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Kentucky Wakes Up: AT&T Dereg Bills Will Not Bring Better Broadband, Will Make Rural Service Worse

luckykyQuestion: How will ripping out landline infrastructure in Kentucky help improve broadband service for rural areas?

Answer: It won’t.

This is not for a lack of trying though. AT&T has returned to the Kentucky state legislature year after year with a company-written bill loaded with more ornaments than a Christmas tree. In the guise of “modernizing” telecom regulation, AT&T wants to abolish most of it, replaced by a laissez-faire marketplace for telecommunications services not seen in the United States since the 1910s. AT&T claims robust competition will do a better job of keeping providers in check than a century of oversight by state officials. But customers in rural Kentucky have a better chance of sighting Bigfoot than finding a competitive alternative to AT&T’s telephone and DSL service. AT&T retains a monopoly in broadband across much of the state where cable operators like Time Warner don’t tread.

This year, Senate Bill 99, dubbed “The AT&T Bill” received overwhelming support from the Kentucky Senate as well as in the House Economic Development Committee. AT&T made sure the state’s most prominent politicians were well-compensated with generous campaign contributions, which helped move the bill along.

Since 2011, AT&T’s political-action committee has given about $55,000 to state election campaigns in Kentucky, including $5,000 to the Senate Republican majority’s chief fundraising committee and $5,000 more to the House Democratic majority’s chief fundraising committee. The company spent $108,846 last year on its 22 Frankfort lobbyists.

That generosity no doubt helped Republican Floor Leader Jeff Hoover find his way to AT&T’s talking point that only by “modernizing” Kentucky’s telecom laws would the state receive much-needed broadband improvements.

Hoover

Hoover

Hoover is upset that the state’s House Democratic leadership stopped AT&T’s bill dead in its tracks, despite bipartisan begging primarily from AT&T’s check-cashers that the bill see a vote. Speaker Greg Stumbo, whose rural Eastern Kentucky district would have seen AT&T’s landline and DSL service largely wiped out by AT&T’s original proposal, would hear none of it.

He has been to AT&T’s Deregulation Rodeo before.

“When I served as attorney general, I dealt with deregulation firsthand to protect consumers as much as possible,” he wrote in a recent editorial. “In most cases, deregulation led to worse service and less opportunity to correct the problems customers invariably faced. It is now our job as House leaders to continue defending Kentucky’s consumers.”

Stumbo, like many across Kentucky, have come to realize that AT&T’s custom-written legislation gives the company a guarantee it can disconnect rural landline service en masse, but does not guarantee better broadband as a result.

“In fact, there is nothing in the legislation guaranteeing better landline, cell or Internet service,” Stumbo noted.

Hoover declared that by not doing AT&T’s bidding, Kentucky was at risk of further falling behind.

“This decision by Stumbo and House Democrat leadership, like many others, has unfortunately had a real effect on the lives of Kentuckians as we will go, at minimum, another year before these private businesses can focus on increasing broadband speed throughout the commonwealth,” he wrote. “It is another year in which we risk falling further behind our neighboring states and others in the competitive world of economic development.”

Stumbo

Stumbo

Stumbo responded the Republicans seemed to have a narrow vision of what represents progress. Hoover and his caucus voted against the House budget that included $100 million for a broadband improvement initiative spearheaded by Gov. Steve Beshear, Rep. Hal Rogers, and private interests.

By relying entirely on a deregulated AT&T, rural Kentucky residents may lose both landline and DSL service and be forced to wireless alternatives that come at a high price.

“There are citizens, many of whom are elderly or on fixed income, who depend on their landline or cannot afford more expensive options; these are the people I am fighting for,” said Stumbo. “I do not want to get a call from a family member who lost a loved one because that person could not reach a first responder in time.”

State residents watching the debate have increasingly noticed discrepancies between what AT&T wants and what it is promising Kentucky.

“No one has ever been able to satisfactorily explain to me how allowing phone companies to abandon landline service will help expand broadband Internet, especially since DSL service requires phone lines,” said H.B. Elkins, Public Information Officer at KYTC District 10.

Matt Simpson recognizes that Senate Bill 99 and other similar measures will not change the economic realities of AT&T’s for-profit business.

“Without regulation, the for-profit companies like AT&T are going to invest in the most profitable areas,” he wrote. “If they thought they could make a huge profit providing broadband in rural areas, they would already be doing it. Deregulation is not going to change that profit calculation. They will still view rural broadband as unprofitable, and they still won’t do it. The bill was a total giveaway to the industry, with no offsetting benefit to the consumers.”

Michael Yancy summed up his views more colorfully.

“The ‘AT&T bill should be classified as a sheep bill. It was all about pulling the wool over the eyes of the public,” Yancy said. “Anyone who thinks the people of Kentucky will benefit from more of the same, needs to make inquiries into moving the Brooklyn Bridge to the Ohio River.”

http://www.phillipdampier.com/video/KET Phone Deregulation Kentucky Tonight 1 2-19-13.mp4

Kentucky Educational Television aired a debate between AT&T and the Kentucky Resources Council on the issue of telephone deregulation in 2013. The same issues were back this year in AT&T’s latest failed attempt to win statewide deregulation and permission to switch landline customers in rural Kentucky to less reliable wireless service. In this clip AT&T argues it should be able to shift investment away from landline service towards wireless because wireless is the more popular technology, but not everyone gets good coverage in Kentucky. (Feb. 19 2013) (3:00)

http://www.phillipdampier.com/video/KET Phone Deregulation Kentucky Tonight 2 2-19-13.mp4

In this second clip, AT&T claims customers who want to keep landline service can, but Kentucky Resources Council president Tom Fitzgerald reads the bill and finds AT&T’s claims just don’t hold up under scrutiny. The carrier of last resort obligation which guarantees quality landline phone service to all who want it is gone if AT&T’s bill passes. Customers can be forced to use wireless service instead. (Feb. 19 2013) (4:33)

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Los Angeles Public TV Station Gives Up Its Channel So AT&T/Verizon Can Have More Spectrum

Two educational public broadcasting stations in Los Angeles will soon share the same channel to make room for AT&T and Verizon Wireless’ growing needs for wireless spectrum.

KCET, a charter member of the Public Broadcasting Service (PBS) that left the network to become the nation’s largest independent TV station in 2010 will share the transmitter of KLCS, an educational PBS TV station owned by the Los Angeles Unified School District Board of Education. The move will turn back a 6MHz UHF channel to the Federal Communications Commission, to be auctioned off to the highest wireless carrier bidder in a future spectrum auction.

The two stations will share a single UHF channel, multiplexed into up to eight digital over-the-air sub-channels, equally divided between the two.

The time-sharing agreement is nothing new for KLCS, which had shared one of its digital sub-channels with Spanish language KJLA-TV earlier this year in a trial in partnership with the biggest wireless lobbying organization in the country – CTIA and the Association of Public Television Stations. The trial was designed to see how well two stations could use the H.264 compression video codec for simultaneous shared digital television transmissions. The multiplexing test, completed in March, found generally good results as long as the stations avoided concurrent HD broadcasts on the same channel. There is simply not enough bandwidth in a single 6MHz channel to handle multiple HD feeds showing complex content.

KJLA’s primary transmitter already multiplexes 10 low resolution digital sub-channels of its own, primarily in Vietnamese, Mandarin and Spanish.

When KCET and KLCS begin the channel sharing arrangement, one is unlikely to air its programming in HD. Instead, the channel space will be divided into up to eight 480i channels airing both stations’ programming lineups. For some, it will be a viewing quality downgrade. KCET was one of the first stations in Los Angeles to air HD programming, but that will be unlikely in the future.

KCET’s Channel Lineup

Channel Video Aspect PSIP Short Name Programming
28.1 720p 16:9 KCET-HD Main KCET programming
28.2 480i 4:3 KCET-LN KCET Link
28.3 KCET-Vm V-me
28.4 N H K NHK World Japan

KLCS’ Channel Lineup (No HD programming)

Channel Video Aspect PSIP Short Name Programming
58.1 480i 4:3 KLCS-1 Main KLCS programming/PBS
58.2 KLCS-2 PBS Kids
58.3 KLCS-3 Create
58.4 KLCS-4 MHz WorldView

KCET is the financially weaker of the two stations, having given up its membership in PBS four years ago and seeing a dramatic decline in viewer pledges ever since. KCET sold its studio complex to the Church of Scientology in 2011 and moved its operations to smaller facilities in Burbank. KOCE-TV in Huntington Beach is now the primary PBS station in greater Los Angeles.

The Federal Communications Commission will hold its voluntary spectrum incentive auction in mid-2015, allowing stations to bid on surrendering their licenses, moving their UHF channel to an open VHF channel or sharing their channel with another station — all in exchange for cash payments. AT&T and Verizon Wireless are widely expected to be the two largest bidders for the valuable spectrum.

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Wi-Fi is Threatening AT&T and Verizon Wireless’ 4G Data Money Party; Wi-Fi Usage Conquers 4G

att verizonVerizon Wireless and AT&T have invested billions expanding and improving their wireless networks, telling investors that revenue from exploding wireless data usage would more than recoup their investments, but the growing availability of low-cost and free Wi-Fi is threatening to derail those plans.

Business Week reports that as carriers have dropped unlimited use data plans in favor of costly, restricted-usage offers, savvy customers have learned to conserve their data allowance by switching to Wi-Fi wherever possible. Adobe Systems reported this week that more than half of all wireless data traffic from smartphones occurs over Wi-Fi, not 3G or 4G networks. Total Wi-Fi traffic passed mobile data networks more than a year earlier.

AT&T and Verizon’s business plans depend on smartphone users accessing faster 4G LTE networks to consume high bandwidth online applications like video streaming, but that isn’t happening at the rate they expected. Instead, customers are waiting to connect to a Wi-Fi hotspot before watching.

The carriers are partly to blame for the Wi-Fi habit by encouraging customers to switch to Wi-Fi to reduce congestion on their 3G and 4G networks while they were upgraded and expanded. But after carriers completed those upgrades, customers are sticking with Wi-Fi.

“There’s a flavor of too much of a good thing here, where Wi-Fi offloads start to really impinge on the prospects of monetizing all that additional usage,” says industry analyst Craig Moffett. “All the carriers have put their eggs in the basket of incremental usage as the source of revenue growth. It isn’t going according to plan.”

wifiAT&T and Verizon hoped customers would face upgrades to more costly plans with more generous usage allowances as data usage increased. Early efforts to monetize data usage seemed encouraging. Both carriers reported surprising success from in-store marketing efforts to push families to upgrade to deluxe 10GB+ usage plans in larger numbers than anticipated. But customers are now increasingly trying to stay within their budget and current usage allowance, with the help of Wi-Fi.

‘As customers become more aware of the limits on their data plans, they’re more careful about moving to Wi-Fi as often as possible,’ says Tamara Gaffney, an analyst with Adobe’s Digital Index.

Wi-Fi hotspots are easier to find as cable companies provide them for their customers. Major shopping, dining and entertainment venues often offer free access to draw and keep customers.

As carriers began to realize smartphones would not be the data sucking vampires they were expecting, both AT&T and Verizon eagerly dove into the tablet business, hoping to convince customers to buy mobile-ready versions of the devices that would more likely be used for data allowance-killing online video.

But customers outsmarted them again, preferring tablets equipped only with Wi-Fi. Carriers responded by slashing prices, to no avail. Even those who splurged on 3G and 4G-ready tablets rarely use them on AT&T and Verizon’s wireless networks. More than 93% of tablet traffic is done over Wi-Fi, derailing a potential wireless data money train.

onstarTheir latest plan is to push the “Internet of Things” — machine to machine communications. Both AT&T and Verizon have invested heavily in wireless utility meter technology and are pushing manufacturers to add 4G capability to all sorts of home appliances from refrigerators, ovens, and dishwashers to home laundry centers, alarm systems, and even pet-webcams. But early efforts have not been promising. Reception in fixed indoor locations, especially basements, is often very poor to non-existent, and manufacturers don’t see much benefit adding mobile network connectivity when traditional Wi-Fi is cheaper and much more reliable.

That hasn’t stopped AT&T, which won a lucrative contract to offer 4G LTE and/or HSPA+ support inside Audi and GM vehicles. To them, the “connected car” is a cash cow waiting to be milked.

“Five or six years ago when we talked to car OEMs, it was about safety and embedded modules and cheap rates,” said Glenn Lurie, CEO of AT&T Mobility.

That was the era of OnStar and other competing telematics systems that can monitor vehicle performance and notify emergency responders in the event of an accident. Verizon Wireless has supported GM’s OnStar system for years and until GM’s bankruptcy reorganization offered Verizon customers the option of adding their OnStar speakerphone to a Verizon Wireless family plan for $9.99 a month, sharing that plan’s voice calling minutes. Starting this year, AT&T has the contract.

AT&T is celebrating the end of cheap rates and see big dollar signs selling in-car connectivity, which will be available in dozens of car models.

Mary Chan from GM committed to offer AT&T 4G access on 33 GM model vehicles by the end of this year.

Customers will get a free sample of the service in promotions lasting from 30-90 days. After that, customers will need to pay:

  • OnStar’s data plan (doesn’t include voice calling/emergency response) will cost $10 a month to add the car as a device on your AT&T Mobile Share plan and $10 a month for 200MB of data; $30 a month for 3GB of data, or $50 a month for 5GB;
  • Applicable taxes and federal/state universal service charges, regulatory cost recovery charge (up to $1.25), gross receipts surcharge, administrative fees and other government assessments which are not taxes or government required charges are not included in the above-stated prices;
  • A $5 day pass will be available for occasional users providing 250MB of access for up to 24 hours;
  • All payments must be made in advance of receiving service and will be automatically renewed month-by-month until the customer cancels;
  • The built-in Wi-Fi hotspot will support up to seven devices;
  • Excessive roaming may result in service termination.

“The connected car will change the entire wireless industry,” said AT&T Mobility’s Ralph de la Vega. AT&T expects as many as 10 million connected cars will be signed up for service in just a few years.

But at AT&T’s prices, Moffett suspects the ingenuity of Silicon Valley and other entrepreneurs will eventually find a much cheaper solution, potentially robbing AT&T of yet another expected cash coup.

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AT&T U-verse Customers Can Escape AT&T’s Usage Caps With DSL Extreme’s trueSTREAM

dsl extremeThere is a way out for AT&T U-verse customers stuck dealing with the company’s arbitrary 250GB monthly usage cap — sign up with U-verse reseller DSL Extreme for the same Internet access with no usage caps whatsoever.

Today, DSL Extreme announced the introduction of trueSTREAM in 21 states serviced by AT&T’s U-verse fiber to the neighborhood system. Much like Earthlink’s reseller agreement with Time Warner Cable, customers can transparently switch between the two providers and receive essentially the same service at a different price point.

The biggest selling point of trueSTREAM is that it has absolutely no usage limits.

DSL Extreme has signed a contract with AT&T to offer the service in states including California, Texas, Illinois, and Florida, among many others.

Customers don’t need to have a phone line to subscribe. They will need to lease a wireless gateway router ($6.50/mo) from DSL Extreme and the rate plans are similar to AT&T’s own U-verse broadband offerings:

  • truestreamValue ($17.95/mo) 768/384kbps
  • Plus ($22.95/mo) 1.5Mbps/384kbps
  • Pro ($27.95/mo) 3Mbps/512kbps
  • Elite ($32.95/mo) 6Mbps/768kbps
  • Max ($37.95/mo) 12/1Mbps
  • Max Plus ($42.95/mo) 18/1.5Mbps
  • Max Turbo ($52.95/mo) 24/3Mbps
  • Power ($62.95/mo) 45/6Mbps
  • Power Plus ($92.95/mo) 75/8Mbps

Professional installation is now free of charge and an optional one-year contract delivers other extras, such as a static IP address. A Supplier Surcharge Recovery fee of $2.88 per month applies. Customers can pre-qualify on the company’s website.

The coverage area of trueSTREAM will extend the company’s reach overnight to 30 million potential customer locations, growing to nearly 60 million by 2015.

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Frontier’s Buyout of AT&T Connecticut Rejected By Regulators; Deal Offers Little Benefit to Customers

puraConnecticut’s tough Public Utilities Regulatory Authority (PURA) has rejected a settlement between state officials and Frontier Communications to acquire AT&T Connecticut, saying the deal offers very little to Connecticut ratepayers.

The settlement between Frontier, Connecticut’s Consumer Counsel and the Connecticut Attorney General’s office included commitments from Frontier governing contributions to state non-profit groups, phone rates and broadband expansion.

The Authority was told it could either approve or reject the settlement, but not suggest or require changes. It decided late last week to reject the settlement deal.

The regulator cited several reasons for its disapproval:

  • PURA_new_area_code_mapA landline rate freeze offers little benefit to Connecticut ratepayers because landline rates have been stable for years and any attempt to increase them will only fuel additional disconnections;
  • Frontier’s commitments to improve broadband service in Connecticut are vague, lacking specific speed improvements and rural broadband expansion targets to meet;
  • Frontier attempted to insert weakened rules governing pole inspections, which should be part of a separate regulatory proceeding;
  • The agreement might limit PURA’s ability to launch cost-recovery proceedings and flexibility to maintain oversight over Frontier’s performance in the state;
  • A contractual agreement requiring Frontier to make specific contributions to state non-profit groups is inappropriate and unenforceable;
  • A lack of information about how Frontier and AT&T will collaborate after the transaction is complete, particularly with AT&T’s U-verse offering;
  • No details about how Frontier U-verse intends to handle Public, Educational, and Government Access channels on its television platform;
  • A lack of a detailed disaster preparedness plan from Frontier to handle major service disruptions.

PURA’s Acting Executive Secretary Nicholas Neeley said the goal is to “improve the likelihood of success of Frontier as it assumes the duties, obligations and responsibilities currently held by AT&T in Connecticut.”

“(It seeks to) balance the interests of all parties affected by this transaction, promote competition and preserve the public’s rights to safe and adequate communications services,” Neeley wrote in a public notice. “The Authority hopes that such a session will produce an amended proposal from Frontier that would be deemed acceptable for consideration.”

The rejection also seeks to protect and preserve Connecticut’s regulatory oversight power over Frontier.

Frontier received a better reception from the Communications Workers of America. The phone company has traditionally maintained reasonably good relations with its unionized workforce. CWA approved of Frontier’s purchase of AT&T Connecticut after winning commitments for new union jobs, a job security program, a payout of 100 shares of company stock to each union member, and Frontier’s commitment to prioritize Connecticut-based call centers.

Wall Street is less impressed. This morning, Morgan Stanley downgraded Frontier’s stock to “underweight,” citing complications in the AT&T Connecticut deal and Frontier’s increasing debt load. Frontier is financing $1.55 billion of the $2 billion transaction by selling two groups of senior notes of $775 million each, due in 2021 and 2024. As of June 30, Frontier had amassed $7.9 billion in debt with just $805 million in cash on hand.

Frontier's proposed northeastern service areas would add almost the entire state of Connecticut to its holdings in mostly-rural upstate New York and Pennsylvania and the urban metropolitan Rochester, N.Y. 585 area code region.

Frontier’s proposed northeastern service areas would add almost the entire state of Connecticut to its holdings in mostly rural upstate New York and Pennsylvania and the metropolitan Rochester, N.Y. 585 area code region where the company got its name.

http://www.phillipdampier.com/video/Frontier Communications Connecticut 1-2014.mp4

Frontier Communications introduces itself to AT&T Connecticut customers in this company-produced video. (4:03)

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Frontier Communications Promises Gigabit Broadband Will Be Available… to Almost Nobody

Frontier's "High Speed" Fantasies

Frontier’s “High Speed” Fiber Fantasies

Frontier Communications has jumped on the gigabit broadband promises bandwagon with an announcement to investors the company will make available 1,000Mbps broadband speeds available later this year to a small handful of customers.

“I want to note that nearly 10% of our households are served through a fiber to the home architecture,” said Frontier’s chief operating officer Dan McCarthy. “Over the next several quarters we will introduce expanded speed offerings in select markets including 50-100Mbps services. Some residential areas will also be able to purchase up to 1Gbps broadband service. We are excited to bring these new products to market and look forward to making these choices available to our customers.”

Most of Frontier’s fiber customers are part of the FiOS fiber to the home infrastructure Frontier adopted from Verizon in Fort Wayne, Ind., and in parts of Oregon and Washington. The rest of Frontier customers accessing service over fiber are in a few new housing developments and some multi-dwelling units. The majority of customers continue to be served by copper-based facilities.

Despite the speed challenges imposed by distance-sensitive DSL over copper networks, Frontier customers crave faster speeds and more than one-third of Frontier’s sales in the last quarter have come from speed upgrades. As of this month, 54% of Frontier households can receive 20Mbps or greater speed, 75% can get 12Mbps and 83% can get 6Mbps. Here at Stop the Cap! headquarters, little has changed since 2009, with maximum available Frontier DSL speeds in this Rochester, N.Y. suburban neighborhood still maxing out at a less-impressive 3.1Mbps.

Frontier’s plans for the next three months include a growing number of partnerships with third-party equipment manufacturers and software companies, as well as integrating former AT&T service areas in Connecticut into the Frontier family:

Sale of AT&T Connecticut Assets to Frontier Communications Wins Approval from State Attorney General

frontier frankConnecticut’s Attorney General has announced a deal with Frontier Communications to approve its acquisition of AT&T’s wired assets in the state. The office asked for and got a three-year rate freeze on basic residential telephone rates and a commitment to keep selling standalone broadband at or below Frontier’s current rates. Low-income military veterans would receive basic broadband service for $19.99 per month, a substantial discount off the regular price of $34.99. The first month of service is free.

Frontier will make $500,000 in donations annually to various Connecticut charities, give $512,500 to the University of Connecticut basketball teams, and commit $75,000 to sponsor the Connecticut Open tennis tournament in New Haven.

The phone company has also committed to invest $64 million on network upgrades between 2015-2017, primarily to expand DSL broadband and U-verse service. The company also must undertake to inspect the wireline network it is buying from AT&T and replace deteriorating infrastructure including lines and telephone poles as needed.

Frontier announced it was buying AT&T’s wired assets in December for $2 billion. AT&T will continue to own and operate its wireless network assets in the state. Connecticut was home to AT&T’s only significant landline presence in the northeast. The Southern New England Telephone Company of Connecticut was originally bought by SBC Communications for $4.4 billion in 1998. After SBC purchased AT&T, the telephone company changed its name to AT&T Connecticut. Its primary competitor is Cablevision Industries, which also serves eastern New York and parts of New Jersey. AT&T has aggressively deployed its U-verse platform in Connecticut. Frontier will continue to run and expand U-verse in the state.

Frontier Services and Partnerships Expand

  • Customers may have already received marketing for Frontier’s Emergency Phone, a $4.99/mo landline that can only reach 911. Frontier CEO Maggie Wilderotter told investors that global climate change has made weather patterns more unpredictable, making the reliability and resiliency of traditional landlines a “true life line” in the event of an emergency knocking out Voice over IP lines or cell phone service;
  • Frontier Texting, powered by Zipwhip, allows customers send and receive text messages using their existing landline numbers. The service appears most popular with business customers, with more 800 signed up so far;
  • Frontier third-party technical and security support offers a large range of computer security, home automation, and support services for both hardware and software. Frontier added the Nest thermostat during this quarter, as well as tech support for Intuit QuickBooks and Dropcam remote video monitoring.

Wilderotter Flip-Flops on Gigabit Broadband: You Don’t Need a Gig

Less than three weeks ago, Wilderotter told the Pacific Northwest readers of The Oregonian they didn’t need gigabit broadband speeds:

“Today it’s about the hype, because Google has hyped the gig,” said Wilderotter, in Portland this week for a meeting of her company’s board. She said Google is pitching something that’s beyond the capacity of many devices, with very few services that could take advantage of such speeds, and confusing customers in the process.

“We have to take the mystery and the technology out of the experience for the user because it’s a bit disrespectful to speak a language our customers don’t understand,” said Wilderotter, in Portland this week for a meeting of her company’s board.

Frontier’s pitch: Better prices for more modest speeds. For most people, Wilderotter said, 10 to 12 megabits per second will be perfectly adequate for at least the next couple years. She said Frontier is upgrading its networks in rural communities where it doesn’t offer FiOS to meet that benchmark.

Now that Frontier proposes to offer those speeds, company officials are excited they will be available. Customers shouldn’t be. Most won’t have access for some time to come, if ever.

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More Proof of Comcast’s Monopoly Tendencies: Spending Big to Kill Community Broadband Competition

When the community of Batavia, Ill., a distant suburb of Chicago, decided they wanted something better than the poor broadband offered by Comcast and what is today AT&T, it decided to hold a public referendum on whether the town should construct and run its own fiber to the home network for the benefit of area residents and businesses. A local community group, Fiber for Our Future, put up $4,325 to promote the initiative back in 2004, if only because the town obviously couldn’t spend tax dollars to advertise or promote the idea itself.

Within weeks of the announced proposal, both Comcast and SBC Communications (which later acquired AT&T) launched an all-out war on the idea of fiber to the home service, mass mailing flyers attacking the proposal to area residents and paying for push polling operations that asked area residents questions like, “should tax money be allowed to provide pornographic movies for residents?” The predictable opposition measured in response to questions like that later appeared in mysterious opinion pieces published in area newspapers submitted by the incumbent companies and their allies.

no comm broadband

Comcast spent $89,740 trying to defeat the measure in a community of just 26,000 people. SBC spent $192,324 — almost $3.50 per resident by Comcast and just shy of $7.50 per resident by SBC. Much the same happened in the neighboring communities of St. Charles and Geneva. 

According to Motherboard, the scare tactics worked, cutting support for the fiber network from over 72 percent to its eventual defeat in two separate referendums, leaving most of Batavia with 3Mbps DSL from SBC or an average of 6Mbps from Comcast.

Much of the blizzard of mailers and brochures Comcast and SBC mailed out were part of a coordinated disinformation campaign. Both companies also knew their claims would go largely unchallenged because Fiber for Our Future and other fiber proponents lacked the funding to respond with fact check pieces of their own mailed to residents to expose the distortions.

When it was all over, it was back to business as usual with Comcast and SBC. The latter defended its reputation after complaints soared about its inadequate broadband speeds.

Kirk Brannock, then midwest networking president for SBC, told city council members in the area that “fiber is an unproven technology.”

“What are you going to do with 20Mbps? It’s like having an Indy race car and you don’t have the racetrack to drive it on. We are going to be offering 3Mbps. Most users won’t use that,” he said.

risky

“All the subscribers got these extraordinary fliers. Ghosts, goblins, witches. I mean, this is about a broadband utility. Very scary stuff. This is real. This is comical, but this is very real,” Catharine Rice of the Coalition for Local Internet Choice said of the fliers at an event discussing municipal fiber earlier this year. “They have this amazing picture, and then they lie about what happened. They’re piling in facts that aren’t true.”

In communities that won approval for construction of publicly-owned fiber networks, the battle wasn’t over. Tennessee’s large state cable lobbying group unsuccessfully sued EPB to keep it out of the fiber business. In North Carolina, Time Warner Cable effectively wrote legislation introduced and passed by the Republican-dominated General Assembly that forbade community broadband expansion and made constructing new networks nearly impossible. In Ohio, another cable industry-sponsored piece of legislation destroyed the business plan of Lebanon’s fiber network, forcing the community to eventually sell the network at a loss to Cincinnati Bell.

The larger Comcast grows, the more financial resources it can bring to bare against any would-be competitors. Even in 2004, the company was large enough to force would-be community competitors to steer clear and stay out of its territory.

women

 

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Windstream Teaches AT&T, Comcast, Verizon, Others How to Avoid Federal Income Taxes

A gift from the American taxpayer, willing to make up the difference.

Another corporate tax cut

Wall Street rallied around big telecommunications company stocks this week as news spread that Windstream has found a way to avoid paying federal income tax by converting its copper and fiber networks and other property assets into a tax-exempt trust.

Windstream says it has already won Internal Revenue Service approval to convert all of its network assets into a publicly traded “real estate investment trust.” REIT’s pay no federal income taxes, and if other large telecom companies follow Windstream’s lead, taxpayers will have to make up the estimated $12 billion in lost tax revenue annually.

Investors are excited by the prospect of a major reduction in tax exposure for some of America’s richest telecommunications companies. Windstream was rewarded the most with a 12 percent boost in its share price – a two-year high for the largely rural phone company. But AT&T, Verizon, Comcast, Time Warner Cable, and Cablevision also saw stock prices rising over the possibility of major increases in dividend payouts to shareholders from the proceeds of the tax savings.

REIT conversions are just the latest trick in the book corporations have used to cut, if not eliminate most of their tax liabilities. REITs are exempt from federal taxes as long as they distribute 90 percent of taxable earnings back to shareholders. Democrats in Congress have been busy fighting their Republican colleagues offer efforts to drop the practice of inversion — allowing companies to cut taxes by relocating offshore. Robert Williams, an independent corporate tax consultant, told Bloomberg News the Democrats have their hands full with that this year and are unlikely to be able to also devote resources to closing the REIT tax loophole.

“Management teams will surely look closely at emulating Windstream because the tax savings are potentially so significant,” said Craig Moffett, an analyst at MoffettNathanson LLC, in a note. “For a company like AT&T, where free cash flow has been under pressure and management has been willing to push hard to save on taxes, the appeal must surely be great.”

staxIf a high-profile phone or cable company moves to enact an REIT, that might be enough to provoke Congress to act, warned Moffett.

“The biggest hurdle in this process is getting the private letter ruling from the IRS, and we’ve got that,” David Avery, a spokesman for Windstream, told Bloomberg. The deal doesn’t need the consent of the Federal Communications Commission, Avery added.

Windstream’s tax savings will cut company debt by around $3.2 billion and produce about $115 million annually in free cash flow. Although Windstream chief financial officer Tony Thomas vaguely promised to use some of the money to invest in broadband upgrades, he was more specific about the benefits Windstream’s REIT will have on the company’s growth agenda. It can use the savings to “acquire other network assets to grow,” — business jargon meaning more merger and acquisition deals, this time fueled by Windstream’s slashed tax bill.

Wall Street investment banks paid to advise on Windstream’s REIT conversion are promoting the concept to other telecom companies as easy to replicate and profoundly profitable. But who should share in the new found wealth?

“People are asking the question if these tax benefits should be passed on to the end user — you and I when we pay our phone or cable bill — versus going to the corporation,” said Phil Owens, vice president at Green Street Advisors, a real estate research firm in Newport Beach, California, that has counseled companies like Equinix on REIT conversions.

Don’t count on it.

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Miss. Taxpayers Pay for “Sweetheart Deal” With AT&T; Competitive Bids and Public Scrutiny Prohibited

att loveAT&T couldn’t have gotten a better deal for itself if it tried.

Mississippi state officials that awarded AT&T a 10-year State Master Contract, compelling the majority of state government offices to do business only with AT&T, have just given the phone company an early two-year extension without allowing for any public discussion or competitive bidding.

In 2005, when the contract with AT&T was first signed, it was unlikely most government offices, schools, and libraries would be able to find any bidder other than AT&T. The state contract spells out a series of requirements that critics contend were tailor-written with the full knowledge only AT&T could offer the full menu of required services. Nearly 10 years later, and more than a year before the contract was up for renewal, the state suddenly granted AT&T a two-year contract extension, potentially exposing taxpayers to overpriced, taxpayer-funded broadband services.

Interested members of the public who want to examine the state contract for telecommunications with AT&T have run headlong into a roadblock erected by a Hinds County judge who ruled it was off-limits for public inspection and has since been sealed under court order. To this day, only government customers of Mississippi’s Department of Information Technology Services, the agency in charge of the state government’s broadband, are allowed to see the document.

Mississippi-welcomeThe state contract comes at a significant cost to taxpayers if Marvin Adams’ figures are correct. Adams, who works for the Columbia School District, suspects a lot of money has been frittered away because of the lack of competitive bidding. Only the state’s schools and libraries have the option of either securing a contract with AT&T or requesting bids from competitors like Ridgeland-based C-Spire, which supplies fiber and wireless connectivity.

Adams says AT&T’s contract with the state costs taxpayers $5 per Mbps. But AT&T also charges a “transport circuit charge” of between $10-45 per Mbps. Adams said his colleagues have seen competitive bids averaging $6 per Mbps and the transport circuit charge is included in that price.

The Mississippi Watchdog delivered the understatement of the year when it called AT&T’s contract with Mississippi “lucrative.” Attempts to modify the contract have met with fierce opposition in Jackson, the state capital. Senate Bill 2741, a modest measure that would have compelled school districts to seek competitive bids before signing a multi-year contract with a provider, died in committee earlier this year.

AT&T has close political ties in several southern states. The company co-authored an article with Gov. Phil Bryant and donated at least $42,500 to his various campaigns for political office. In 2012, Bryant signed a bill into law removing most of Mississippi’s remaining regulatory authority over AT&T.

Mississippi Governor Phil Bryant
Mississippi Governor Phil Bryant
Mississippi Governor Phil Bryant

Next door in Louisiana, Gov. Bobby Jindal also maintains close ties with AT&T. The company has funneled more than $250,000 to his wife’s charitable foundation – the Supriya Jindal Foundation for Louisiana’s Children, which also takes substantial contributions from oil and chemical companies, the insurance industry and defense contractors. The New York Times reported back in 2011 that telecom companies like AT&T were increasingly contributing to politically connected charities they could use in campaigns to influence legislation and regulation. Companies can write off their unlimited charitable giving while politicians take credit for the work done by the non-profit groups while also quietly understanding exactly where the money is coming from.

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Omitted from AT&T’s GigaPower Fiber to the Press Release: 1Gbps for 1%, <100Mbps for 99%

Phillip Dampier July 24, 2014 AT&T, Broadband Speed, Competition, Consumer News No Comments
Notice the word "may"

AT&T’s Fiber Fairy Tale

Holding your breath waiting for AT&T’s GigaPower 1Gbps U-verse upgrade to arrive in a town near you is hazardous to your health.

Despite a blizzard of press releases promoting the forthcoming arrival of gigabit Internet access from AT&T, the fine print reveals as little as one percent of some communities will actually get the upgrades.

In Winston-Salem, N.C., city officials cannot even get a firm commitment from AT&T that it will deliver the faster service to the 63 businesses the city chose as early candidates for the fiber upgrade.

In June, the city and AT&T signed an agreement for gigabit broadband expansion using AT&T’s GigaPower U-verse platform. But AT&T largely gets to decide where, when and even if it will invest in upgraded service. The city did not impose many conditions beyond a requirement that AT&T provide up to 20 free Internet connections to community sites with a one-time installation cost of $300 to $500. Another 20 connections would be provided to small to mid-size businesses, with no obligation to buy services.

In response, AT&T said it would only commit to reviewing the city’s list and “make an effort to serve the proposed locations if they are in the vicinity of where service will be available.”

If those locations fall outside of AT&T’s plans, no gigabit fiber.

A significant indicator of the true extent of AT&T’s expansion plans is whether the company is allocating capital spending commensurate with the costs of running fiber optic cable to individual homes and businesses. So far, AT&T has not. With no obligation to deliver the service AT&T is implying it will offer, the company is free to wire a handful of technology parks, businesses, and new housing developments and claim to have met its commitment, despite the fact 99 percent of area residents have no access to the faster speeds.

For the benefit of low-income residents who lack affordable Internet access, AT&T also promised it would offer some lower-speed Internet connections in a limited number of apartment complexes in low-income areas.
Here are the sites nominated by the city of Winston-Salem for AT&T gigabit broadband. AT&T’s response: ‘Maybe.’

Community sites: Aids Care Service; Boys & Girls Clubs at New Walkertown Road and Reynolds Park; Brown & Douglas Neighborhood Center; Russell Recreation Center; Liberty CDC; Community Care Center; ElBuen Pastor; Forsyth Technical Community College’s Woodruff Center; Gateway YWCA; Knollwood Baptist Church; Little Creek Neighborhood Center; Malloy/Jordan East Winston Heritage Center; MLK Jr. Center; Reynolda Branch library; S.G. Atkins CDC; SciWorks; Sedge Garden Center; Shepherd’s Center; South Fork Center; Southside Library; United Metropolitan Church; Winston Lake YMCA.

Small- to mid-size businesses: Bellomy Research; Campus Partners; Carolina Liquid Chemistries Corp.; Center for Design Innovation; CML Microcircuits (USA); Computer Credit Inc.; Computing Solutions Group Inc.; COR365 Innovation Solutions; Dairy Fresh Inc.; DataChambers LLC; Davenport Transportation Consulting; Debbie’s Staffing Service; Eastridge Technology Inc.; Exhibit Works; Flywheel; IMG College; Interact 911; KeraNetics LLC; Key Services Inc.; Kings Plaza; MissionMode; Ocular Systems; Odigia; OnceLogix LLC; Out of Our Minds Animation Studios Inc.; Page’s Sporting Goods; PhoneTree; Piedmont Propulsion; Segmented Marketing Solutions Inc.; Small Footprint Inc.; SolidSpace LLC; Special Event Services; Sunrise Technologies Inc.; The Clearing House Payment Center; Triad Semiconductor; TrueLook; Voyss Solutions; Washington Perk site at Washington Park; West 3rd Street Media; West End Mill Works.

Source: City of Winston-Salem

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