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Revolving Door: Head of N.J. Consumer Agency Resigns to Take Comcast Job

Lee

Steve Lee, the director of the New Jersey Division of Consumer Affairs is resigning to take a job with the nation’s largest cable company.

Lee, whose resignation becomes effective Sept. 5, will become Comcast’s deputy general counsel, according to a statement released Tuesday by the state Attorney General’s Office.

Lee has been in charge of the consumer protection agency since 2014, but has spent the last several months speaking with Comcast about accepting a position likely to pay substantially more than he earns in his current role.

Lee’s three years as director has not seen any significant actions against Comcast initiated by his office. During Lee’s tenure, the Division has primarily focused on an aggressive prescription monitoring program to combat opioid abuse, sexual misconduct by doctors in exam rooms, and streamlining state licensing procedures.

The deputy director of the division, Sharon Joyce, will become acting director effective Sept. 6. She has been with the Division of Law since 1979 and has served as the acting director on three prior occasions.

Altice Returns: Patrick Drahi Wants Charter/Spectrum to Be His, Preparing an Offer

Patrick Drahi, Altice, and his friends at Goldman Sachs are depicted as working together to make Altice’s acquisition dreams come true.

Patrick Drahi rarely gives up on his dreams. His latest is to be America’s biggest cable magnate, and there are signs he is laying the groundwork to make that dream come true.

CNBC and some French media outlets report Drahi’s Altice NV and Altice USA are assembling their European and North American financiers, attorneys, and dealmakers to potentially make an offer to acquire Charter Communications. If successful, Altice would leapfrog to the largest cable operator in the United States after combining its Cablevision and Suddenlink systems with Charter’s own legacy systems and those it acquired from Time Warner Cable and Bright House Networks.

Any succcessful deal would likely require an offer of $500 a share for Charter stock, which would make the company worth about $200 billion. Because Altice is dwarfed by Charter, it is unlikely Drahi will be able to raise enough cash on his own to make a deal, and Altice is already mired in debt from its ongoing aggressive acquisitions. Drahi’s biggest competitor for Charter is expected to be Japan’s SoftBank, which has shown an interest in acquiring the cable operator to combine with its wireless carrier Sprint.

Altice isn’t likely to encounter the regulatory hurdles that have caused other colossal cable deals like Comcast’s attempt to buy Time Warner Cable to collapse over regulator opposition.  Drahi’s involvement in U.S. cable has been limited to acquisitions of two smaller players – Cablevision and Suddenlink.

Drahi’s strongest arguments to sell investors on the deal are likely to surround his well-known obsession with draconian cost-cutting at his acquired companies. Drahi would certainly offer investors billions in deal synergies and savings, accomplished through dramatic layoffs, scrutinizing costs right down to replacement coffee makers for the break room and copy paper for the office, and sweeping cutbacks on employee and vendor perks. Drahi has also taken a strong stand against Hollywood studios and cable programmers that seek double-digit rate increases for cable programming. In Europe, Drahi is known for terminating costly contracts with programmers and launching alternative channels Altice owns and operates to replace them.

Drahi is also likely to sell regulators on his current plans to transform cable in the United States away from coaxial cable and towards fiber optics straight through to the home. Drahi has already offered to wire all of France with fiber optics and is presently embarking on a fiber upgrade for his Cablevision systems in New Jersey, New York, and Connecticut. But Drahi’s ambitious fiber plans have been met with suspicion in France where some believe Drahi is all talk and no spending.

He has promised the Macron government he will spend $17.6 billion on building an Altice-owned fiber broadband network in France by 2025 without any taxpayer subsidies. While that sounds laudable, it would mean Altice’s SFR would pull out of the government’s national fiber strategy that depends on different telecom companies building out fiber in different regions of the country.

Drahi is threatening to become a spoiler because before he acquired SFR, the former management cut a deal with Orange – France’s largest telecom company, to jointly build a fiber network for 14 million French households in smaller towns and suburbs. Orange would build and own 80% of the territory, SFR 20%. But because SFR needs access to that fiber network for its own wired and wireless broadband and television services, it will have to pay rental fees to Orange to use the network in most of the territory. Drahi instead wants a 50-50 ownership split to cut costs and Orange has said no. Altice’s plans for its own alternative fiber network would allow it to bypass the Orange-owned network and deliver traffic over its own fiber system. That could mean parts of less-populated France will have two fiber networks to choose from instead of just one.

Drahi

It is an expensive gamble, but investors seem largely unfazed so far, perhaps suspecting Drahi has no intention of actually following through on spending billions on a potentially redundant fiber network in the suburbs and farm country, preferring to believe the threat of doing so will drive Orange back to the negotiating table.

Some American analysts are uncertain whether Drahi can pull off an acquisition deal that would combine Charter, a company many times larger than Altice, with Altice’s much smaller earlier cable acquisitions. Some also suspect he won’t find enough money to attract interest from Charter’s biggest shareholder — John Malone’s Liberty Media and Charter’s current CEO Thomas Rutledge.

But French media has little doubt Drahi can pull it off, especially when he is motivated.

“Patrick Drahi, founder of Altice, has set his limits: he has none,” notes Le Figaro, adding Drahi is a classic industry spoiler, completely happy to blow up cable’s comfortable status quo, even when at risk of attracting the wrath of his competitors.

CNBC reports Altice is preparing a serious offer to acquire Charter Communications. (5:54)

Telcos Intentionally Cut Rural Broadband Investments Hoping for Taxpayer Subsidies

AT&T: Using taxpayer and ratepayer dollars to subsidize 4G LTE upgrades for its customers.

With taxpayer subsidies on the horizon, phone companies cut back investing their own money on rural broadband expansion hoping taxpayers would cover funding themselves.

That is the conclusion of Dave Burstein, a long-standing and well-respected industry observer and publisher of Net Policy News. Burstein is concerned the unintentional consequence of Obama and Trump Administration rural broadband funding programs has been fewer homes connected than what some carriers would have managed on their own without government subsidies.

“Since 2009, carrier investment in broadband in rural areas has gone down drastically,” Burstein wrote.

As a result, FCC Chairman Ajit Pai announced plans to spend $4.53 billion from a public-financed Mobility Fund over the next decade to advance 4G LTE service, primarily in rural areas that would not be served in the absence of government support. Burstein suspects much of that money could end up being unnecessarily wasted.

“Under current plans, most of the money is likely to go where telcos would build [4G] without a subsidy, [or will be used to] buy obsolete technology, or give the telcos two or three times what the job should cost,” Burstein wrote. “Any spending on wireless except where towers or backhaul is unavailable should be assumed wasteful until proven otherwise.  Realistic costs need to be developed and subsidies allocated on that basis.”

AT&T’s rural fixed wireless expansion program, funded substantially by U.S. taxpayers and ratepayers, is a case in point. AT&T is receiving almost $428 million a year in public funds to extend wireless access to 1.1 million customers in 18 states, the FCC says. Much of that investment is claimed to be spent retrofitting and upgrading existing cell towers to support 4G LTE service. But AT&T claims 98% of its customers already have access to 4G LTE service — more than any other carrier in the country, so AT&T is actually spending the money to bolster its existing 4G LTE network, something more likely to benefit its cell customers, not a few thousand fixed wireless customers.

(Source: AT&T)

“An AT&T exec in California said communities didn’t need to worry about the impact of the CAF-funded project, since it was almost all going to be on existing towers,” Burstein wrote, allaying fears among members of the public that money would be spent on lots of new cell towers. “I don’t know what loophole AT&T is using to get the money, but it’s a pretty safe guess they would have upgraded most of them without the government paying. 4G service now reaches all but 3-5 million of the 110-126 million U.S. households. Probably half [of the less than five million] targeted would soon be served without a subsidy – if the telcos knew no subsidy was likely. Before spending a penny on subsidies, the FCC needs to do a thorough assessment of what would be built without government money.”

Burstein

Wireless executives were delighted when the U.S. government in 2009 committed to spending $7 billion in taxpayer funds on broadband stimulus funding as part of a full-scale economic stimulus program to combat the Great Recession.

“Both George Bush in 2004 and Barack Obama in 2008 had promised to bring affordable broadband to all Americans,” Burstein noted. “The clamor to reach these last few million was so loud, telcos became confident the government would pay for it if they just stopped their own investment. They aren’t stupid and refused to spend their own money. Before 2009 and the expected huge stimulus program, most telcos expanded their networks each year, based on available capital funds.”

Burstein believes some phone companies became better experts at milking government money to pay for needed network upgrades than frugally spending public funds on rural broadband expansion. As a result, after eight years and massive spending, Burstein notes fewer than two million of the “unserved” six million homes were reached by wireline or wireless broadband service when the funding ran out.

Under Chairman Pai’s latest round of rural broadband funding, Burstein believes much of this new money is also at risk of being wasted.

“[Pai] needs to dig into the details of what he’s proposing,” Burstein wrote. “Nearly all cells with decent backhaul will be upgraded to 4G; Verizon and AT&T have already reached 98% of homes. Government money should go to building towers and backhaul where that’s missing, not filling in network holes the carriers would likely cover.”

Rural advocacy groups have been frustrated for years watching rural telephone companies deliver piecemeal upgrades and service expansion, often to only a few hundred customers at any one time. When they learn how much was spent to extend broadband service to a relatively few number of customers, they are confused because companies often spend much less when they budget and pay for projects on their own without government subsidies.

Gov. Andrew Cuomo announcing rural broadband initiatives in New York.

Burstein is currently suspicious about the $200 million approved in subsidy funding to extend rural broadband in parts of upstate New York. Burstein notes Pai is factually wrong about his claim that the hundreds of millions set aside for New York would be spent on “unserved areas of rural New York.”

“Most of that money will not go to unserved areas,” Burstein reports. “Some grants are going to politically connected groups. I’ve read the rules and the approved proposals. The amounts look excessive based on the limited public details.”

Telephone companies have become skilled negotiators when it comes to wiring their rural service areas. Most want more money than the government has previously been willing to offer to help them meet their Return On Investment expectations. Burstein noted that under normal circumstances, a government program offering a 25% subsidy to extend rural broadband into areas considered unprofitable to serve would be enough in most cases to get approval from rural phone companies like CenturyLink and Frontier Communications. But many phone companies, including AT&T, Verizon, and Qwest (now a part of CenturyLink) did not even file applications to participate in early funding rounds. Qwest’s lack of interest was especially problematic, because the former Baby Bell served the Pacific Northwest and Rocky Mountain regions where some of the worst broadband accessibility problems persisted.

Burstein claims Jonathan Adelstein, then Rural Utilities Administrator, had to double his subsidy offer to get Qwest’s attention with a 50% subsidy.

Rural backhaul connectivity is often provided by fiber optic cabling.

“Qwest refused, demanding 75%,” Burstein noted. “That was probably twice the amount necessary and Adelstein rightly refused. They knew the government had few ways to reach those unserved without paying whatever the telcos demanded. A few years later, Qwest is part of Centurylink. Many of those lines are now upgrading under [public] Connect America Funds with what amounts to a greater than 100% subsidy.”

Net Neutrality appeared to have no impact on telephone company investment decisions, even in rural areas. The investment cuts followed a trend that began even before President Barack Obama took office. Wireless carriers slash investments in rural areas when management is confident the government is motivated to step in and offer taxpayer dollars to expand rural broadband service. When those funds do become available, a significant percentage of the money isn’t spent on constructing new infrastructure to extend the reach of wired and wireless networks into unserved rural areas. Instead, it pays for expanding existing infrastructure that may coincidentally reach some rural customers, but is still primarily used by existing cellular customers.

“In many extreme rural areas, only the local telco has the ability to deliver broadband at a reasonable cost,” noted Burstein. “You need to have affordable backhaul and a local staff for repairs. Because the ‘unserved’ are in very small clusters, often less than 100 homes, it’s usually impractical for a new entrant to bring in a backhaul connection.”

Instead, AT&T is attempting to fill some of the gaps with fixed wireless service from existing cell towers. While good news for customers without access to cable or DSL broadband but do have adequate cellular coverage to subscribe to AT&T’s Fixed Wireless service, that is not much help for those in deeply rural areas where AT&T isn’t investing in additional cell towers to extend coverage. In effect, AT&T enjoys a win-win for itself — adding taxpayer-funded capacity to their existing 4G LTE networks at the same time it markets data-cap free access to its bandwidth-heavy online video services like DirecTV Now. That frees up capital and reduces costs for AT&T’s investors. But it also alienates AT&T’s competitors that recognize the additional network capacity available to AT&T also allows it to offer steep discounts on its DirecTV Now service exclusively for its own wireless customers.

Comcast Trying to Get Rid of Public Service Obligations in Vermont

A requirement that Comcast must operate in the public interest of the people of Vermont may result in the cable company filing suit against the state.

Comcast is upset about the state’s “Certificate of Public Good,” which puts a responsibility on Comcast to support Vermont’s public access channels, include their programming lineups in electronic program guides, and expand service with 550 additional miles of cable line extensions over 11 years.

Comcast lobbied the Vermont Public Utility Commission to drop the requirements, but their request was turned down last week.

“We are disappointed the Vermont Public Utility Commission chose to deny our motion for important amendments necessary to fairly compete in Vermont,” Comcast spokeswoman Kristen Roberts told Vermont Public Radio. “We are still reviewing the order and have not yet determined our next steps.”

Comcast told the Commission upgrades would be costly and cumbersome, particularly because many of its systems in the state were acquired from Adelphia, a cable company that declared bankruptcy in 2002 as a result of executive corruption. Most of its cable systems, some in disrepair, were sold to Time Warner Cable and Comcast, who were forced to commit additional funding to upgrade them soon after the acquisitions were complete.

The Commission was not impressed with Comcast’s arguments, suggesting the requests in the Certificate were achievable and given a long lead time to complete.

Comcast may appeal the order in court.

Canadian Telecom Cos. Raid Montreal Software Developer’s Home, Interrogate Him for 9 Hours

6A group of five men representing Bell, Rogers, and Vidéotron burst into the private home of a Montreal man at 8 a.m. on June 12 without notice and interrogated him for nine hours about his involvement in a search engine that helps Canadian viewers circumvent geographic restrictions on online TV shows and movies.

The lawyer representing Canadian telephone company Bell and two of the country’s largest cable companies — Rogers and Vidéotron, was backed by a bailiff and independent counsel who informed Montreal software developer Adam Lackman, founder of TVAddons and a current defendant in a copyright infringement lawsuit filed by the telecom companies, that he was “not permitted to refuse to answer questions” posed by the companies under threat of additional criminal and civil penalties.

Lackman was instructed he had one hour to locate an attorney, but was forbidden to use any electronic or telecommunications device to contact one. He was also not allowed to leave the designated room in his home where he was held unless accompanied by a corporate lawyer or court official. The men also warned Lackman’s attorney he could not counsel Lackman on his answers to their questions and had to remain silent.

“I had to sit there and not leave their sight. I was denied access to medication,” Lackman told TorrentFreak. “I had a doctor’s appointment I was forced to miss. I wasn’t even allowed to call and cancel.”

Lackman was eventually placed in a room in his home and interrogated almost continuously for nine hours, but was given a brief break for dinner and time to finally talk privately with his attorney. By the time the bailiff, two computer technicians, the independent counsel and the corporate attorney left, it was 16 hours later and after midnight. The men left with Lackman’s personal computer and phone, along with a full list of usernames and passwords to access his email and social media accounts.

“The whole experience was horrifying,” Lackman told CBC News. “It felt like the kind of thing you would have expected to have happened in the Soviet Union.”

Lackman

The telecom giants gained access to Lackman’s home with the use of a Anton Piller order, a type of civil search warrant that gives private individuals and companies acting as plaintiffs in a lawsuit full access to a defendant’s home with no warning. The order was designed to allow searches and seizure of relevant evidence at high risk of being destroyed by a defendant.

The Canadian companies were upset because of Lackman’s involvement in Kodi, an open source home theater platform that allows viewers to access stored and online streaming media. Lackman produces apps, known as add-ons, that help Kodi users access live TV streams and recorded content. Unfortunately, that sometimes occurs in contravention of geographic and copyright restrictions imposed by the Canadian companies on Canadian viewers. As a result, several large telecom companies filed suit against Lackman for copyright infringement.

“Approximately 40 million unique users located around the world are actively using infringing add-ons hosted by TVAddons every month, and approximately 900,000 Canadian households use infringing add-ons to access television content,” claims the lawsuit. “The amount of users of infringing add-ons hosted TVAddons is constantly increasing.”

The Honourable B. Richard Bell (Image: Keith Minchin)

On June 9, a Canadian Federal Court judge handed the telecom companies a victory in the form of an interim injunction and restraining order against Lackman prohibiting him from engaging in any activity that could further violate the companies’ interpretation of copyright law. The ruling also included an Anton Piller order, which critics contend often allows private companies to engage in extended fishing expeditions looking for additional evidence to further their case.

The order included the right to seize any and all data surrounding the alleged offense, including equipment, paper records, bank accounts, and anything else in Lackman’s possession that plaintiffs could argue was connected to the lawsuit. It also permitted a bailiff and computer forensics experts to assume control of many of Lackman’s internet domains including TVAddons.ag and Offshoregit.com, as well as his social media and web hosting accounts for a period of two weeks. Since the case was handled ex parte (open to only one side) by the Federal Court, Lackman was not informed or given the opportunity to present a defense.

The ruling evidently allowed the companies to believe they had carte blanche to question Lackman.

When the corporate attorney was not grilling Lackman about his own involvement in Kodi add-ons, he demanded Lackman disclose any and all information he had on an additional 30 individuals that might also be involved in services like TVAddons. That demand fell squarely outside of the range of the court order, which is designed to protect existing evidence, not permit plaintiffs to fish for new evidence to bolster their case.

After the search ended, Lackman and his attorney went to court to challenge what they believed to be one of the most shocking instances of corporate intimidation and legal abuse ever seen in a copyright case. Lackman’s attorney had little trouble convincing the Honourable B. Richard Bell, who presided over a Federal Court hearing on the matter.

Bell found multiple egregious violations of the court order, including a limit on any search to between 8 a.m. and 8 p.m. but instead lasted until at least midnight. The judge also found ample evidence Lackman’s rights were violated and he was subjected to an intimidation campaign designed to destroy his software business, leave him financially unable to mount any defense against the lawsuit, and get him to both incriminate himself and others against his will.

A court transcript reveals the real motives of Canadian telecom companies: to “neutralize the guy” that is hurting their businesses.

“It is important to note that the Defendant was not permitted to refuse to answer questions under fear of contempt proceedings, and his counsel was not permitted to clarify the answers to questions. I conclude unhesitatingly that the Defendant was subjected to an examination for discovery without any of the protections normally afforded to litigants in such circumstances,” the judge said. “Here, I would add that the ‘questions’ were not really questions at all. They took the form of orders or directions. For example, the Defendant was told to ‘provide to the bailiff’ or ‘disclose to the Plaintiffs’ solicitors’.”

Bell also saw through the plaintiffs’ questioning of Lackman about 30 other individuals that might also be allegedly involved in copyright infringement.

Lose in one venue, win in another.

“I conclude that those questions, posed by Plaintiffs’ counsel, were solely made in furtherance of their investigation and constituted a hunt for further evidence, as opposed to the preservation of then existing evidence,” he wrote in a June 29 order. “I am of the view that [the order’s] true purpose was to destroy the livelihood of the Defendant, deny him the financial resources to finance a defense to the claim made against him, and to provide an opportunity for discovery of the Defendant in circumstances where none of the procedural safeguards of our civil justice system could be engaged.”

The judge ruled the Anton Piller order be declared null and void and ordered all of Lackman’s possessions to be returned to him.

To all observers, it was a withering repudiation of the tactics used by the Canadian telecom companies suing Lackman. But deep pockets always allow lawyers the luxury of a change of venue and the telecom companies promptly appealed Bell’s ruling to the Federal Court of Appeal, requesting a stay of execution of Judge Bell’s order. The court granted the appeal on behalf of the telecom companies and allowed the plaintiffs to keep possession of all seized items, domains, and social media accounts until a full appeal of the case can be heard this fall. However, the court found defects in the execution of the Anton Piller order, and ordered the telecom companies to post a security bond of $140,000 CDN and continue the $50,000 CDN bond in case sanctions are later warranted.

Lackman intends to continue his legal fight and is raising money to cover legal expenses on the fundraising site Indiegogo. He has also set up a new TVAddons website and Twitter account and has resumed the add-on development that got him embroiled in the copyright infringement lawsuit in the first place. But Lackman seems to have at least one judge on his side.

“The defendant has demonstrated that he has an arguable case that he is not violating the [Copyright] Act,” wrote Judge Bell, adding that by the plaintiffs’ own estimate, only about one per cent of Lackman’s add-ons were allegedly used to pirate content.

Updated 8/16: The website is now back under this new URL: https://www.tvaddons.co/

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