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Cincinnati Bell Plans to Shutdown Telegraph Grade Service, On Offer Since the 1800s

telegraph key

Telegraph key

If you thought your Internet service was slow, consider being a customer of Cincinnati Bell’s 75 baud Telegraph Grade service, on offer to subscribers since the 1800s for low-speed stock quotes, telegrams, and office-to-home communications. But don’t consider it too long, because the service is about to be discontinued.

The first telegram in the United States was sent on Jan. 11, 1838 using the newly developed “Morse Code” system introduced by Samuel Morse. The message was sent unceremoniously across two miles of wire strung across the sprawling Speedwell Ironworks outside of Morristown, N.J. But the experiment didn’t attract much attention until it was repeated in 1844 in Washington, D.C., where members of Congress looked on as the message, “What hath God wrought” successfully traveled from Washington to Baltimore, Md. A decade later, telegraph lines were strung to every major city on the east coast. By 1861, telegraph cables stretched across the territories west of the Mississippi and reached the West Coast, putting the Pony Express out of business.

It would be a decade after that before The City and Suburban Telegraph Company, later Cincinnati Bell Telephone, was officially incorporated on July 5, 1873, becoming the first company in the city to offer direct communication between the city’s homes and businesses. Only the wealthiest families could afford a private telegraph line, which cost $300 a year provided you lived no more than a mile from the company’s office. After four years, the company only managed to attract 50 paying customers, mostly business tycoons who relied on the telegraph to stay in contact with the office while at home. Other businesses used telegraphs to connect their different offices. Most employed young men to serve as telegraph operators, translating short written messages into a series of dots and dashes and back again.

Telegraph stamps, used to prove payment for sending and receiving messages.

Telegraph stamps, used to prove pre-payment for telegraph messages.

Business was better further east. The story of two men that would change the course of the telegraph and launch a company that remains a household name to this day started in 1838 when banker and real estate entrepreneur Hiram Sibley moved to Rochester, N.Y. He saw plenty of opportunities in upstate New York and quickly settled in, later becoming elected Monroe County Sheriff. That position soon led to his introduction to Judge Samuel L. Selden, who had the patent rights to the House Telegraph system. Seeing an opportunity, the two embarked on their own telegraph business — the New York State Printing Telegraph Company. It did not take long for them to realize competing against the larger New York, Albany, and Buffalo Telegraph Co., was a financial disaster. The two decided it would be smarter to consolidate existing providers instead of building new networks to compete. The first craze of telecommunications company consolidation was underway. With the assistance of deep pocketed investors in Rochester, Sibley and Selden founded the New York and Mississippi Valley Printing Telegraph Company. The new entity would string some of its own telegraph lines westwards, but more importantly it would focus on acquiring its rivals, especially in areas where fierce competition kept profits low and expectations of monopoly wealth even lower.

sibley

Sibley

By 1854, Sibley and Selden were confronted with competitors using two different messaging systems among 13 different companies. Sibley’s solution? Buy them out and unify them with the Morse system, available thanks to a separate acquisition of the Erie & Michigan Telegraph Company. In 1856, the company that had its beginnings in Rochester was renamed the “Western Union Telegraph Company,” which referred to the union of the different telegraph systems of the “western states” of that era (today considered the midwest).

Between 1857 and 1861 merger mania hit almost all the telegraph companies, and by the end of this period, most formerly independent companies were owned by one of six conglomerates:

  • American Telegraph Company (covering the Atlantic and some Gulf states),
  • Western Union Telegraph Company (covering states North of the Ohio River and parts of Iowa, Kansas, Missouri, and Minnesota),
  • New York Albany and Buffalo Electro-Magnetic Telegraph Company (covering New York State),
  • Atlantic and Ohio Telegraph Company (covering Pennsylvania),
  • Illinois & Mississippi Telegraph Company (covering sections of Missouri, Iowa, and Illinois),
  • New Orleans & Ohio Telegraph Company (covering the southern Mississippi Valley and the Southwest).

Much like the cable industry today, these six giants maintained a mutually friendly alliance and never competed for territory. Any remaining independents quickly learned cooperation with these larger systems was essential. But once competition stalled in the telegraph business, so did interest in investing in challenging upgrades.

western unionBy 1860, as the United States continued its expansion westward and tension grew between the northern and southern states over issues like slavery and self-determination, the administration of President James Buchanan realized having a reliable national telegraph network was critical to the security of the country. Unfortunately for the president, his priorities ran headlong into private company intransigence. Persuading the for-profit companies to expand their networks to connect the west coast seemed impossible. None wanted to risk investor dollars on a telegraph line they believed would be too expensive and difficult to maintain.

That same year Congress passed, and President James Buchanan signed, the Pacific Telegraph Act, which authorized the Secretary of the Treasury to seek bids for constructing a transcontinental telegraph line, financed by the federal government. Two of the three bidders eventually dropped out, leaving Hiram Sibley’s Western Union the sole bidder.

The Pacific Telegraph Act of 1860 resulted in the construction on this telegraph line extending from Nebraska to Nevada.

The Pacific Telegraph Act of 1860 resulted in the construction of this telegraph line extending from Nebraska to Carson City, Nev.

To insulate his other business interests from the project, Sibley organized the Pacific Telegraph Company to be responsible for construction of the new telegraph line to the west, starting in Omaha, Neb. Sibley also consolidated several small local companies into the California State Telegraph Company, which in turn launched the Overland Telegraph Company, managing construction of the cable eastward from Carson City, Nev., to Salt Lake City. The line was finally completed in October, 1861, seven months after the outbreak of the Civil War.

While newly elected president Abraham Lincoln was distracted settling into office starting March 4, 1861, Sibley was quietly preparing to consolidate control over the new taxpayer-funded cross-country cable. After the project was complete, Pacific Telegraph and California State Telegraph were quickly merged into Western Union, making Hiram Sibley the undisputed king of the telegraph industry. Any future ventures rising to challenge Western Union were instead eaten up by acquisition. By 1866, Western Union announced it was moving its company headquarters from Rochester to 145 Broadway in New York City.

Sibley retired from Western Union in 1869, and went into the seed and nursery business in Rochester and Chicago. He left the company during its most powerful era, having a virtual monopoly on the telegraph business at least a decade before the telephone would arrive on the scene. He retired the richest man in Rochester, and his home in the East Avenue Historical District still stands today. He gave generously to charity after retirement and helped incorporate a new college in the Southern Tier of New York called Cornell University.

The Hiram Sibley House, constructed in 1869, still stands today at 400 East Ave, Rochester, N.Y.

The Hiram Sibley House, constructed in 1868, still stands today at 400 East Avenue, Rochester, N.Y.

As the 1870s arrived, the Civil War was five years finished and huge changes were coming. Although telegraph service was already in place in many eastern seaboard cities, it took longer to arrive in smaller cities in the midwest and southern United States, and it was not too long after that before the telephone followed.

In Cincinnati, the telegraph service that began in 1873 was threatened by the arrival of the telephone in 1878 — just five years later. That fall, Cincinnati’s telegraph company signed an agreement with Bell Telephone Company of Boston, the first telephone company in the country. Bell held several patents essential for manufacturing telephones and granted the telegraph company an exclusive contract to sell phone service within a 25-mile radius of the city.

Bell Telephone arrived in the era of the Robber Barons, where trusts and monopolies were the product of unfettered capitalism. Bell’s business planners were more than happy following the telegraph industry to the glory days of consolidation and monopolization.

By 1879, the Bell Telephonic Exchange was well on its way, up and running on the corner of Fourth and Walnut streets in downtown Cincinnati — the 10th phone exchange in the nation and the first in Ohio. That year, Cincinnati’s first phone book was printed and the young men that operated the telegraph lines were not welcome manning the huge expanse of manual cord boards built inside the central office.

City and Suburban believed women served as better ambassadors for the newly emerging telephone company and the concept of “Hello Girls” was born. Only later would the Bell System insist on referring to these professional employees as “operators.” In Cincinnati, around two dozen women manned the cord boards in the exchange office during its first year. They were required to memorize the names of all callers and had to quickly learn how to complete calls — a process that involved connecting a patch cable between the caller and the person called on a giant board with a plug for every subscriber. They managed nearly 150,000 completed calls during the first year for over 1,000 customers.

1930s: View of half of the world's longest switchboard at the City and Suburban Telegraph Company (later Cincinnati Bell Telephone). The board held 88 positions and handled a record of 9,722 outgoing calls in 1937. Cincinnati, Ohio. 01/01/1935 Photo by Cincinnati Historical Society/Getty Images

Jan. 1, 1935: View of half of the world’s longest switchboard at the City and Suburban Telegraph Company (later Cincinnati Bell Telephone). The board held 88 positions and handled a record of 9,722 outgoing calls in 1937. (Photo by Cincinnati Historical Society/Getty Images)

The simplicity and directness of the telephone quickly proved a major challenge for the telegraph industry. Western Union saw opportunities investing in telegraph networks overseas to stay ahead of this trend. It also launched a stock ticker service and a money transfer service, allowing people to send money across the country in a matter of hours. Despite the innovation, by 1875, financier Jay Gould had finally managed to assemble a formidable competitor to Western Union — the Atlantic and Pacific Telegraph Company. An overabundance of Western Union stock on the market by 1881 made it possible for Gould to finally launch a successful takeover.

A Telex machine in use during the 1970s.

A Telex machine in use during the 1970s.

Telegraph lines remained in use well into the 20th century, used primarily for business communications, cables, and telegrams which were printed and delivered by messenger. Cincinnati Bell sold telegraph grade data lines for a variety of business applications, including slow speed data services. Even after the Morse code telegraph of the 1800s was long gone, other data services existed well before the arrival of the fax machine and the home computer. Telex messages were exchanged over a network of “teleprinters” which resembled an oversized manual typewriter. AT&T’s Teletypewriter eXchange (TWX) network was common in large businesses during the late 1960s into the 1970s. One of Cincinnati Bell’s other large customers for slow speed data lines was the military.

Cincinnati Bell customers signed up for telegraph grade service received an unconditioned telephone line capable of transmitting at 0-75 baud or 0-150 baud in half-duplex or duplex operation. That was half the data speed of computer modems common in the mid 1980s supporting up to 300 baud — which transmits text at a speed most can read and follow along in real-time.

Remarkably, Cincinnati Bell still needs the permission of regulators to drop the Civil War era telegraph service and in discontinuance requests sent to state and federal authorities, it reminded regulators the change will have no impact on the “public convenience and necessity” because there has been no demand for the service for a long time.

In fact, Cincinnati Bell has no customers to notify of the impending doom of telegraph grade service, because there have been no customers subscribed to it.

cincinnati bellCincinnati Bell’s request would have gone unnoticed if it wasn’t for the long legacy of the telegraph era. Western Union dispatched its last telegram on Jan. 27, 2006, after 155 years of continuous service, and largely kept quiet about it, only notifying current customers: “Effective 2006-01-27, Western Union will discontinue all Telegram and Commercial Messaging services. We regret any inconvenience this may cause you, and we thank you for your loyal patronage. If you have any questions or concerns, please contact a customer service representative.”

Those nostalgic for telegrams might be interested to know another company has risen where Western Union left off. iTelegram promises to bring back the experience of a messenger at your front door, but it’s a costly trip down Memory Lane. A Priority Telegram costs $28.95 + $0.75 per word and is delivered usually within 24 hours, and includes proof of delivery. A “MailGram,” dispatched through the U.S. Mail is a slightly less expensive option, costing $18.95 and includes up to 100 words. It arrives in 3-5 days. Or you could send an e-mail for approximately nothing.

While Cincinnati Bell’s request recalls a distant past, Verizon and AT&T are also asking to discontinue services that customers were still using in the 1990s. Verizon wants to drop postpaid calling cards and personal 800 services that customers used to buy from MCI, now a Verizon subsidiary. For its part, AT&T wants to drop operator-assisted services due to almost no customer demand. In many areas, dialing “0” no longer even works to reach one of those Hello Girls… pardon me, I meant operators.

Time Warner Cable Quotes Rural Ky. Resident $410/Mo + 5 Yr. Contract for Broadband

green acresIf residents in rural Kentucky want Time Warner Cable to offer broadband service, they better be prepared to pay for it.

As Time Warner customers consider the company’s latest rate increases, which now include a $10 modem rental fee and an increasingly common $4.99 “Wi-Fi Fee” if you don’t use your own wireless router, there are other customers signing contracts for residential Internet service from Time Warner at prices as high as $410 a month.

Jack Prindle lives in the Big Bone community near Union, Ky., — close enough to Cincinnati to be a suburb, but rural enough to be bypassed for broadband. Two dozen of his neighbors live along a nine-tenths of a mile stretch of Big Bone Church Road, which isn’t exactly a priority for Time Warner Cable. The families have spent a decade trying to entice anyone to offer broadband Internet access. Insight Communications (Time Warner’s predecessor) and Cincinnati Bell have never shown much interest. Time Warner Cable, however, has been engaged in a type of cat and mouse game, offering service at ever-escalating prices only to change its mind at the last minute.

“Within the last year, I have signed contracts with Time Warner for Internet service starting at $300 a month, with a three-year contract, only to have them come back and raise it to $350 for five years, and then $410 a month with a commitment of five years,” Prindle wrote in the Community Recorder. “Then only to be told a month later they were not going to provide Internet. Others of the 24 have similar bizarre stories concerning Time Warner and Cincinnati Bell.”

“Prindle’s story is an example of what is wrong with rural broadband in the United States,” writes Cynthia Rawley, who shared the story with Stop the Cap! “Unchecked cable and phone companies get federal dollars and the benefit of a fake broadband map that has no relationship to reality, leaving many to believe there is no rural broadband problem to solve. But there is.”

Union, Ky.

Union, Ky.

Rawley points out the FCC’s official National Broadband Map shows the two dozen homes around Prindle are all provided 5-50Mbps broadband service by both Time Warner Cable and Cincinnati Bell, despite the fact neither offers any broadband service to anyone in the vicinity.

“Boone County Judge-executive Gary Moore wrote to inform the FCC of this error and failed to get a response,” Prindle noted. What bothers him even more is his tax dollars have paid to subsidize rural Internet service he cannot get at any price.

“Some basic research reveals that Time Warner has received millions of taxpayer dollars to provide broadband Internet in rural areas,” Prindle notes. “The commonwealth of Kentucky has given over $100 million to Internet providers alone to provide broadband Internet in rural areas alone. Opensecrets.org reports that Time Warner spent $4,950,000 in lobbying efforts of federal, state, and local governments in 2015. With this amount of money changing hands, the conspiracy theorists among us see a 20/20 episode coming.”

Prindle better have his rabbit ears ready to watch, because at the rate providers are not expanding rural broadband, he will have a long wait before being able to watch that 20/20 episode online.

Google Fiber Threat Cited in Cincinnati Bell’s Decision to Sell Wireless Division to Verizon Wireless

Phillip Dampier April 8, 2014 Cincinnati Bell, Competition, Consumer News, Google Fiber & Wireless, Verizon, Video, Wireless Broadband Comments Off on Google Fiber Threat Cited in Cincinnati Bell’s Decision to Sell Wireless Division to Verizon Wireless

cincinnati bellCincinnati Bell threw in the towel on its wireless mobile business Monday when it decided to sell its wireless spectrum licenses, network, and 340,000 customers for $210 million to its larger rival Verizon Wireless.

While most analysts say the transaction is the inevitable outcome of a wireless industry now dedicated to consolidation, at least one analyst said the threat of Google Fiber eventually entering the Cincinnati market may have also contributed to the decision to sell.

The future of Cincinnati Bell’s wireless division had been questioned for more than a year, ever since the arrival of the company’s newest CEO Ted Torbeck in January 2013. Cincinnati Bell, one of the last independent holdouts of the Bell System breakup that have not been reabsorbed by AT&T or Verizon, had struggled since Torbeck’s predecessor made some bad bets on acquisitions, including an investment in microwave communications provider Broadwing that left the company with more than $2 billion in debt in 2004. Another $526 million acquisition of data center Cyrus One left the company further in debt.

Torbeck

Torbeck

Torbeck promised a frank evaluation of Cincinnati Bell’s operations last year and keeping its declining wireless division no longer made sense with Torbeck’s focus on replacing the company’s aging copper wire network with fiber optics.

For years, Cincinnati Bell’s biggest competitor has been Time Warner Cable, which has taken away many of its landline customers. Cincinnati Bell’s mobile phone division was created to protect its core business, picking up wireless subscribers as customers dropped their landlines. But the cable company’s bundled service packages made landline service much less expensive than sticking with the phone company, and many wireless customers prefer a national wireless phone company offering better coverage and a wider selection of devices.

Rampant wireless industry consolidation has concentrated most of the cell phone market in the hands of AT&T and Verizon Wireless, giving those two companies access to the most advanced and hottest devices while regional carriers made do offering customers less capable smartphones. Its competitors’ march towards 4G LTE network upgrades also challenged Cincinnati Bell with costly capital investments in a 4G HSPA+ network that Torbeck recently decided no longer made economic sense.

Cincinnati Bell’s wireless revenue for 2013 was $202 million, a decrease of 17 percent from 2012. The company also lost 58,000 subscribers last year, an unsustainable drop that showed few signs of stopping.

610px-Verizon-Wireless-Logo_svg“Our business has been in decline for five or six years,” Torbeck told the Cincinnati Business Courier. “This is absolutely the right time to make this deal. It was probably the highest value we could get at this point in time.”

Torbeck believes Cincinnati Bell’s best chance for a future lies with with fiber optics, capable of delivering phone service along with a robust broadband and television offering that can effectively compete with Time Warner Cable.

“We’ve got to grow market share in Cincinnati and fiber optics is the way to do it,” Torbeck said in 2013. “We have about 25 percent of the city covered and we think from a financial perspective we can get to 65 or 70 percent so we’ve got significant growth opportunity there.”

fiopticsLast year, Cincinnati Bell had passed 184,000 homes with fiber optics – a 28 percent market share. But only 52,000 homes subscribed to Fioptics — Cincinnati Bell’s fiber brand. Time Warner Cable had managed to keep many of its wavering 446,000 customers loyal to the cable company with aggressive discounting and customer retention offers. But now that many of those discounts have since expired, Torbeck wants to reach 650,000-700,000 homes in its service area covering southwestern Ohio and northern Kentucky and convince 50% of those customers to switch to fiber optics.

Torbeck isn’t interested in limiting his business to just greater Cincinnati either.

“At some point in time, we’d like to expand regionally into Indianapolis, Columbus,” Torbeck said. “Louisville is another opportunity. But that’s probably a little down the road. From a fiber standpoint, we could look at acquisitions and get into metro fiber. These are things we’re looking at, but these are things that are down the road. We got a lot of room for growth just here in Cincinnati.”

But financial analysts warned Cincinnati Bell’s enormous debt load limits the company’s potential to invest in expansion. Torbeck’s decision to sell off the company’s wireless unit is another step in reducing that debt and further investing in fiber optics expansion.

google fiberThe company’s unique position as the last remaining independent phone company that still bears the name of the telephone’s inventor may make the company a target for a takeover before Torbeck’s vision is realized. One analyst thinks Cincinnati Bell would be a natural target for Google, which has a recent record of repurposing fiber networks built by other companies as a cost-saving measure to further deploy Google Fiber.

“They are a small and cheap company with the infrastructure that Google could use,” said Brian Nichols. “My theory is that Google will buy undervalued companies like Cincy Bell to save on the mounting costs of buildouts, which could top $30 billion,“ Nichols wrote in an email to WCPO-TV.

Google did exactly that in Provo, Utah, acquiring struggling iProvo from the city government for $1 in return for agreeing to expand the fiber network to more homes.

Cincinnati’s local phone company would sell for considerably more than that, but it would still prove affordable for Google, which has a market value of $361 billion, about 470 times that of Cincinnati Bell.

cincCincinnati Bell has already spent about $300 million on Fioptics and plans to spend an extra $80 million this year on expansion. Before the network is complete, the phone company is likely to spend as much as $600 million on fiber upgrades. But the payoff has been higher revenue — $100 million last year alone, and a stabilizing business model that has reduced losses from landline cord-cutting. Telecom analyst Nicholas Puncer offers support for the investment, something rare for most Wall Street advisers.

“It’s a reasonable strategy,” Puncer said. “There’s only going to be more data going through networks in the future, not less. The way we consume content is going to be a lot different 10 years from now than it is today. This is their effort to be on the right side of that, giving people more options to receive that content.”

But if Google Fiber comes to town, it may not be enough.

“Google has an unprecedented luxury,” Nichols said in his email to WCPO. “They are [attaching] fiber to existing poles owned by AT&T (and other telecom companies), and then targeting areas where consumers agree for service before the network is even built. Given this demand, and its mere ability to operate in such a manner, I do think Cincinnati Bell will have major problems once that day comes (likely sooner rather than later). In fact, I don’t think they stand a chance of competing against Google.”

Cincinnati Bell said it will continue to offer wireless service for customers for the next 8 to 12 months. The company will notify customers with further details regarding transition assistance around the time of the closing, which is expected to be in the second half of 2014.

It was not immediately clear on Monday if the sale will impact jobs. Cincinnati Bell Wireless employs about 175 people, including retail store employees.

WKRC in Cincinnati reports on what the sale of Cincinnati Bell Wireless to Verizon Wireless means for customers. (1:24)

Cincinnati Bell’s Fioptics Fiber to the Home Network Can Deliver 1,000Mbps if Customers Want It

cincinnati bellCincinnati Bell is an island in the middle of a sea of AT&T — offering over 258,000 southwestern Ohio residents and businesses access to a fiber to the home network that has kept customer disconnects down and broadband speeds up.

Now the phone company says it is ready for any speed increases on tap from competitor Time Warner Cable and has the capacity to bring gigabit speeds to Cincinnati as soon as enough customers ask. But first it has to expand its footprint.

cincin speedThe company has plans to bring Fioptics to 35 percent of Cincinnati by the end of this year, according to Leigh Fox, chief technology officer for Cincinnati Bell. The company has successfully upgraded its fiber network to offer 53,000 more homes a fiber alternative to Time Warner Cable during the first nine months of this year. At least 29 percent of Cincinnati residents have cut Time Warner Cable’s cord at least once, trying the fiber to the home service.

Cincinnati Bell wants a 50-70 percent penetration rate in the city, defined as the percentage of customers who have subscribed at least once.

“I am pretty confident on returns and we do have to hit a certain metric,” said Fox. “As an example, we just built out my neighborhood over the summer where in the first two weeks we had 23 percent penetration and after a month we had 43 percent penetration.”

Unlike AT&T which confines U-verse to larger population areas, Cincinnati Bell is continuing to invest in traditional ADSL/2+ service for the nearly half million customers throughout its service area that cannot get Fioptics service yet. The company claims the majority of these customers can now buy 10Mbps or faster DSL service, making Cincinnati Bell competitive with Time Warner Cable across the region. Higher, stable speeds are the phone company’s best defense against DSL disconnects. Most cable broadband growth comes at the expense of telephone company DSL customers leave behind.

Currently, the majority of Cincinnati Bell’s “non-techie” fiber customers are satisfied with 20Mbps service. Time Warner Cable is planning to offer up to 100Mbps in the near future, but Fox noted Fioptics has the capability to exceed those speeds ten times over, and said if enough customers want 1Gbps speed, Cincinnati Bell will offer it.

Comcast/Time Warner Cable Biggest Broadband Winners; DSL Withers on the Vine

Won 1.1 million new customers in 2011

Comcast and Time Warner Cable collectively picked up more than 1.5 million new customers in 2011, with most of the growth coming from dissatisfied DSL subscribers seeking better broadband speeds.

Leichtman Research Group, Inc. (LRG) found the eighteen largest cable and telephone providers in the US — representing about 93% of the market — acquired 3 million net additional high-speed Internet subscribers in 2011. Annual net broadband additions in 2011 were 88% of the total in 2010.

The top broadband providers now account for 78.6 million subscribers — with cable companies having over 44.3 million broadband subscribers, and telephone companies having over 34.3 million subscribers.

Stalled growth

Despite AT&T’s position as the second largest Internet Service Provider in the country, the company only picked up 117,000 new customers in 2011.  In contrast, Time Warner Cable, with 6 million fewer customers, added almost a half-million new broadband subscriptions last year.

Frontier Communications, which made broadband a primary target for expansion, has not seen considerable growth either.  The company only added just short of 38,000 new broadband customers last year, almost all getting DSL, often at speeds of 1-3Mbps.

Other key findings include:

  • The top cable companies netted 75% of the broadband additions in 2011;
  • The top cable companies added 2.3 million broadband subscribers in 2011 — 98% of the total net additions for the top cable companies in 2010;
  • The top telephone providers added 750,000 broadband subs in 2011 — 68% of the total net additions for the top telephone companies in 2010;
  • In the fourth quarter of 2011, cable and telephone providers added 765,000 broadband subscribers — with cable companies accounting for 82% of the broadband additions in the quarter.

Now serving 10.3 million

“Despite a high level of broadband penetration in the US, the top broadband providers added 88% as many subscribers in 2011 as in 2010,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. “At the end of 2011, the top broadband providers in the US cumulatively had over 78.6 million subscribers, an increase of nearly 25 million over the past five years.”

Americans are increasingly treating broadband as an essential “utility” service, as fundamental as electricity or clean water.

The majority of consumers who lack the service either consider it irrelevant in their lives (a factor that increases with the age of the surveyed respondent), cannot obtain service from their provider because of their location, or cannot afford the service.

Broadband Internet Provider Subscribers at End of 4Q 2011 Net Adds in 2011
Cable Companies
Comcast 18,147,000 1,159,000
Time Warner^ 10,344,000 491,000
Cox* 4,500,000 130,000
Charter 3,654,600 252,900
Cablevision 2,965,000 73,000
Suddenlink 951,400 65,100
Mediacom 851,000 13,000
Insight^ 550,000 25,500
Cable ONE 451,082 25,680
Other Major Private Cable Companies** 1,925,000 55,000
Total Top Cable 44,339,082 2,290,180
Telephone Companies
AT&T 16,427,000 117,000
Verizon 8,670,000 278,000
CenturyLink 5,554,000 238,000
Frontier^^ 1,735,000 37,833
Windstream 1,355,300 53,600
FairPoint 314,135 24,390
Cincinnati Bell 257,300 1,200
Total Top Telephone Companies 34,312,735 750,023
Total Broadband 78,651,817 3,040,203

Sources: The Companies and Leichtman Research Group, Inc.
* LRG estimate
** Includes LRG estimates for Bright House Networks, and RCN
^ Totals prior to Time Warner Cable’s acquisition of Insight completed on 2/29/2012
^^ LRG estimate does not include wireless subscribers
Company subscriber counts may not represent solely residential households
Totals reflect pro forma results from system sales and acquisitions
Top cable and telephone companies represent approximately 93% of all subscribers

AT&T Knows Best: Kentucky Senator Introduces Company-Written Bill That Ends Universal Service

Sen. Paul Hornback (R-AT&T)

A Kentucky state senate panel on Tuesday approved a bill admittedly-authored by AT&T that could allow the company to abandon providing basic telephone service in areas deemed not sufficiently profitable.

Senate Bill 12 is just the latest effort by AT&T to end “Universal Service,” the basic principal that all Americans should have equal access to basic landline telephone service.

The proposed legislation would allow the three largest phone companies in Kentucky — AT&T, Windstream, and Cincinnati Bell to abandon customers who, in one possible scenario, do not agree to a more deluxe feature package that includes long distance calling, wireless service, and/or broadband.

“This bill represents a grave threat to continued, stand-alone, basic telephone service for many Kentuckians who don’t have the luxury of access to Twitter and all the things that we in urban areas tend to take for granted,” Tom FitzGerald, director of the Kentucky Resources Council told the Lexington Herald-Leader.

AT&T says allowing it the right to terminate rural landline service would “spur innovation and create jobs.” It would also strip Kentucky of its power to investigate and force resolutions of consumer complaints.

The optics of the bill’s primary sponsor, Sen. Paul Hornback (R-Shelbyville/AT&T), sitting next to the two AT&T executives who authored the bill as he testified before the Senate Committee on Economic Development, Tourism and Labor was not lost on the bill’s opponents.

“It’s obvious who he is really working for,” said our regular Kentucky reader Paul in Louisville.

Daniel, the Stop the Cap! reader who first shared the story with us, is not happy either.

“This infuriates me,” he writes. “If AT&T gets their way, they will have less reason to invest in areas that are underserved or not served at all, and allow them to further push people to their horrific cell service.”

Daniel barely gets DSL from AT&T — 3Mbps if he’s lucky, and most of his neighbors cannot get any broadband from the company because they don’t officially service the area with broadband.  Daniel suspects once AT&T is deregulated further, they will have even fewer reasons to focus on less-populated regions of the state.

Hornback: "Nobody knows better than AT&T what the company needs the legislature to do for it."

“AT&T is my only reliable option – and if I can’t keep their Internet service then I will lose my job,” he says.

In 2006, AT&T helped push through a deregulation measure that stripped the Kentucky Public Service Commission of its ability to oversee prices for telecommunications services in the state. Customers of both AT&T and Cincinnati Bell soon saw price increases after the legislation passed with arguably no improvement in service.

Hornback argues S.12 will help “modernize telecommunications in the state of Kentucky,” without explaining exactly how abandoning customers enhances their level of service.

AT&T says they will not completely exit rural Kentucky if given the power to disconnect its landline network.  It can sell rural customers AT&T cell phone service instead. Critics say that comes at a substantially higher price and offers only limited broadband.

Hornback defended that, suggesting the company is wasting money and resources keeping its current antiquated landline facilities when it might be better spending that money on wireless services.

But customers would face charges starting at nearly $40 a month after taxes and fees for a basic AT&T wireless plan with as few as 200 calling minutes a month.

Hornback got around initial opposition to an earlier measure he introduced — SB 135, by reintroducing essentially the same measure inside another unrelated bill.  Hornback said that was an effort to give the legislation “a fresh start” in light of heated criticism from consumer groups, the AARP, and even Kentucky businesses.

The committee voted 9-1 for Hornback/AT&T’s measure and sent the bill forward to the Senate floor.  The single “no” vote came from Sen. Denise Harper Angel (D-Louisville).

Phone companies in Kentucky

AT&T’s clout in the state capital is unparalleled according to the newspaper:

It employs 31 legislative lobbyists, including a former PSC vice chairwoman and past chairs of the state Democratic and Republican parties, spending about $80,000 last year on legislative lobbying. Its political action committee has given at least $91,000 in state political donations since 2007.

Remarkably, Hornback defended AT&T’s authorship of his bill that would directly benefit the company’s interests.

Nobody knows better than AT&T what the company needs the legislature to do for it, Hornback said.

“You work with the authorities in any industry to figure out what they need to move that industry forward,” Hornback said. “It’s no conflict.”

Senate Bill 12 (As amended)

Amend KRS 278.542 to allow for certain exemptions to the commission’s jurisdiction as provided for in KRS 278.541 to 278.544; amend KRS 278.543 to allow a telephone utility, other than an electing small telephone utility, to establish market-based rates, subject to certain limitations, for basic local exchange service not subject to commission jurisdiction; relieve an electing utility of any provider of last resort obligation notwithstanding any provision of law or administrative regulation; amend KRS 278.54611 to allow the commission to apply standards adopted by the Federal Communications Commission to eligible telecommunications carriers, and the commission may exercise its authority to to ensure that carriers comply with those standards only to the extent permitted by and consistent with federal law; amend KRS 278.5462 to state that the commission shall have jurisdiction to assist in the resolution of consumer service complaints with respect to broadband services.

Inside ALEC: How Corporations Ghost-Write Anti-Consumer State Telecom Legislation

[Stop the Cap! has written extensively about the pervasive influence some of the nation’s largest cable and phone companies have on telecommunications legislation in this country.  On the state level, one group above all others is responsible for quietly getting company-ghost-written bills and resolutions into the hands of state lawmakers to introduce as their own.]

The American Legislative Exchange Council (ALEC) is the latest corporate response to campaign finance and lobbying reform — a Washington, D.C.-based “middle man” that brings lawmakers and corporate interests together while obfuscating the obvious conflict of interest to voters back home if they realized what was going on.

ALEC focuses on state laws its corporate members detest because, in many cases, they represent the only regulatory obstacles left after more than two decades of deregulatory fervor on the federal level.  State lawmakers are ALEC’s targets — officeholders unaccustomed to a multi-million dollar influence operation.  The group invites lawmakers to participate in policy sessions that equally balance corporate executives on one side with elected officials on the other.  Consumers are not invited to participate.

ALEC’s telecom members have several agendas on the state level, mostly repealing:

  • Local franchising and oversight of cable television service;
  • Statewide oversight of the quality of service and measuring the reliability of phone and cable operators;
  • Consumer protection laws, including those that offer customers a third party contact for unresolved service problems;
  • Universal service requirements that insist all customers in a geographic region be permitted to receive service;
  • Funding support for public, educational, and government access television channels;
  • Rules governing the eventual termination of essential service for non/past due payments;
  • Local zoning requirements and licensing of outside work.

But ALEC is not always focused on deregulation or “smaller government.” In fact, many of its clients want new legislation that is designed to protect their position of incumbency or enhance profits.  Cable and phone company-written bills that restrict or ban public broadband networks are introduced to lawmakers through ALEC-sponsored events.  In several cases, model legislation that was developed by cable and phone companies was used as a template for nearly-identical bills introduced in several states without disclosing who actually authored the original bill.

ALEC specializes in secrecy, rarely granting interviews or talking about the corporations that pay tens of thousands of dollars to belong.  Corporate members also enjoy full veto rights over any proposal or idea not to their liking, and aborted resolutions or legislative proposals are kept completely confidential. More often than not, however, legislators and corporate members come to an agreement on something, and the end product ends up in a central database of model bills and resolutions ready to be introduced in any of 50 state legislatures.

Many do, and often these proposed bills are remarkably similar, if not identical. That proved to be no coincidence.  In July 2011, the Center for Media and Democracy was able to obtain a complete copy of ALEC’s master database of proposed legislation.  The Center called it a stark example of “corporate collaboration reshaping our democracy, state by state.”

National Public Radio takes an inside look at the American Legislative Exchange Council and how it works to help major corporations influence and change state laws. (October 29, 2010) (8 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

ALEC’s Corporate Telecom Members

ALEC defends itself saying it does not directly lobby any legislator.  That is, in fact true.  But many of its corporate members clearly do.  AT&T is one of ALEC’s most high profile members, serving as a “Private Enterprise Board” member, state corporate co-chair of Arkansas, California, Connecticut, Louisiana, Mississippi, and Texas (all AT&T service areas), a member of the Telecommunications and Information Technology Task force, and “Chairman” level sponsor of the 2011 ALEC Annual Conference (a privilege for those contributing $50,000).

AT&T’s lobbying is legendary, and is backed with enormous campaign contributions to legislators on the state and federal level.

But AT&T isn’t the only telecommunications company that belongs to or supports ALEC:

  • CenturyLink (also including Qwest Communications), “Director” level sponsor of 2011 ALEC Annual Conference ($10,000 in 2010)
  • Cincinnati Bell
  • Comcast, State corporate co-chair of Georgia, Minnesota, Missouri and Utah and recipient of ALEC’s 2011 State Chair of the Year Award
  • Cox Communications, “Trustee” level sponsor of 2011 ALEC Annual Conference ($5,000 in 2010)
  • Time Warner Cable, State corporate co-chair of Ohio, “Director” level sponsor of 2011 ALEC Annual Conference ($10,000 in 2010)
  • Verizon Communications, Private Enterprise Board member and State corporate co-chair of Virginia and Wyoming

ALEC supporters among trade groups and astroturf/corporate-influenced “non profits”:

  • National Cable and Telecommunications Association, ALEC Telecommunications and Information Technology Task Force member
  • Free State Foundation (think tank promoting limited government and rule of law principles in telecommunications and information technology policy)
  • Heartland Institute, Exhibitor at ALEC’s 2011 Annual Conference, Telecommunications and Information Technology Task Force member, Education Task Force member, Commerce, Insurance and Economic Development Task Force, Financial Services Subcommittee member and Energy, Environment and Agriculture Task Force member

ALEC’s Ready-to-Introduce Legislation

The two most pervasive pieces of legislation ALEC’s telecom members (especially AT&T) want as a part of state law are bills to strip local authority over cable systems and hand it to the state government and the elimination or excessive micromanagement of community broadband networks:

This model bill for increased cable competition strips most of the authority your community has over cable television operations and transfers it to under-funded or less aggressive state bodies. Although the bill claims to protect local oversight and community access stations, the statewide video franchise fee almost always destroys the funding model for public, educational, and government access channels.

These municipal broadband bills are always written to suggest community and private players must share a "level playing field." But bills like these always exempt the companies that actually wrote the bill, and micromanage and limit the business operations of the community provider.

Legislators: Bring the family to Mardi Gras World on us, sponsored by America's largest telecommunications companies.

WHYY Philadelphia’s ‘Fresh Air’ spent a half hour exploring who really writes the legislation introduced in state legislatures. When ALEC gets involved, The Nation reporter John Nichols thinks the agenda is clear: “All of those pieces of legislation and those resolutions really err toward a goal, and that goal is the advancement of an agenda that seems to be dictated at almost every turn by multinational corporations.” (July 21, 2011) (32 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Unfortunately, state lawmakers are not always sophisticated enough to recognize a carefully crafted legislative agenda at work.  National Public Radio found one excellent example — the 2010 Arizona immigration law that requires police to arrest anyone who cannot prove they entered the country legally when asked.  America’s immigration problems remain a major topic on the agenda at some ALEC events, curious for a corporate-backed group until you realize one of ALEC’s members — the Corrections Corporation of America — America’s largest private prison operator, stood to earn millions providing incarceration services for what some estimated could be tens, if not hundreds of thousands of new prisoners being held on suspicion of immigration violations.

CCA was in the room when the model immigration legislation, eventually adopted by Arizona’s legislature, was written at an ALEC conference in 2009.

Bring the Kids, Stay for the Corporate Influence

Getting legislators to attend these seminars isn’t as hard as it might sound.

In January, we reported members of the North Carolina General Assembly, who showed their willingness to support telecom industry-written bills when it passed an anti-community broadband initiative in 2011, were wined and dined (along with their staff) by ALEC at the Mardi Gras World celebration in New Orleans.  Rep. Marilyn Avila (R-Time Warner Cable), who introduced the aforementioned measure, brought her husband to Asheville to enjoy a special weekend as the featured guest speaker at a dinner sponsored by North Carolina’s state cable lobbying group:

The North Carolina Cable Telecommunications Association reported they not only picked up Marilyn’s food and bar bill ($290 for the Aug. 6-8 event), they also covered her husband Alex, too.  Alex either ate and drank less than Marilyn, or chose cheaper items from the menu, because his food tab came to just $185.50.  The cable lobby also picked up the Avila’s $471 hotel bill, and handed Alex another $99 in walking-around money to go and entertain himself during the weekend event.  The total bill, effectively covered by the state’s cable subscribers: $1,045.50.

Rep. Avila with Marc Trathen, Time Warner Cable's top lobbyist (right) Photo by: Bob Sepe of Action Audits

ALEC makes it easy because it pays the way for lawmakers and families to attend their events through the award of “scholarships”:

The organization encourages state lawmakers to bring their families. Corporations sponsor golf tournaments on the side and throw parties at night, according to interviews and records obtained by NPR.

[…] Videos and photos from one recent ALEC conference show banquets, open bar parties and baseball games — all hosted by corporations. Tax records show the group spent $138,000 to keep legislators’ children entertained for the week.

But the legislators don’t have to declare these as corporate gifts.

Consider this: If a corporation hosts a party or baseball game and legislators attend, most states require the lawmakers to say where they went and who paid. In this case though, legislators can just say they went to ALEC’s conference. They don’t have to declare which corporations sponsored these events.

Reporter John Nichols told NPR ALEC’s focus on state politics is smart:

“We live at the local and state level. That’s where human beings come into contact more often than not,” he says. “We live today in a country where there’s a Washington obsession, particularly by the media but also by the political class. … And yet, in most areas, it’s not Washington that dictates the outlines, the parameters of our life. … And so if you come in at the state government level, you have a much greater ability to define how you’re going to operate.”

Resources:

  • ALEC Exposed: Access a database of more than 800 corporate ghost-written bills and resolutions intended to become state law in all 50 states. Sponsored by the Center for Media and Democracy.
  • ALEC’s Database Revealed: A more general indictment of ALEC and its coordinated agenda to allow corporate influence to hold an increasing role in public policy.
  • Protestors Demand End to Verizon’s Involvement in ALEC: In Albany, N.Y., protestors turned up in front of Verizon demanding the company end its association with ALEC.
  • California Lawmakers Enjoy Free Trips to Hawaii, Europe: California’s state politicians are under fire for lavish travel arranged by ALEC.

Cincinnati Bell & DirecTV: When a $29.99 Promotion Turns Into $439 Instead

Phillip Dampier June 6, 2011 Cincinnati Bell, Consumer News, Video Comments Off on Cincinnati Bell & DirecTV: When a $29.99 Promotion Turns Into $439 Instead

A Cincinnati-area man found a DirecTV promotion from his local phone company promising a full package of television programming with a DVR box for just $30 a month.  A month later, that “bargain” literally emptied his checking account of more than $400.

Cincinnati Bell, like several other telephone companies, tries to compete for “triple play” customers accustomed to one bill for phone, Internet, and television service.  But where the company’s fiber network does not extend, customers can only get telco-TV by signing up for a DirecTV satellite television package.

Gary Gideon of Westwood learned the hard way that phone company promotions promising attractive prices are often tempered with paragraphs of fine print which make savings elusive.  In this case, the trouble began when Gideon thought he was receiving the standard DirecTV DVR that was included in the promotion.  Instead, the company supplied him with an HD DVR that carries a hefty additional charge, turning his $29.99 price he was originally promised into $49.85 instead — nearly $20 extra a month.

When Gideon complained about the surprise charges, he was offered a DVR downgrade, if he was willing to pony up an expensive deposit he was never asked to pay for the more deluxe model.  The installer responsible for Gideon’s setup promised he could walk away and cancel the package without any harm done.  But a month later, DirecTV deducted nearly $400 from his checking account to cover “early termination fees.”

Despite the assurances Gideon received, the satellite company’s customer service agents refused to budge on waiving the termination fee for just a few weeks of service, telling Gideon “nobody” has the power to waive such fees.

Nobody except the media or an empowered customer service representative.  WKRC-TV in Cincinnati covered Gideon’s nightmare and found DirecTV only too willing to reverse the early termination fees they refused to refund earlier.  They said it was “good customer relations” to do so.  It’s also good public relations on the six o’clock news.

When dealing with satellite providers delivering service on behalf of a phone company, always carefully review the fine print for equipment and installation fees, contract terms and obligations, and disclosures for any additional charges.  If the equipment does not match what the offer provided, refuse it.  Remember that the truck plastered with DirecTV logos that appears in your driveway to handle the installation is probably an independent contractor — one that usually cannot make promises on behalf of the satellite company.  (2 minutes)

 

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