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Cox Introducing $50 Option to Waive Data Caps: The ‘Freedom from Extortion Plan’

As Cox Communications continues to expand its arbitrary data cap program on its broadband customers, the company has announced a ‘cap relief’ option for customers willing to pay $50 more for the same service they enjoyed last year without a data cap.

Company insiders tell DSL Reports Cox will introduce a new $50 option to avoid the data caps and overlimit fees the company began imposing in 2015 starting in its Cleveland, Ohio service area.

On Wednesday, Cox is expected to introduce two add-on options to help avoid the bill shock likely if customers exceed 1TB of usage per month and face the $10 overlimit fee for each 50GB of data consumed:

  • $30 a month for 500GB of extra data;
  • $50 a month to avoid data caps altogether and get back unlimited service.

Cox customers in Cleveland were unimpressed with Cox’s data caps when they were introduced in 2015.

These fees are in addition to whatever Cox customers currently pay for broadband service.

“An overwhelming majority of data is consumed by a very small percentage of internet users,” a memo to employees documenting the changes reads. “The new choices are great options for the small percentage of heavy users who routinely use 1TB+ per month and prefer a flat monthly rate, rather than purchasing additional data blocks. In Cox markets with usage-based billing, the less than two percent of customers who exceed the amount of data included in their plan still have the option of paying $10 for each additional 50GB of data when they need it.”

Such claims raise the same questions Stop the Cap! has always asked since we began fighting data caps in 2008:

If data caps only impact <2% of customers, why impose them at all?

Is the actual revenue earned from overlimit fees worth the expense of introducing usage measurement tools, billing system changes, and the cost of customer dissatisfaction at the prospect of an unexpectedly high bill?

What technical reasons did Cox choose 1TB as its arbitrary usage allowance other than the fact Comcast and other operators chose this level first?

Time Warner Cable executives privately admitted in internal company documents obtained by the New York Attorney General’s office that internet traffic costs represent little more than “a rounding error” in expenses for cable companies. But for most consumers, $30-50 to buy a bigger data allowance is hardly that.

In short, the “solution” Cox has decided on this week comes in response to a problem the company itself created — imposing arbitrary, unwanted data caps and overlimit fees on a product that is already intensely profitable at the prices Cox has charged for years. This internet overcharging scheme is just another way to gouge captive customers that will likely have only one alternative — the phone company and its various flavors of DSL or a U-verse product that cannot compete on speed unless you are lucky enough to live in a fiber-to-the-home service area.

Frontier’s March to Oblivion: Bankruptcy In Its Future?

Frontier Communications is quickly becoming the Sears and Kmart of phone companies, on a slow march to bankruptcy or outright oblivion.

What started as a small independent phone company in Connecticut has grown through acquiring overpriced or decrepit landline cast-offs, mostly from Verizon, leaving itself with massive amounts of debt and infrastructure it is not willing to upgrade.

Despite rosy prognostications given to customers and shareholders, few are willing to take Frontier’s word that life is good with a company that still relies heavily on copper wire phone and DSL service.

Don’t take out word for it. Just watch the line of customers heading for the exits, canceling service and never looking back. As Frontier continues to lose customers fed up with its bad DSL service, rated even poorer than satellite-delivered broadband by Consumer Reports, its only chance to grow is to acquire more customers through more acquisitions. Unfortunately, after another disastrous transition for former Verizon customers in Florida, California, and Texas, Frontier’s bad reputation is likely to leave regulators and shareholders concerned about Frontier’s ability to manage yet more acquisitions in the future.

The Wall Street Journal reports Frontier bet on making it big with rural and suburban landlines, and lost.

Frontier’s mess has infuriated shareholders who invest in the stock mostly for its dividend payouts. The Norwalk, Conn. company recently announced it slashed its dividend, causing investors to flee the stock. Shares are down 69% so far this year. In a desperate bid to keep its Nasdaq listing, the company announced an unprecedented 1-for-15 reverse stock split just to prop up its share price.

Frontier’s slow hemorrhage of landline customers turned into a flash flood in the spring of 2016 after botching yet another “flash cutover” of customers acquired from Verizon. Verizon’s decision to sell off its landline networks in Florida, California, and Texas (mostly acquired from GTE by Verizon predecessor Bell Atlantic) was good news for Verizon, bad news for Frontier’s newest customers. Frontier hates to spend money to overhaul its copper-based facilities with fiber. It prefers to buy service areas from companies that undertook fiber upgrades on their own dime. Verizon had already upgraded large sections of those three states with its FiOS fiber to the home network. Frontier’s interest was primarily about acquiring that fiber, Frontier finance chief Perley McBride told the Wall Street Journal. Even McBride admitted Frontier failed to do a good job integrating those customers.

Consumer Reports rates Frontier DSL lower than one satellite broadband provider.

That should not be news to McBride or anyone else. Frontier has repeatedly failed every flash cutover it has attempted. The worst recent examples were Frontier’s botched 2010 transition in West Virginia, where the company inherited copper landlines neglected by Verizon for decades. Customers were infuriated by Frontier’s inability to maintain service and billing, and the company was investigated by state officials after many customers lost service, sometimes for weeks. In Connecticut, Frontier messed up a transition of its acquisition of AT&T’s U-verse system, having learned nothing from its mistakes in West Virginia or elsewhere. The company was forced to pay substantial service credits to residential and business customers that were offline for days. Thus it was no surprise yet another hurried transition would lead to disaster last spring. Regulators received thousands of complaints and a significant percentage of longtime Verizon customers left for good.

Frontier CEO Dan McCarthy appears to be even less credible with investors and customers than his predecessor Maggie Wilderotter, who may have retired with an understanding the long term future of Frontier looks pretty bleak. McCarthy has repeatedly put an optimistic face on Frontier’s increasingly poor performance.

John Jureller, Frontier’s last chief financial officer, routinely joined McCarthy in putting a brave face on Frontier’s stark numbers. He repeatedly tried to fuel optimism by telling investors the Verizon landline acquisition would make revenue trends “very positive.”

Jureller is no longer with Frontier. His replacement is the aforementioned McBride, who has a reputation as a “turnaround” expert, usually at the expense of employees. McBride has already helped oversee the permanent departure of at least 1,000 employees, laid off as part of what Frontier is calling “a customer-focused reorganization.” McCarthy prefers to tell Wall Street the layoffs are about reining in costs, despite the company’s profligate spending on acquisitions.

McBride told the Journal he doesn’t expect much revenue growth at Frontier anytime soon in California, Texas, and Florida. McCarthy’s grand turnaround plan isn’t working either. In fact, customer ratings of Frontier are falling about as fast as a rock thrown off a cliff.

There is little evidence Frontier will improve its dismal American Customer Satisfaction Index score in 2017. It finished dead last among internet service providers last year, falling 8% despite taking on new customers and allegedly upgrading others. Frontier’s overall grade was second to last across all categories in the telecom sector. Frontier managed to achieve bottom of the barrel scores despite broad upticks in customer satisfaction among other similar providers last year. Verizon FiOS achieved a 7% improvement to a best-ever customer satisfaction rating. In areas acquired by Frontier, as soon as the service was renamed Frontier FiOS, ratings plunged.

So has Frontier’s revenue, which continues a downward spiral. The company posted a loss of $373 million last year compared to $196 million in losses a year earlier. It has committed to spending $1 billion on its network this year, but customers uniformly report few substantial service improvements, and many wonder where the money is going.

Frontier is also upset that Verizon, in its zeal to make its landline properties in California, Texas, and Florida look as good as possible, stopped collection activity on overdue accounts just before the sale, saddling Frontier with thousands of deadbeat customers Verizon should have written off as uncollectable long ago, but never did.

Yesterday, the western New York office of the Better Business Bureau reported Frontier had achieved an “F” rating, amassed nearly 9,000 complaints, and out of 718 customer reviews, just six were positive:

We find a high volume and pattern of complaints exists concerning prior Verizon consumers who have not had a smooth transition to Frontier Communication since Frontier Communications took over various Verizon customers on April 1, 2016. Consumers have reported that services did not transition properly: many do not have services or are having spotty service with outages; many internet issues, from slow speeds to complete outages, consumers advise they are paying for certain levels of internet speeds but are not receiving those levels. Cable issues including missing networks, movie on demand concerns, issues with purchased subscriptions not carrying over, titles consumers have paid for (purchased licensed for) not being uploaded to their libraries and no solutions are being offered; and inability to access items like DVR boxes at the same time (multiple boxes in households not functioning); the Frontier App is not functioning for consumers; not fulfilling the rewards advertised with new service signups; charging consumers unauthorized third party charges on their telephone bill and not properly applying credits to consumer’s bills or consumers not being able to login to pay their bills.

When consumers call to receive assistance many report to BBB that they are hung up on or calls are disconnected and [are not followed up] by Frontier representatives. Consumers are transferred from representative to representative without receiving any assistance to their concerns many times resulting in a disconnection.

We have also identified a pattern in [Frontier’s] responses to complaints stating:

  • Per Tariff, in no event shall Frontier be liable in tort, contract, or otherwise for errors, omissions, interruptions, or delays to any person for personal injury, property damage, death, or economic losses. Frontier shall in no event exceed an amount equivalent to the proportionate charge to the customer for the period of service during which such mistake, omission, interruption, delay, error or defect occurs. Frontier will apply a credit based on the customer’s daily service rate.
  • We trust that this information will assist you in closing this complaint.  We regret any inconvenience that ‘consumer name’ may have experienced as a result of the above matter.

The business did not respond to the pattern of complaint correspondence BBB sent.

“Cable companies are beating the pants off Frontier,” Jonathan Chaplin, an analyst for New Street Research, told the newspaper. Heavy targeted marketing of Frontier’s customers, especially those served by Charter Communications in states like New York, Texas, Florida, and California are only accelerating Frontier’s customer cancellations.

Frontier’s cost consciousness and deferred upgrades as a result of its financial condition are only allowing cable companies to steal away more customers than ever, as the value for money gap continues to widen. While Frontier has failed to significantly upgrade many of their DSL customers still stuck with less than 10Mbps service, Charter Communications is gradually boosting their entry-level broadband speed to 100Mbps across its footprint and selling it at an introductory price of $44.99 a month.

Even Verizon sees the writing on the wall for the revenue prospects of landline service, especially in areas where it has not undertaken FiOS upgrades. Verizon DSL is still very common across its northeastern footprint, particularly in states like New York, Pennsylvania, Virginia, and Maryland. Upstate New York is almost entirely DSL territory for Verizon, except for a few suburbs in Buffalo, Syracuse, and the state’s Capitol region. Verizon soured on upgrading its copper facilities in these areas years ago, and has contemplated selling them or moving customers to wireless service instead.

Verizon spokesman Bob Varettoni admitted Verizon’s strategy was to “sharpen our strategic focus on wireless,” which makes Verizon considerably more money than its wireline networks.

“If Verizon’s selling assets, they’re selling them for a reason,” Chaplin said. “Verizon had taken those markets [in California, Florida, and Texas] pretty close to saturation before they sold. That’s the point at which they punted the assets to Frontier.”

Frontier cannot continue to do business this way and expect to survive. Investors have circled 2020 on their calendar — the year $2.4 billion in debt payments are due. Another $2.5 billion is due in 2021 and $2.6 billion in 2022, not including interest charges and other obligations. Refinancing is expected to get tougher at struggling companies and interest rates are rising. The pattern is a familiar one in the telecom industry, where acquirers like FairPoint Communications and Hawaiian Telcom spent heavily on acquiring landline cast-offs from Verizon. Customer departures, a financial inability to upgrade facilities quickly enough, and heavy debts forced both companies into bankruptcy, precisely where Frontier Communications will end up if it does not change its management and business practices.

The Truth About Corporate-Backed Net Neutrality Opponents

It’s never too late to start your own policy institute or astroturf-phony consumer group. In reviewing some of the comments against Net Neutrality, I encountered a particularly odious set of organizations and individuals associated with a number of “institutes,” “centers,” and “Americans for This for That.” Most are funded by the Koch Brothers or quietly work with the American Legislative Exchange Council (ALEC) or other conservative and corporate donors that back “consumer-sounding” groups that literally work against the best interests of consumers.

The “groups” touting their unified opposition to Net Neutrality as “Over 65 Groups Against Obama FCC Internet Regulations,” is a major stretch, considering some are run out of UPS Stores or post office boxes, others haven’t updated their websites in years, have no web presence at all, or don’t discuss Net Neutrality (or any internet public policy) on their websites. Many are “asterisked” to reflect the fact the letter signer is expressing their own personal views and not necessarily those of the groups they are affiliated with.

Several signers are with groups operating under different names but share the same parent group or telephone number. Ironically, these birds of a feather often flock together and many of the same people also signed joint letters on a range of disparate public policy campaigns. They always take the side of corporate interests, usually coal, chemical companies, tobacco, oil and gas, and big cable and phone companies.

FCC Chairman Ajit Pai announces his opposition to Net Neutrality at a FreedomWorks and Small Business & Entrepreneur Council-sponsored event at the Newseum in Washington, D.C. Both organizations signed the letter opposing Net Neutrality.

Their joint letter opposing Net Neutrality relies on claims harvested from industry-funded and backed sources and dark money players including Hal Singer, Will Rinehart, and George Ford. Let’s take a closer look at who is signing:

  • Grover G. Norquist, Americans for Tax Reform: Everyone knows Grover. He’s been backed by deep pocketed conservative donors for years, usually fighting to keep taxes low for his friends. But now for some reason he is the first signer of this letter to the FCC opposing Net Neutrality.
  • Leigh Hixon, Alabama Policy Institute: A member of the Koch Bros./ALEC-backed State Policy Network.
  • Phil Kerpen, American Commitment: Kerpen has been affiliated with a lot of different groups. We tangled with him before and when he was working for Americans for Prosperity. Koch money.
  • Daniel Schneider, American Conservative Union: Lobbying organization.
  • Steve Pociask, American Consumer Institute: The telecom industry’s 100% fake “consumer group” that astroturfs industry talking points.
  • Center for Citizen Research: Just another name for the phony American Consumer Institute.
  • Lisa Nelson, American Legislative Exchange Council: Corporate funded group that writes its own state legislative bills and finds Republicans willing to call them their own.
  • Christine Harbin, Americans for Prosperity: Prosperity for the Koch Bros. (who founded this group) anyway.
  • Robert Alt, The Buckeye Institute: Koch money and a history of problems with accuracy.
  • Jeffrey Mazzella, Center for Individual Freedom: Hides its donor list, but there are ties to Big Tobacco and Karl Rove.
  • Grant Maloy, Center Right Coalition of Orlando: So small, it doesn’t even have a website.
  • Chuck Muth, Citizen Outreach: A Nevada blogger and Republican operative. Their bizarre issues agenda suggests possible funding. It includes “free market sugar, ‘contact lens’, and patent trolls.” Nothing about Net Neutrality.
  • Michael J. Bowen, Coalition for a Strong America: Funded entirely by the Koch Bros.’ Wisconsin Club for Growth, this group operates out of a UPS Store mailbox in Beaver Dam, Wisc.
  • Matthew Kandrach, Consumer Action for a Strong Economy: “The only thing making it possible to call his organization an ‘organization’ is that, along with its vice president, they make an organization of two people.” Amateurish combination of bad links and no spell-checking, a-la their Issues list which includes “Banking & Investmets” (sic).
  • Col. Francis X. De Luca USMR (Ret), Civitas Institute: Koch money.
  • Katie McAuliffe, Digital Liberty: “Digital Liberty is a project of Americans for Tax Reform,” which means it’s a Grover operation pretending to be more than what it actually is.
  • Hance Haney, Discovery Institute: Donor list is kept top secret to “avoid harassment” but this group usually obsesses about promoting “intelligent design” but also loves to lobby on telecom issues, which means industry money is extremely likely.
  • Adam Brandon, FreedomWorks Foundation: Its immediate predecessor was founded by the Koch Bros. Washington Post: “wealthy donors [sway] the direction of FreedomWorks and other political groups, which increasingly rely on unlimited contributions from corporations and financiers for their financial livelihood.” A handful of those donors are said to be responsible for the bulk of FreedomWorks’ annual budget.
  • Annette Meeks, Freedom Foundation of Minnesota: Conservative group that got the bulk of its funding from DonorsTrust, “the dark-money ATM of the conservative movement.”
  • Richard Watson, Florida Center/Right Coalition: See “Center Right Coalition of Orlando.”
  • David Barnes, Generation Opportunity: Koch money.
  • Ray Chadwick, Granite State Taxpayers: Lists National Taxpayers Union, Americans for Tax Reform, New Hampshire Tea Party Coalition, and Americans for Prosperity as “affiliates,” but also calls itself “non-partisan.”
  • Joseph Bast, The Heartland Institute: Close ties to ALEC and now hides its donor list.
  • Mike Krause, Local Colorado Project: No website at all, but we believe it is affiliated with the “Independence Institute,” a group closely tied to ALEC.
  • Andrew Langer, Institute for Liberty: Started as a one-man operation with a $25k budget until the corporate donors moved in. Now the group refuses to disclose its donor list, but SourceWatch discovered it shared a phone number with the National Taxpayers Union.
  • Tom Giovanetti, Institute for Policy Innovation: Ties to Koch Bros. and ALEC.
  • Seton Motley, Less Government: Close ties to ALEC and part of the Heartland Institute’s plethora of groups.
  • Daniel Garza, The LIBRE Initiative: Astroturf en español. A Koch operation trying to pass itself off as a Latino group.
  • Bartlett Cleland, Madery Bridge: It’s a bit hilarious to find a corporate lobbying firm listed as one of the 65 “groups” against Net Neutrality. But at least it’s a case of being honest. Like most of the others, there is a financial incentive to take that position.
  • Dee Hodges, Maryland Taxpayers Association, Inc. – Website hasn’t been updated for over a year. Nothing about Net Neutrality. Zombie group?
  • Mike Wendy, MediaFreedom: We exposed Mike Wendy’s close ties to the telecom industry back in 2010, and we notice his and several other names listed among the 65 “groups” here were part of the ridiculous Progress & Freedom Foundation (now defunct), which was the final destination of the generously filled money train from some of the biggest telecom companies in the country. MediaFreedom is comprised primarily of Wendy’s blog attacking media reform groups like Free Press. His bio shows an endless journey working for a number of groups quietly funded by the cable and telephone companies.
  • Henry Kriegel, Montanans for Tax Reform: Their website has not been updated in years and the rest appears to be little more than a post office box in Bozeman.
  • Brent Mead, Montana Policy Institute: Ties to Koch Bros. and ALEC.
  • Scott Cleland, NetCompetition: The Payola Pundit. Mr. Cleland doesn’t like to talk about his close ties to ALEC, where he served as co-chair of the Telecommunications and Information Technology Task Force. Members of that committee include Comcast and AT&T.
  • Lorenzo Montanari, Property Rights Alliance: Really Americans for Tax Reform under yet another name.
  • Don Racheter, Ph.D., Public Interest Institute: Five people on a college campus in Iowa. Ties to ALEC. Claims to be non-partisan but attacked “liberals” all over its website.
  • Mike Stenhouse, Rhode Island Center for Freedom & Prosperity: You guessed it. Ties with ALEC and Franklin Center, which funds reporters of all things.
  • Paul Gessing, Rio Grande Foundation: Ties to Koch Bros., ALEC, and Franklin Center.
  • Tom Struble, R Street Institute: Broken record — ties to Koch Bros. and Franklin Center.
  • Karen Kerrigan, Small Business & Entrepreneurship Council: Has unnamed “corporate partners.” Ironic opponent of Net Neutrality, considering it is supposed to represent the interests of small startups, entrepreneurs, and small businesses — exactly the types that would be discriminated against by giant ISPs unconcerned about Net Neutrality.
  • James L. Martin, 60 Plus Association: The corporate astroturf version of AARP funded by the Koch Bros. Mr. Martin is a prolific letter-signer when corporate interests are involved. Check out this letter on another issue and notice how many of the groups signing that letter just happen to be involved in this Net Neutrality opposition campaign.
  • David Williams, Taxpayers Protection Alliance: The Taxpayers Protection Alliance (TPA) is part of the network of front groups funded by the Koch Bros. and their political network.
  • Berin Szoka, TechFreedom: “Sucking on the teat of the phone and cable companies” who donate tens of thousands of dollars to TechFreedom to act as their sock puppet.
  • Gerrye Johnston, Women for Democracy in America, Inc.: Very, very odd organization (it’s now MEN and Women for Democracy by the way.) Internet public policy is so far afield from their mission statement, you’d need to book a flight to find it.
  • Mary Adams, Maine Center-Right Coalition: See Center Right Coalition of Orlando. We think this group is normally concerned about illegal immigration, but there does not seem to be a formal coordinated web presence.

Stop the Cap!’s Net Neutrality Comments to FCC

July 17, 2017

Marlene H. Dortch, Secretary
Federal Communications Commission
Office of the Secretary
445 12th Street, SW
Washington, DC 20554

Dear Ms. Dortch,

Stop the Cap! is writing to express our opposition to any modification now under consideration of the 2015 Open Internet Order.

Since 2008, our all-volunteer consumer organization has been fighting against data caps, usage-based billing and for Net Neutrality and better broadband service for consumers and businesses in urban and rural areas across the country.

Providing internet access has become a bigger success story for the providers that earn billions selling the service than it has been for many consumers enduring substandard service at skyrocketing prices.

It is unfortunate that while some have praised Clinton era deregulatory principles governing broadband, they may have forgotten those policies were also supposed to promote true broadband competition, something sorely lacking for many consumers.

As a recent Deloitte study[1] revealed, “only 38 percent of homes have a choice of two providers offering speeds of at least 25Mbps. In rural communities, only 61 percent of people have access to 25Mbps wireline broadband, and when they do, they can pay as much as a 3x premium over suburban customers.”

In upstate New York, most residents have just one significant provider capable of meeting the FCC’s 25Mbps broadband standard – Charter Communications. In the absence of competition, many customers are complaining their cable bills are rising.[2]

Now providers are lobbying to weaken, repeal, or effectively undermine the 2015 Open Internet Order, and we oppose that.

We have heard criticisms that the 2015 Order’s reliance on Title II means it is automatically outdated because it depends on enforcement powers developed in the 1930s for telephone service. Notwithstanding the fact many principles of modern law are based on an even older document – the Bill of Rights, the courts have already informed the FCC that the alternative mechanisms of enforcement authority that some seem motivated to return to are inadequate.

In a 2-1 decision in 2014, the U.S. Court of Appeals for the D.C. circuit ruled:

“Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order.”[3]

In fact, the only important element of the pre-2015 Open Internet rules that survived that court challenge was a disclosure requirement that insisted providers tell subscribers when their internet service is being throttled or selected websites are intentionally discriminated against.

Unfortunately, mandatory disclosure alone does not incent providers to cease those practices in large sections of the country where consumers have no suitable alternative providers to choose from.

Reclassifying broadband companies as telecommunications services did not and has not required the FCC to engage in rate regulation or other heavy-handed oversight. It did send a clear message to companies about what boundaries were appropriate, and we’ve avoided paid prioritization and other anti-consumer practices that were clearly under consideration at some of the nation’s top internet service providers.

In fact, the evidence the 2015 Open Internet Order is working can be found where providers are attempting to circumvent its objectives. One way still permitted to prioritize or favor selected traffic is zero rating it so use of preferred partner websites does not count against your data allowance.[4] Other providers intentionally throttle some video traffic, offering not to include that traffic in your data allowance or cap.[5] Still others are placing general data caps or allowances on their internet services, while exempting their own content from those caps.[6]

Our organization is especially sensitive to these issues because our members are already paying high internet bills with no evidence of any rate reductions for usage-capped internet service. In fact, many customers pay essentially the same price whether their provider caps their connection or not. It seems unlikely consumers will be the winners in any change of Open Internet policies. Claims that usage caps or paid prioritization policies benefit consumers with lower prices or better service are illusory. One thing is real: the impact of throttled or degraded video content which can be a major deterrent for consumers contemplating disconnecting cable television and relying on cheaper internet-delivered video instead.

Arguments that broadband investment has somehow been harmed as a result of the 2015 Order are suspect, if only because much of this research is done at the behest of the telecom industry who helped underwrite the expense of that research. Remarkably, similar claims have not been made by executives of the companies involved in their reports to investors. Those companies, mostly publicly-traded, have a legal obligation to report materially adverse events to their shareholders, yet there is no evidence the 2015 Order has created a significant or harmful drag on investment.

In a barely regulated broadband duopoly, where no new significant competition is likely to emerge in the next five years (and beyond), FCC oversight and enforcement is often the only thing protecting consumers from the abuses inherent in that non-competitive market. Preserving the existing Open Internet rules without modification is entirely appropriate and warranted, and has not created any significant burdens on providers that continue to make substantial profits selling broadband service to consumers.

Transferring authority to an overburdened Federal Trade Commission, not well versed on telecom issues and with a proven record of taking a substantial amount of time before issuing rulings on its cases, would be completely inappropriate and anti-consumer.

Therefore, Stop the Cap!, on behalf of our members, urges the FCC to retain the 2015 Open Internet Order as-is, leaving intact the Title II enforcement foundation.

Respectfully yours,

Phillip M. Dampier
Founder and Director

Footnotes:

[1] https://www2.deloitte.com/us/en/pages/consulting/articles/communications-infrastructure-upgrade-deep-fiber-imperative.html#1

[2] “Thousands of Time Warner Cable Video Customers Flee Spectrum’s Higher Prices.” (http://bit.ly/2tjHJ8f); “Lexington’s Anger at Spectrum Cable Keeps Rising. What Can We Do?” (http://www.kentucky.com/news/local/news-columns-blogs/tom-eblen/article160754069.html)

[3] http://www.cadc.uscourts.gov/internet/opinions.nsf/3AF8B4D938CDEEA685257C6000532062/$file/11-1355-1474943.pdf

[4] https://cdn3.vox-cdn.com/uploads/chorus_asset/file/7575775/Letter_to_R._Quinn_12.1.16.0.pdf

[5] https://www.t-mobile.com/offer/binge-on-streaming-video.html

[6] http://www.chicagotribune.com/bluesky/technology/ct-data-cap-policies-20151214-story.html

Kansas’ Double-Down on Trickle-Down, Deregulation Flops as Residents Leave the State

We will mail it to you on floppy disks because your internet connection is too slow to download it.

While FCC Chairman Ajit Pai and Sen. Ron Johnson (R-Wisc.) decry government regulation as responsible for destroying capital and incentives to invest, the state of Kansas this week ended its all-out experiment with deregulation and trickle-down economics on steroids, with a Republican-dominated state legislature calling it a giant flop.

In charge of the Grand Experiment in Trickle-Down, Doubled-Down is Gov. Sam Brownback, who has systematically hobbled the state’s social spending and investment programs since becoming governor in 2011. He adopted his ‘vision thing’ from Reaganomics proponent Art Laffer, who apparently forgot the Reagan Administration’s penchant for all things deregulation was not all sweetness and light and had to be tempered by President George H.W. Bush after he was elected in 1988.

But what if history could have a second chance? What if a state kept its pledge of no new taxes and slashed regulation and oversight to the bone. Would it result in a free market paradise where government got out of the way for the public good? Would lower taxes result in more tax revenue as Kansas businesses boomed? Would infrastructure take care of itself?

To find out, Brownback slashed the state’s income tax, eliminated the top income tax bracket and delivered a disproportionate share of the tax cut benefits to the economic motivators (also known as Kansas’ richest families) who would supposedly use the surplus to invest in businesses and jobs. At the urging of the powerful small business lobby, backed by the Koch Brothers and their octopus of astroturf anti-tax groups demanding reform, Brownback zeroed out taxes on “pass-thru” income, which effectively allowed anyone running a LLC or small business to evade taxes.

There were moderate Republicans in Kansas that warned about the prospects of Brownback’s questionable assertion that low taxes and low funding of the state government would bring a new era of growth and prosperity. But dark money and Koch’s political machine saw to it those politicians were “de-elected” and replaced with Brownback’s army of minions.

In addition to creating budgetary ruin with tax revenue cratering, essential digital infrastructure crashed and burned. Deregulation and a mediocre state broadband expansion effort didn’t make internet service in Kansas better. In fact it got worse, along with the finger-pointing over who was responsible.

Last fall, Kansas Sen. Pat Roberts brought then FCC commissioner Ajit Pai to the community of Allen to meet with executives working for a dozen small telephone companies who were having trouble upgrading their networks across the great expanse of rural Kansas.

Brownback

Roberts wasn’t ready to claim federal government regulation was responsible for the mess. But Pai’s reflexive claims that deregulation incentivizes for-profit companies to invest in better broadband simply wasn’t working in Kansas either. The only solution for The Free Marketeers in rural Kansas turns out to be handing out government money to expand rural broadband, except in Kansas, there was very little money to be had after Brownback took an ax to the state budget.

The Wichita Eagle unintentionally drew a contrast between the thinking of providers that want to blame everyone else for the problem and plain reality for Brian Thomas, who works for the Blue Valley Tele-Communications Company.

“It really all comes down to a quality of life perspective,” Thomas told the newspaper. “I think we all live that. That’s our jobs, to provide that.”

The newspaper noted that without government money, the only way private companies could afford to pay to replace thousands of miles of ancient copper phone wiring in favor of fiber would be to make internet service so expensive that only businesses and the ultra-wealthy would be able to afford it.

So while Brownback’s great social experiment carried on, internet expansion and upgrades stalled in many communities across Kansas. In Allen, where Pai met to extol the virtues of private investment, the town librarian at Allen’s public library got some help from the Manhattan (Kansas) library system to install an inexpensive Wi-Fi hotspot that, once switched on, almost immediately filled its parking lot day and night with what the newspaper called “internet-starved townspeople.”

Allen County, Kan.

“There are several people who will watch movies outside” after hours, town librarian Nikki Plankington said. “The kids use it for the Pokemon Go thing. I don’t know what that’s all about, but the kids use it.”

While the public library did its part, Kansas’ for-profit private internet providers are going in a different direction – complaining a lot and asking for handouts with no strings attached.

The Eagle reported Pai’s meeting with rural telecom executives turned into a ‘whine and cheese’ reception. The phone companies had a laundry list of dislikes they wanted the deregulation-minded Pai to fix for them while they pondered upgrades:

  • The Universal Service Fund/Connect America Fund, financed by ratepayers through surcharges on their phone bills, was “obsolete” and didn’t provide enough money.
  • The federal government didn’t allow ISPs to chase after the deepest pockets to pay for their upgrades — popular online websites like Netflix and Amazon.com.
  • The FCC’s definition of broadband as 25Mbps ignored the fact Kansas phone companies wanted to deliver considerably lower speed service, claiming customers don’t want more than 10Mbps.

If the government could be lobbied to lower standards, eliminate regulation, and deliver or at least compel a cash welfare infusion from content providers and ratepayers, there was no need to ask rich Kansans to stop counting their money long enough to invest some of it in better broadband.

Catherine Moyer from Pioneer Communications claimed it was unfair to ask companies and customers to pay for upgrades when those internet titans like Netflix, Amazon, and Google make countless billions in profits using Pioneer’s network with absolutely no compensation for doing so.

“My customers and the customers here in Allen and all the customers in Wichita for that matter that have voice service pay a proportion of their bill,” she said. But, “there’s a whole group of people and companies utilizing the network that don’t pay into the fund in any meaningful way … so they haven’t helped build out this network.”

When the newspaper suggested she was effectively asking for higher taxes and paid lanes for internet content companies like Netflix that Moyer claimed was consuming 35% of Pioneer’s available bandwidth, she didn’t seem to have any objections.

“It’s not necessarily what people want to see, but in the same light, if you want these networks and you want these speeds, you have to somehow fund that. And who should fund it?” Moyer asked.

The next issue that doesn’t work for Kansas telecom companies is the FCC’s standard that broadband service be at least 25Mbps, and if a phone or cable company wants public dollars to build out their networks, they better choose a technology capable of delivering that kind of speed.

“One thing that kind of concerns me a little bit is having the FCC dictate, or Washington dictate, the level of speed I’m required to have in order to maintain a certain level of funding,” said Archie Macias of Wheat State Telephone, which serves rural communities in Butler, Cowley, Chase and Lyon counties. Macias is upset because his system uses fiber optics that can easily handle 25Mbps, but his customers only want to pay for 10Mbps.

“I’m not going to build a network that’s like having 500 channels on a TV that you’re going to watch 12 or 13,” he told the newspaper.

Wheat State currently offers four broadband plans in areas where fiber service is available:

  • $39.99 Pro (10/2Mbps)
  • $49.99 Multi-Pro (15/3Mbps)
  • $69.99 Power-Pro (25/5Mbps)
  • $79.99 Mega-Pro (50/20Mbps)
  • $10 discount when bundled with other services

What customers choose for broadband service is often an issue of pricing, not speed.

In more populated parts of Kansas, customers are still trying to cope with DSL service that has not seen significant upgrades for a decade. Since Brownback isn’t doing much to help, and tax cuts and deregulation have failed to inspire the kind of robust broadband expansion “light touch” regulation is supposed to provoke, a lot of Kansans are leaving the state for good.

An abandoned farm.

One of those threatening to flee is Christianne Parks, who lives in Allen and endures not-even-close-to-being-broadband.

“Eventually, I probably would get bored out of my mind and leave,” 19-year old Parks told the newspaper when asked what she would do if her broadband situation did not change.

Last fall, the newspaper pinpointed some of the real problems afflicting the state’s economy and missing from the list were taxes and regulation. Deregulation-inspired consolidation in the state’s critical agribusiness sector decimated rural farms and the local economies that depended on them. When the farmers leave, Main Street businesses soon follow. The 1970s and 1980s was the era of the Rust Belt in the northeast and midwest. Now parts of the midwest including Kansas risk being labeled a Wheat Belt of economic deterioration.

Since 2000, 81 of Kansas’ 105 counties have lost population, according to the U.S. Census Bureau. The consensus is that trend will get worse, according to the newspaper – especially among young people – until and unless someone can find a way to get better internet service to the outlands. Brownback’s hands-off policies favoring providers are in contrast to New York’s more aggressive rural broadband funding program that seeks to achieve near 100% penetration of broadband service in the state over the next few years. New York regulators also compel companies doing business in the state to share some of their wealth from mergers and acquisitions, most recently requiring Charter Communications and Altice to expand their broadband networks to improve service and reach customers they don’t serve today.

The free-market-solves-everything concept celebrated by Pai and the Koch Brothers has now been tested and failed in Kansas. Among the few bright spots for broadband in Kansas are civic-minded telephone or cable providers that look beyond return on investment formulas in their community, and more commonly community-owned broadband networks or co-ops with a motive beyond profit — delivering decent broadband to maintain, sustain, and grow their local economies.

Recovery from the “free market miracle” train wreck started last fall, when a wave of moderate Democrats and Republicans were elected with a pledge to do everything possible to kill Brownback’s vision of paradise. This week, the Republican-dominated legislature had enough of living in Brownback’s PretendLand and overrode his veto of their plan to raise income taxes across the board and kill his legalized tax evasion scheme for business owners to bring in an additional $1.2 billion over the next two years to invest in Kansas.

The improved broadband that could result may give something for the state’s wealthiest citizens to do in their free time besides count their money.

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