if it’s not on the pay-TV service to which they subscribe.

These rules will open the door for innovation, spurring new apps and devices, giving consumers even more choice and user control.

While our primary focus during this proceeding was to promote consumer choice and fulfill our congressional mandate, we recognize that protecting the legitimate copyright interests of content creators is also key to serving the public interest. To ensure that all copyright and licensing agreements will remain intact, the delivery of pay-TV programming will continue to be overseen by pay-TV providers from end-to-end. The proposed rules also maintain important protections regarding emergency alerting, accessibility and privacy.

Large pay-TV providers, which serve more than 90% of subscribers, will have two years to fully implement the new requirements.  Medium-sized providers will have an additional two years to comply, and the smallest providers would be exempt.

This is a golden era for watching television and video. By empowering consumers to access their content on their terms, it’s about to get cheaper — and even better.

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