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T-Mobile/Sprint Merger Approval May Depend on GOP Maintaining Majority in Congress

As the wireless industry awaits an announcement that T-Mobile and Sprint have an agreement to merge, some on Wall Street are skeptical the merger deal will win approval, especially if Republicans lose their majority in the House and Senate in the 2018 mid-term elections.

Matthew Niknam of Deutsche Bank has warned his clients any merger deal not approved by next November is more likely to fall apart if  Democrats take back control of Congress:

“There also may be greater incentive for both sides to evaluate a potential deal sooner rather than later, given the risk that deal approval may slip beyond mid-term elections in late 2018 (with the risk that more populist/less corporate-friendly sentiment may become more pervasive in D.C.) In fact, we note that the Democrats’ ‘Better Deal’ agenda (unveiled in July 2017, targeted towards 2018 elections) highlights ongoing corporate consolidation as a threat to U.S. consumers, and proposes sharper scrutiny of potential deals.”

Nikram writes there has not been a lot of interest by cable operators to acquire Softbank’s Sprint, which has been effectively up for sale or merger for at least a year.

Fierce Wireless notes Cowen & Company Equity Research last month suggested the chance of a merger between T-Mobile and Sprint was now 60-70%, down from 80-90% originally. The reason for the pessimism is their estimate that any deal’s chance of winning approval was only about 50%. The odds get even worse if the Democrats start to check the Trump Administration’s power.

Public policy groups and well-compensated industry opinion leaders are already preparing to wage a PR war over a deal that would reduce America’s major wireless carriers to just three.

Professor Daniel Lyons, well-known for writing pro-industry research reports defending almost anything on their corporate policy wish list, is hinting at a possible strategy by the merging carriers by suggesting neither could survive without a merger.

Most analysts predict that with just three national wireless carriers, the U.S. wireless marketplace would more closely resemble Canada — widely seen as more carrier-friendly and expensive.

Wall Street analysts are debating exactly how many tens of thousands of jobs will be lost in a merger, and the numbers are staggering.

Jonathan Chaplin of New Street Research predicts the merger would cost the country more jobs than now exist at Sprint.

He predicts “approximately 30,000 American jobs” will be permanently lost in a merger. Together the two companies currently employ 78,000 — 28,000 at Sprint and 50,000 at T-Mobile.

Craig Moffett of MoffettNathanson Research was more conservative, predicting 20,000 job losses would come from a merger. But the impact would not be limited to just direct hire employees.

“We conservatively estimate that a total of 3,000 of Sprint and T-Mobile’s branded stores (or branded-equivalent stores) would eventually close,” Moffett’s report said.

Golden parachutes will make some executives at Sprint and T-Mobile very wealthy if a merger succeeds.

Many T-Mobile and Sprint stores are located in malls and retail “power centers” where maintaining both stores would be unnecessary. Also hard hit would be wireless tower owners and those employed to care for them. Most believe Sprint’s CDMA wireless network would eventually be decommissioned in a merger, and many of its cell sites would be mothballed. Sprint’s biggest asset is its currently unused trove of high frequency wireless spectrum it could use to deploy future 5G services, but those services would likely be provided from small cells mounted on utility poles and street lights.

The biggest winners in any deal will likely be top executives at Softbank, Sprint, and T-Mobile, Wall Street banks providing deal advisory services and financing, and shareholders, who can expect higher earnings from a less competitive marketplace. Fierce competition from T-Mobile and Sprint were both directly implicated for threatening revenues for all four wireless companies, who have had to respond to aggressive promotions by cutting prices and offering more services for less money.

The Trump Administration’s choices of Ajit Pai for Chairman of the FCC and Makan Delrahim as United States Assistant Attorney General for the Antitrust Division of the Justice Department are both widely seen as signals the White House is not going to crack down on competition-threatening merger deals. Mr. Pai has recently improved the foundation for a T-Mobile/Sprint merger by declaring the wireless industry to be suitably competitive, something required before seriously contemplating reducing the number of competitors.

Eight Democrats sent a letter to the FCC chairman last week calling on both the FCC and the Justice Department to begin an investigation into the possible merger as soon as possible, citing possible antitrust concerns.

The text of the letter:

Dear Chairman Pai and Assistant Attorney General Delrahim:

We write to ask you to begin investigating the impact of a merger between T-Mobile International and Sprint Corporation. According to Pew Research, over three-quarters of Americans now own smartphones, driven by a 12 percent increase in smartphone ownership among adults over age 65 and a 12 percent increase in smartphone ownership in households earning less than $30,000 a year since 2015. Today, smartphones are not really just phones at all. For many, they are the primary connection to the internet. An anticompetitive acquisition would increase prices, burdening American consumers, many of whom are struggling to make ends meet, or forcing them to forego their internet connection altogether. Neither outcome is acceptable.

We believe that an investigation is appropriate for three reasons. First, aggressive antitrust enforcement benefits consumers and competition in the wireless market. Second, a combination of T-Mobile and Sprint would raise significant antitrust issues and could dramatically harm consumers. Third, although a deal has not been announced, the two parties have made repeated attempts to merge, and current reports suggest they are close to an agreement. Your agencies should be in a position to fully – but expeditiously – investigate and analyze this deal should it occur.

Competition among wireless carriers has lowered prices, increased quality, and driven innovation

Consumers have benefited from competition among the four national carriers, and we have effective antitrust enforcement to thank for that competition. In the summer of 2011, the Department of Justice’s (DOJ) Antitrust Division filed suit to block AT&T’s proposed acquisition of T-Mobile despite claims that T-Mobile was a weak competitor and, without the deal, remaining options “won’t be pretty.”  The FCC likewise outlined its opposition to the deal that fall. The deal collapsed, but T-Mobile did not. It competed. It spent billions improving its network, and it offered better terms; for example, it eliminated two-year contracts and data overages. It enticed customers to switch providers by paying their termination fees. And, its competitors had to respond in kind. As William Baer, former head of DOJ’s Antitrust Division, has explained, consumers have enjoyed “much more favorable competitive conditions” since that transaction was blocked.  In May 2017, the Wall Street Journal reported that cellphone plan prices were down 12.9 percent since April 2016, the largest decline in 16 years, and attributed the drop to “intense competition” among the top cell service providers: Verizon, Sprint, T-Mobile, and AT&T.  Paul Ashworth, chief U.S. economist at Capital Economics, specifically suggested that it was caused by the “price war that has broken out among cell-phone service providers, with all the big providers now offering unlimited data plans at cheaper rates.”

Further, the fact that T-Mobile and Sprint appear to be each other’s primary competitor raises additional concerns about this potential horizontal merger. That direct competition has particularly benefited lower-income families and communities of color, many of whom rely on mobile broadband as their primary or only internet connection.  Sprint and T-Mobile have offered products and service options that are more appealing to lower-income consumers. For example, T-Mobile was the first major carrier to offer a no contract plan,  and both Sprint and T-Mobile have been leaders in offering prepaid and no credit check plans, which allow people who may have poor credit to obtain a cell plan and ultimately access the internet.

A combination of T-Mobile and Sprint would raise significant antitrust concerns

Not surprisingly, when T-Mobile and Sprint first discussed a merger in 2014, both of your predecessors expressed skepticism. William Baer stated that “[I]t’s going to be hard for someone to make a persuasive case that reducing four firms to three is actually going to improve competition for the benefit of American consumers.”  Similarly, former FCC Chairman Tom Wheeler simply explained, “[f]our national wireless providers are good for American consumers.”

What is surprising, however, is that a few years later the two companies have revived their merger talks. Whether one looks at cellphone competition as a national market or as numerous local markets, T-Mobile’s acquisition of Sprint would very likely be presumptively anticompetitive. We are concerned that this consolidation would increase prices, reduce incentives to offer new plans, and allow the remaining carriers to curtail their investment in their networks. Further, given both companies’ focus on competing for lower-income customers, the combination of Sprint and T-Mobile could disproportionately harm those consumers. In addition to potentially raising retail prices, the remaining carriers are also likely to increase prices to companies like Straight Talk, which buys bulk access to one or more of the four national carriers and advertises almost exclusively to lower-income communities.

T-Mobile and Sprint will no doubt claim that the merger will leave sufficient competition, increase cost savings, and spur investment. The agencies will need to examine these issues in depth and make the ultimate determination as to whether the effect of such a deal would be to undermine or promote competition. The very complexity of the issues only further justifies the need for the agencies to begin examining the markets and investigating the competitive dynamics sooner rather than later.

Initiating an investigation is appropriate

Although the antitrust agencies often wait for an official filing before opening an investigation, nothing requires this delay. For example, in May, the Antitrust Division announced an investigation of the possible acquisition of the Chicago Sun-Times by the owner of the Chicago Tribune.  The two companies in question here have had a longstanding interest in combining, and, according to reports, an agreement between Sprint and T-Mobile may be weeks away.

Beginning an investigation into a merger of T-Mobile and Sprint now will allow your agencies to quickly, but fully, review the agreement if it is announced. Indeed, multiple news sources are reporting that the two parties are close to a deal in principle. The likelihood of the transaction occurring combined with the serious issues that it raises provide compelling reason for DOJ and the Federal Communication Commission to begin investigating the potential transaction.

For the reasons stated above, we urge you to begin to examine this potential transaction now. Competition among four major cell phone carriers has benefited consumers with lower prices, better service, and more innovation. We are concerned that consolidation will thwart those goals. Thank you for your prompt attention to this matter.

Sincerely,

Amy Klobuchar (D-Minn.)
Al Franken (D-Minn.)
Patrick Leahy (D-Vt.)
Richard Blumenthal (D-Conn.)
Ron Wyden (D-Ore.)
Kirsten Gillibrand (D-N.Y.)
Ed Markey (D-Mass.)
Jeff Merkley (D-Ore.)

T-Mobile Makes Deal With FOX Television to Relocate Channels to Boost Cell Coverage

WWOR advertises itself as My 9, but the station actually transmits over UHF channel 38 and will move to channel 25 early next year.

T-Mobile today announced a partnership with FOX Television Stations to hasten channel relocation to make room for the wireless carrier’s expansion of wireless service in the 600MHz spectrum it won at auction.

As part of the agreement, FOX-owned WWOR-TV in Secaucus, N.J., will vacate its current digital UHF channel 38 in early 2018, over a year sooner than originally planned. The station will move to UHF channel 25, but most viewers will still find the channel on virtual channel 9. T-Mobile will then bring new cell service online in metropolitan New York where WWOR’s signal used to be.

T-Mobile is aggressively trying to bring its valued 600MHz spectrum online as quickly as possible because it offers the carrier and its customers expanded coverage and better reception in indoor locations. Although the FCC has set an August 2019 deadline for stations to vacate and move their channels to make way for improved cell service, T-Mobile is offering incentives to get broadcasters to make the move well before that deadline.

Earlier this year, PBS and America’s Public Television Stations announced a similar partnership with T-Mobile. The wireless carrier has offered to pay the costs for a significant number of rural TV translators to move to new channel positions to make room for T-Mobile’s cell expansion.

“We’re committed to working with broadcasters across the country to clear 600MHz spectrum, so we can preserve programming and bring increased wireless choice and competition across the country,” said Neville Ray, chief technology officer at T-Mobile.

Working with the low power television outlets is a win-win solution for T-Mobile and the stations, because some budget-constrained stations may be required to change channel positions at least twice. There are concerns that the diminishing UHF TV dial may not have room to accommodate every TV station that wants to remain on the air.

Cable Operators Talk Broadband Capacity and Upgrades

With many cable operators reporting a need to double network capacity every 18-24 months to keep up with customer traffic demands, the industry is spending time and money contemplating how to meet future needs while also finding ways to cut costs and make networks more efficient.

Top technology executives from five major cable operators answered questions (sub. req’d.) from Multichannel News about their current broadband networks and their plans for the future. Some, like Mediacom, are aggressively adopting DOCSIS 3.1 cable broadband upgrades for their customers while companies like Cox and Comcast are deploying multiple solutions that use both traditional hybrid fiber-coax network technology and, on occasion, fiber-to-the-home to boost speed and performance. But at least one cable company — Charter Communications — thinks it can continue operating its existing DOCSIS 3 network without major upgrades for several years to come.

Cable Broadband Traffic Can Be Handled

“We’ve been on a pretty steady path of doubling our network capacity every 18-24 months for several years, and I don’t see anything that makes me think that will change,” said Tony Werner, president of technology and product at Comcast. “We’ve been strategically extending fiber further into our network to meet customer demand, and that effort, combined with our commitment to deploying DOCSIS 3.1 has given us a network that’s powerful, flexible, and ready for what’s next.”

J.R. Walden, senior vice president of technology at Mediacom was more aggressive.

“We have completed the removal of all the analog channels. That was the big step one,” Walden said. “Step two was to start transitioning high-speed data over to DOCSIS 3.1, so we’re not adding any more 3.0 channels, and reuse spectrum for 3.1, which is a bit more efficient. The whole company is 3.1, all the modems we’re buying since June have been 3.1, so we’ve begun that next transition.”

Walden added Mediacom is also trying to improve broadband performance by reducing the number of customers sharing the same connection.

“We average about 285 homes to 290 homes per node as an average,” he said.

Mediacom is also scrapping older technology on the TV side to open new bandwidth. The cable company is getting rid of MPEG-2-only set-top boxes so the company can transition its video lineup to MPEG-4. But even that won’t last long. Walden admits the company will then quickly start moving less-viewed channels and some premium networks to IP delivery.

Traditional cable broadband service relies on a hybrid fiber-coax network.

In its European markets, Liberty Global has adopted Converged Cable Access Platform (CCAP) equipment across its footprint. CCAP technology saves cable operators space and operates more efficiently, and supports future convergence of technologies that cable operators want to adopt in the future. CCAP has helped Liberty Global deal with its 45% traffic growth by making upgrades easier. The company is also using advanced features of CCAP to better balance how many customers are sharing a connection. The next step is adopting DOCSIS 3.1.

“Seventy to 80% of our plant will be DOCSIS 3.1 ready by the end of next year, giving us a path to even greater capacity expansion allowing us to continue to increase the available capacity across our access network, upstream and downstream,” said Dan Hennessy, chief architect of network architecture for Liberty.

Charter is prioritizing maximizing performance on the network it already has.

“Our priority is to constantly balance capacity against demand. It’s a never-ending quest,” said Jay Rolls, Charter’s chief technology officer. “We watch it very closely, and we’re very pragmatic about it — the volume of tools, metrics and ways to see what’s really happening, and invest accordingly, is really deepening in ways that matter.”

Is Fiber-to-the-Home in Your Future?

While some cable operators like Altice’s Cablevision are scrapping their existing hybrid fiber-coax networks in favor of fiber-to-the-home (FTTH), America’s largest cable operators are not in any hurry to follow Altice.

Comcast has expanded its fiber network closer to customers in the last few years, but sees no need to convert customers to FTTH service.

“I feel pretty strongly that the best path ahead is to leverage the existing coaxial network and DOCSIS resources to the fullest, then inch towards FTTH, over time Why? Because we can. We don’t have to build an entire network just to turn up one customer.”

The next generation of cable broadband service may depend on CCAP – technology that will cut operator costs and lay the foundation for changing the way video and other services are delivered to customers.

Cox has a 10-year Network 2.0 plan that will bring fiber closer to customers, but not directly to every home. More important to Cox is having the option to support symmetrical speeds, which means delivering upload speeds as fast as download speeds.

“We’re also thinking about the fiber investment and fiber deep as it relates to our wireless strategy, enabling some of our customers with a small cell strategy but also positioning ourselves to take advantage of that in the future, as well as thinking about fiber deep to benefit both residential and our commercial customers simultaneously,” said Kevin Hart, Cox’s executive vice president and chief product and technology officer.

Liberty/Virgin Media’s Project Lightning is bringing cable broadband and TV service to places in the UK that never had cable service before.

In Europe, Liberty Global’s “Project Lightning” network expansion initiative is building out traditional cable service in the United Kingdom. Most of the UK never adopted cable service, favoring small satellite dish service instead. Now Liberty Global is putting cable expansion on its priority list. But decades after most North Americans got cable service for the first time, today’s new buildouts are based largely on fiber optics — either fiber to the home or fiber to the neighborhood, where coaxial cable completes the journey to a customer’s home.

Charter admits the technology it will use in the future partly depends on what the competition is offering. Rolls says the company can eventually roll out DOCSIS 3.1, take fiber deeper, or offer symmetrical download/upload speeds presumably targeted towards its commercial customers. But he also suggested Charter’s existing network can continue to deliver acceptable levels of service without spending a lot on major upgrades.

“It’s a rational approach, where we’re trying to balance the needs, the available technologies, and the costs,” Rolls said. But he also suggested DOCSIS 3.1 isn’t always the answer to upgrades. “DOCSIS 3.1 has some pretty remarkable capabilities, but it’s not necessarily a hard-and-fast reason to not take fiber deeper, for instance [allowing for additional DOCSIS 3 node splits]. Different situations drive different capacity decisions.”

Walden agreed, and Mediacom customers should not expect more than DOCSIS 3.1 upgrades for the near future.

“[Fiber deep] is a bit further out, at least as a large-scale type of project,” Walden told Multichannel News. “I think fiber deep for multi-dwelling units, high-density areas and some planned higher end communities doing deeper fiber or fiber-to-the-home [is happening]. But as a wholesale [change] and going to node+0 kind of architecture, I don’t see that in the next two years.”

Are Symmetrical Speeds Important for Customers?

Verizon’s fiber to the home service FiOS uses symmetrical broadband speeds to its advantage in the marketplace.

Many fiber to the home networks offer customers identical upload and download speeds, but cable broadband was designed to favor downstream speeds over upstream. That decision was based on the premise the majority of users will receive much more traffic than they send. But as the internet evolves, some are wondering if cable broadband’s asymmetric design is now outdated and some competitors like Verizon’s FiOS fiber to the home service now use its symmetrical speed advantage as a selling point.

Cox Communications does not think most customers care, even though its network upgrades are laying the foundation to deliver symmetrical speeds.

“It’s a little but further out on the horizon,” said Hart. “The upstream growth rate is ticking up a couple of notches, but not to the tune that we would need significant additional capacity and/or a complementary need for symmetrical bandwidth. [A]t this stage, the symmetrical is a nice-to-have for residential and definitely will be a good option for our commercial customers.”

Rolls isn’t sure if symmetrical speeds are important to customers either and Charter has no specific plans to move towards upload speed upgrades.

“The world of applications and services continues to evolve, obviously, but so far we’ve been able to meet those needs with an asymmetrical topology,” Rolls said. “That said, things like real-time gaming, augmented and virtual reality, and the Internet of Things — some of those will likely drive more symmetry in the network. It remains to be seen.”

Netflix is Raising Their Rates

Phillip Dampier October 5, 2017 Competition, Consumer News, Online Video 1 Comment

Most Netflix customers in the U.S. will be paying $1-2 more a month to the online streaming service starting in November.

Mashable reports Netflix is raising prices on its Standard plan (currently $9.99/mo) by $1 and those on its Premium plan (now $11.99) will pay $2 more a month. The basic $7.99 plan remains unchanged for now.

“From time to time, Netflix plans and pricing are adjusted as we add more exclusive TV shows and movies, introduce new product features and improve the overall Netflix experience to help members find something great to watch even faster,” Netflix said in a statement.

Most of the extra money will likely be spent on content creation and acquisition for subscribers. Netflix is expected to spend $7 billion on content in 2018.

Netflix plans are differentiated based on video quality and the number of concurrent streams. Here are the respective features of each plan. Customers and downgrade or upgrade at any time.

Prices reflected are prior to the impending rate increase.

The last Netflix rate increase was announced in 2014, but did not take full effect for all customers until 2016.

The End of Google Fiber Expansion: Where Did It All Go Wrong?

Alphabet, the parent company of Google Fiber, has lost interest in expanding its fiber to the home service and is showing signs of pulling the plug on its cable television alternative while it drags its feet on keeping promised rollout commitments.

The first sign of trouble for the upstart fiber network came as early as 2015, when without warning Google co-founder Larry Page suddenly unveiled Alphabet, a new holding company that would be at the heart of Google and its many ventures, including Google Fiber. The concept was tailor-made to please Wall Street and investors, because it would better expose which Google projects were earning money and which were hemorrhaging cash with no sign of profitability. But an equally important event occurred in May with the hiring of Ruth Porat, who would become Alphabet’s chief financial officer.

Known inside by some at Google as “Ruthless Ruth,” Porat is Wall Street’s definition of a proper executive that keeps shareholder interests first in mind. Porat lead Morgan Stanley’s technology banking division at the heart of the first dot.com boom in the late 1990s, served as an adviser to the Treasury Department on the taxpayer bailouts of Fannie Mae and Freddie Mac, and was chief financial officer at Morgan Stanley by 2010. Her mission at Google: put an end to expensive innovation for innovation’s sake. If a project did not show signs of making money for shareholders, it would face intense scrutiny under her watch.

“She’s a hatchet man,” a former senior Alphabet executive frankly told Bloomberg News.

Porat

Her key priorities are “discipline” and “focus,” something Google never had to be concerned with while earning truckloads of ad-click cash. Google’s reputation for cool innovation and free services earned the company a lot of goodwill with the public, but that left money on the table for investors who want the company to step up shareholder value. Google’s founders Sergey Brin and Larry Page had enjoyed a long run innovating and announcing new projects, including scanning every printed book on the planet, giving away e-mail and office apps, and laying fiber optic cables to deliver the kind of internet service big phone and cable companies were not delivering. The company also acquired other innovators, including Nest Labs — which made connected thermostats and Webpass, which provides wireless high-speed internet access.

But for all of its success, Google also had several high-profile failures that cost billions, setting the stage for future project accountability.

One of the biggest failures was its Google Glass wearable tech project. The first edition, dubbed Explorer, was a flop and received terrible reviews. But the device also clashed with a country increasingly preoccupied with personal privacy. Not everyone appreciated Google Glass’ always-watching camera pointing in their direction, and some wearing the device were derided as “glassholes.”

“I was a Google Glass Explorer, and the experience was horrible from the start. Google Glass now sits in my office museum of failed products,” said Tim Bajarin, President of Creative Strategies Inc. in this post at re/code. “The UI was terrible, the connection unreliable and the info it delivered had little use to me. It was the worst $1,500 I have ever spent in my life. On the other hand, as a researcher, it was a great tool to help me understand what not to do when creating a product for the consumer.”

Google Glass: a major misstep

Google’s other experiments weren’t exactly pulling in a lot of money either. The company’s vision of driver-less cars met the reality of real world driving conditions (some accidents were the result) and traffic planning and safety regulators were cautious about giving a green light to the concept on American streets and highways. A long-time favorite project of Brin and Page, Project Loon — sending 100,000 balloons, blimps, and/or drones into the sky to deliver internet access is still seen by conventional wisdom as weird. These and other experimental projects lost $3.6 billion of Google’s revenue in 2016, almost twice as much as they lost the company in 2014.

After “Ruthless Ruth” entered the picture, as Bloomberg News documented, it appeared the open door to the experiment lab was closed and an exodus of project leaders and engineers began:

Six months after Teller’s rousing speech, Loon’s Mike Cassidy stepped down as project leader. Around the same time, Urmson, the self-driving car engineer, left Alphabet, as did David Vos, the head of X’s drone effort, Project Wing. Vos’s top deputy, Sean Mullaney, left the company as well. Other recent departures: Craig Barratt, chief executive officer of Access, its telecom division; Bill Maris, the CEO of its venture capital arm, GV; and Tony Fadell, the CEO of smart-thermostat company Nest, who was also working on a reboot of Google Glass. That project, now called Aura, also lost its leads of user design and engineering.

Barratt: The former head of Google Access.

The bean counters also arrived at Google Access — the division responsible for Google Fiber — and by October 2016, Google simultaneously announced it was putting a hold on further expansion of Google Fiber and its CEO, Craig Barratt, was leaving the company. About 10% of employees in the division involuntarily left with him. Insufficiently satisfied with those cutbacks, additional measures were announced in April 2017 including the departure of Milo Medin, a vice president at Google Access and Dennis Kish, a wireless infrastructure veteran who was president of Google Fiber. Nearly 600 Google Access employees were also reassigned to other divisions. Medin was a Google Fiber evangelist in Washington, and often spoke about the impact Google’s fiber project would have on broadband competition and the digital economy.

Porat’s philosophy had a sweeping impact on Alphabet and its various divisions. The most visionary/experimental projects that were originally green-lit with no expectation of making money for a decade or more now required a plan to prove profitability in five years or less. Wall Street was delighted and Alphabet’s stock was up 35% since “Ruthless Ruth” arrived, winning praise for remaking Alphabet/Google into a conventional American corporation using familiar corporate principles.

But Alphabet’s transition seems to break a promise Google co-founders Brin and Page made when Google became a public company in 2004.

“We do not intend to become one.”

Both men promised Google would never focus on short-term profitability and would encourage employees to devote 20% of their working hours on exactly the kinds of innovative projects and product developments Porat was intent on cutting or killing. Porat even has a willing army of helpers — executives were paid bonuses to kill their projects before expenses got out of hand. This helped halt development of Tableau, a project to create enormous size TV screens originally championed by Brin.

Porat also had a major hand in slashing the budget at Google’s Nest Labs division. Google spent $3.2 billion acquiring the home thermostat and smoke alarm company in 2014. Nest CEO Tony Fadell came along as part of the deal and was initially considered a major asset, having been the former Apple engineer who built the original iPod prototype. But Fadell clashed with Google’s culture and reports surfaced he was a tyrannical boss comparable to Steve Jobs at his nastiest. Google executives expected more products out of the Nest division, and didn’t get them. Fadell blamed employees and ruthless budget cuts that broke Google’s commitment to allow Nest to lose up to $500 million annually for the first five years under Google’s ownership. Even when Nest managed to generated $340 million in revenue in 2015, Porat wasn’t pleased. The higher-ups expected more considering the amount of money Google spent buying Nest Labs.

Google Fiber was launched knowing it would take billions of dollars and years to pay off for Google. Laying fiber optic cable is expensive, time-consuming, and frequently bureaucratic. Google projects that still have support from Brin and Page are usually protected from Porat’s red pencil, but if either’s optimism waivers, Porat is likely to start cutting.

By the time Barratt tried to jump-start excitement for the slowly progressing fiber service by announcing a series of new launch cities, Page appeared to have lost interest. Former employees say Page became frustrated with Google Fiber’s lack of progress.

“Larry just thought it wasn’t game-changing enough,” says a former Page adviser. “There’s no flying-saucer shit in laying fiber.”

Charter Communications took out newspaper ads trumpeting Google’s abandonment of some of its potential fiber customers in Kansas City.

Left unprotected, Porat’s budget cutters invaded and further fiber expansion has been suspended, except in areas where Google was already committed to provide the service. But the cutbacks have been so significant, cities are now complaining Google is dragging its feet on its commitments.

In Kansas City — the first to get Google Fiber, the network remains incomplete. In March 2017, Google signaled it was likely to remain incomplete indefinitely after returning hundreds of $10 deposits — many paid years earlier — to residents who were informed Google Fiber would no longer expand into their neighborhoods. In the last two years, Google has become very conservative about the neighborhoods where it will expand service. In most cases, the company now targets multi-dwelling units like condos and apartments, which are cheaper to serve than single family homes.

In late September, Atlanta noticed Google Fiber was stalled in the city and nearby Sandy Springs and Brookhaven. A clear sign Google had effectively suspended construction was a sudden end to construction permit applications around six months ago. Google Fiber denies it is pulling out, but city officials notice work progress has slowed to a crawl.

“Google Fiber is currently available in over 100 residential buildings in the metro Atlanta area and in several neighborhoods in the center of the city. We’re working hard to connect as many people as possible, and encourage people to sign up for updates on our website,” a Google Fiber spokesperson said.

There have been similar problems with Google Fiber expansion in several Texas cities. Some neighborhood residents complained about shoddy installation work because of poor quality third-party contractors, and expansion has slowed down markedly in many areas.

Ironically, AT&T may have been responsible for helping kill Page’s enthusiasm for Google Fiber, serving as a regular obstacle to Google Fiber’s expansion in states like Tennessee where it has been delayed by bureaucratic pole attachment disputes, some resulting in legal action. For Ma Bell and its progeny, a five-year delay is nothing for a company that has been around since the early 1900s and took decades to build out its original telephone network.

Google Fiber Huts – Nashville, Tenn.

Utilities employ a small army of workers that do nothing but deal in a world of tariffs, permit applications, and various filings to regulatory bodies that still govern parts of their operations. For a dot.com company in a hurry, filing permit applications, negotiating pole attachment agreements, hiring subcontractors that can meet regulated specifications, and dealing with incomplete or inaccurate infrastructure maps could be hell on earth. But for phone and cable companies, it is just another day on the job, and their “concern trolling” over the danger of allowing a neophyte like Google to mess with existing electric, phone, and cable wiring to make room for fiber did give some local officials pause.

Page’s hurry to accomplish his fiber dreams were effectively dashed by AT&T’s very close relationship with local officials and its ability to generate a mountain of regulatory and legal paperwork. As a result, Google admitted with great frustration that in Nashville, after months of work, it had only upgraded 33 telephone poles out of 88,000 in the city. The delay also took its toll on a Nashville-based subcontractor helping to build out Google Fiber in the city. Phoenix of Tennessee declared Chapter 11 bankruptcy in September with liabilities between $1-10 million. It also laid off 70 employees. The reason? Google Fiber is stalled in the city.

One Alphabet employee mischaracterized the end effect of the dispute in comments to the Wall Street Journal last year, “Everyone who has done fiber to the home has given up because it costs way too much money and takes way too much time.”

Christopher Mitchell, director of the Community Broadband Project summarized the situation more succinctly for Gizmodo: “the new guy gets screwed.

Yet it would be more accurate to say companies with short attention spans and an evolving commitment away from innovation and towards Wall Street and its fixation on short-term results will have more difficulty than other companies and communities that have successfully built fiber networks with a patient focus on the future.

Porat has been defending Alphabet’s increasingly conservative spending plans and pull-backs.

“As we reach for moonshots,” she told investors on a financial results conference call, “it’s inevitable that there will be course corrections along the way.” She called some of the shifting priorities and cutbacks “taking a pause” in some areas of business to “lay the foundation for a stronger future.”

For Google Fiber, that is coming in a number of different directions.

The company this week announced it is pulling back on offering cable television service in its new markets, including Louisville, Ky., and San Antonio, Tex., and is raising rates $20-30 a month for bundled customers in areas where television service is still being sold.

“The cost of providing TV programming continues to rise,” the company said in an email notifying customers of the rate increase. The price change will hit existing customers paying $130 a month for Fiber 1000Mbps service + TV. Current customers will pay $150 a month going forward. New customers will pay $10 more for the bundle – $160 a month.

“We’re not afraid to try new things as part of our normal way of doing business, focused on the end goal of getting superfast internet into people’s homes,” wrote head of sales and marketing for Google Access Cathy Fogler in a blog post.

Google Fiber has been a minor player in the cable television business, according to analysts, attracting around 54,000 customers nationwide as of December — only 24,000 more than it had in 2014.

As for the future, with Porat in charge of finances, it is likely Google will downscale expectations and rely on its acquisition of Webpass for future expansion, providing high-speed wireless internet to multi-dwelling apartments, condos, and businesses in dense urban areas. That eliminates costly fiber expansion to individual homes or businesses and is much less expensive to install and maintain.

Any plans for a major Google Fiber push in the future seems unlikely, considering Wall Street’s demands for Return On Investment are not easily tempered. That leaves independent local overbuilders with established ties to their communities the most likely to pick up where Google Fiber has left off. But even those are in short supply. Like any major project of this scope, the best option for getting fiber optics in your community, assuming the local cable or phone company isn’t doing it already, is to treat it as a public infrastructure project like water, sewer, roads or sidewalks.

Most cities were all too happy to compete for Google’s attention (and infrastructure investment). But now that is no longer likely, and many communities will have to decide for themselves which side of the digital divide they want to live in — the side without 21st century broadband or the side that has elected to control their own broadband future and not wait for someone else to get the job done.

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  • FredH: ....talk about flimsy (or no) evidence.....good luck Charter, wasting our cable fees on a lawsuit they stand no chance of winning....
  • Will: I have to agree with ATT here... Can't blame cord cutters when it's just that ATT's video service is awful and customers are fleeing at the first oppo...
  • kaniki: I really do not see much changing on the Tmobile end of things.. Sprint does not have much coverage outside of Tmobiles right now, so, Tmobile would g...
  • kaniki: I would have to disagree with the "cable company" part.. I would like to see someone, more like google, get them, then a cable company.. Most cable co...
  • MAD DOG: Company really losing customers. What a shame I like it better when the Dolan was running the show. It was like a family company....
  • LG: This is what happens when you charge $150-$300 for TV. People have better things to spend their money on. TV in general is losing viewers after deca...
  • Josh: Good for them! Don't know that $500/day is remotely reasonable (how about $500,000/day?) but regardless good for them....
  • BobInIllinois: DirecTV is a great premium TV service. Downside is that consumers are looking to cut expenses, and they think that streaming can do that. Most consu...
  • EJ: If you don't pay they will more then likely turn it into collections and it will affect your credit. The better move is to pay them again, send a canc...
  • EJ: I think someone put a decimal point in the wrong spot lol?!...
  • Lloyd Schiffres: We are going through the exact same thing. Let me know if you have any success fighting this....
  • FredH: "Pai cited the wireless industry's transition to 5G service, quoting the CTIA -- the wireless industry's top lobbying organization, as creating "three...

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