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Deregulation Allows Lifeline/USF Fraud to Run Rampant; Tens of Millions Fund Lavish Lifestyles

Pinellas County Sheriff’s Office released this mug shot of Leonard I. Solt, 49, of Land O’Lakes, one of three people accused of defrauding the federal Lifeline program out of more than $32 million.

The Pinellas County Sheriff’s Office released this mug shot of Leonard I. Solt, 49, of Land O’Lakes, one of three people accused of defrauding the federal Lifeline program out of more than $32 million.

A lack of robust state oversight of independent contractors and resellers may have cost the Universal Service Fund and nationwide Lifeline program up to $1 billion in waste, fraud, and abuse.

This month, three men were accused of stealing more than $32 million in Universal Service Fund (USF) money that supported lavish lifestyles including the purchase of multiple luxury automobiles. The federal government wants the money back.

Leonard I. Solt, 49, of Land O’Lakes, Fla.,Thomas Biddix, 44, of Melbourne, Fla. and Kevin Brian Cox, 38, of Arlington, Tenn., all face federal criminal charges for allegedly padding the number of customers signed up for Lifeline phone service through five companies all connected to the men: American Dial Tone, Bellerud Communications, BLC Management, LifeConnex Telecom and Triarch Marketing.

In some cases, Lifeline cell phone service was completely subsidized by USF funding, allowing customers to sign up for free cell phone service. Average Americans cover the costs of the program through a surcharge on monthly phone bills.

The indictment charges the defendants with one count of conspiracy to commit wire fraud and 15 substantive counts of wire fraud, false claims and money laundering.

In an 18-month period from 2009 to 2011, the phone companies obtained more than $46 million through the Lifeline program.

Regulators have been suspicious of the companies and the men who ran them since at least 2010 when the Florida Public Service Commission noticed a dramatic spike in Lifeline reimbursement requests from Associated Telecommunications Management Services, LLC., the parent company of the five entities. The Florida PSC accused AMTS of misrepresenting customer enrollment when claiming reimbursement. It was not until June 2011 that the Florida PSC approved a settlement of $4 million from AMTS and an agreement to stop doing business in the state.

bellerudThe case illustrated several ostensibly-independent companies were created to market service across Alabama, Arkansas, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, and Wisconsin. Many had ties back to AMTS management. Despite the Florida settlement, the firms continued to do business in multiple states. Many of the states involved have deregulated the telephone business and have cut staff at state agencies tasked with oversight issues.

By the time the federal government moved in to prosecute, the three men had used USF funds to buy a private jet, a 28-foot boat and six luxury cars, including an orange Lamborghini, a red-bronze Chevrolet Corvette, a black Cadillac Escalade, a Chevrolet Suburban limo, a black Mercedes Benz S63 and a blue Audi R8.

free planLast week, government agents seized the vehicles from Biddix’s Melbourne-based pawn shop, Outdoor Gun and Pawn.

The Wall Street Journal reported in 2013 that the FCC’s own data showed that more than 40% of the six million subscribers at five of the program’s top carriers were either ineligible or failed to show that they qualified for subsidized service. As more independent companies win authorization to start pitching Lifeline landline and mobile phone service to the poor, the cost of the program has skyrocketed to $2.2 billion last year, up from $819 million four years earlier.

The companies are reimbursed for providing service, providing an incentive to sign up as many as possible.

In Alaska, a GCI subsidiary, Alaska DigiTel hired a marketing company to help it sell Lifeline cell phone service. The company quickly began signing up patients in hospitals, using hospital addresses as their residence. It also encouraged applicants to list phony addresses. For four years, GCI profited from questionable  reimbursements filed with the FCC. GCI finally agreed to pay a $1.5 million settlement that includes no admission of liability.

Other providers simply used telephone directories to collect names and mailing addresses of “customers” and sent them unsolicited cell phones for which they requested reimbursement.

An Oklahoma provider that regulators suspect got exceptionally greedy allegedly signed up so many Oklahoma residents to Lifeline service, the state is likely to exhaust the supply of phone numbers remaining in the 405 area code sooner than expected.

Providers sometimes targeted customers disconnected for non-payment.

True Wireless received nearly $46 million under the program in 2012, bringing questions from Oklahoma’s Corporation Commission as to whether enrolling that many residents was mathematically possible. A cursory review found some customers had signed up multiple times in violation of federal rules.

In Wisconsin, the state Public Service Commission eventually revoked Midwestern Telecommunications Inc.’s ability to receive Lifeline funding after its overworked staff discovered MTI was mailing phones to customer that never requested them, billing the USF Fund for reimbursement. Some turned out to be children.

The scheme eventually began to unravel when a former Public Service Commission staffer received an unsolicited Lifeline phone. The alleged fraud was so great, MTI went from receiving 1% of Lifeline reimbursements in Wisconsin during the second quarter of 2010 to 33% of disbursements in the same quarter the following year.

The fraud also extends to Lifeline recipients, some who have bilked the program for free phones. A review of the Lifeline customer database revealed many customers had multiple Lifeline accounts, including some sent more than 10 free phones that were later reportedly resold on street corners.

Nationally, the $1.8 billion Lifeline Program subsidized phone service last year for 14.5 million low-income customers.

Customers are usually eligible if they are already enrolled in income-based programs such as Medicaid, food assistance or public housing, or if household income falls below 150 percent of federal poverty guidelines.

http://www.phillipdampier.com/video/WSJ Lifeline Fraud 2-18-13.flv

WSJ’s Spencer Ante has details of a $2.2 billion government program to give cell phones to poor people that resulted in phones winding up in the hands of people ineligible for the program. (1:13)

Charter’s Rebranded “Spectrum” Service Arrives in Fort Worth; New Name, New Reputation?

Phillip Dampier March 25, 2014 Broadband Speed, Charter, Competition, Consumer News, Video 6 Comments

charter spectrum logoCharter Communications’ latest attempt to rehabilitate its reputation with customers in Fort Worth, Tex. arrived this week in area mailboxes, as Charter reintroduced itself as “Charter Spectrum.”

Fort Worth is the first major city to get Charter’s broad-based service upgrade that began more than a year ago with a switch to all digital television service.

The newly available bandwidth no longer needed to support analog television has allowed Charter to expand its video service to more than 200 HD channels, up from fewer than 100.

Customers also start their Spectrum experience with a free broadband speed bump — from 30Mbps to 60/4Mbps (with a barely enforced monthly usage cap of 250GB), and an improved cable telephone service with nationwide calling.

Charter Spectrum's mailer is now arriving in Ft. Worth mailboxes. (Courtesy: TheTechGuru)

Charter Spectrum’s mailer is now arriving in Ft. Worth mailboxes. (Courtesy: TheTechGuru)

Charter CEO Thomas Rutledge openly admitted last year Charter had an inferior product compared against the competition. Upgrading Charter’s cable systems was designed to correct that and the company hopes its rebranding will deliver a marketplace reset, but some Charter customers remain skeptical.

“Same pig, fresh lipstick,” wrote one Charter customer in Missouri.

Others complain Charter’s upload speeds remain anemic at just 4Mbps.

Charter’s new pricing promotions were designed to simplify the shopping experience. There are now just three heavily promoted Spectrum triple play packages:

spectrum packages

A customer taking advantage of the Triple Play Gold promotion will pay a one-year promotional price of $129.97 a month. (Customers can also select individual services or build their own double-play bundle). The fine print mentions the price rises to $149.97 the second year and then reverts to an undisclosed “standard rate” after that. TV set-top boxes are required on every cable-connected television ($7 a month each – not included in the price). The Internet modem carries no additional charge. Phone taxes, fees and surcharges are also covered, but other taxes, fees, and surcharges are not.

Offers are valid for new customers only, and those who have not subscribed within the last 30 days and have no outstanding debt obligation to Charter.

http://www.phillipdampier.com/video/WLOS Asheville Charter Going Digital 11-11-13.flv

Charter Spectrum arrives only after your local Charter system moves to all-digital television service. That happened last fall in Asheville, N.C., where customers were told they needed a digital set-top box on every television in the home. WLOS-TV covered the story back on Nov. 11, 2013. (1:44)

How Overland Park Blew Google Fiber; Bureaucratic Ineptitude Stalls Project Indefinitely

lucyAfter nine months of foot dragging-negotiations between Overland Park officials and Google Fiber, a last-minute protest by a city council member over an indemnification clause that turned out to be insignificant was the last straw.

Now residents of Overland Park are off Google’s upgrade list for gigabit broadband indefinitely.

Service providers often face a minefield negotiating with local governments over issues like zoning, performance guidelines, franchise agreements, and minimizing disruption to the community. Some also face confusion about technology or a lack of understanding that infrastructure projects require careful scheduling and seasonal construction limitations.

In Overland Park, it was “all of the above” say infuriated residents who watched the fiber project slip away at an Oct. 14 city council meeting when lawyers representing Google requested an indefinite continuance.

“Clearly Google was saying to Overland Park and other cities: if you make this process too difficult for us, we will pick up our ball and go play somewhere else,” said Overland Park resident Robert Walch.

Walch said city council members appeared shocked when Google’s representative broke the news. Just a month earlier, council members including Terry Goodman, Curt Skoog, and Richard Collins seemed intent to pelt Google with a range of objections and unusual questions that suggested a lack of basic knowledge about fiber broadband.

Phillip Dampier

Phillip Dampier

According to those in attendance, Skoog in particular seemed far out of his depth, questioning if 1,000/1,000Mbps was fast enough to provide connections for 6-12 computer terminals inside a local school.

Council member Park Lyons patronizingly told Google representatives Overland Park was one of the best cities in the country and he was glad Google recognized as much.

“There is so much excitement about Google Fiber, and I know people think we should blindly go forward, but I think we need to look at this in a dispassionate way and have due diligence,” Lyons explained.

As Google’s representatives continued to field questions about the project even as the 2013 construction season began to wind down, Skoog sensed Google’s growing exasperation, finally asking at an earlier meeting if they were prepared to walk away over what Skoog characterized as a “minor detail.”

The answer, apparently, was yes, much to the surprise of a stunned city council witnessing a privately funded, multi-million dollar broadband improvement project collapsing before their eyes. Damage control for exposed council members likely to face the wrath of voters began immediately, starting with a symbolic, but largely empty resolution expressing the council’s profound interest in the fiber project they just buried.

“It’s disappointing because it would have been nice to have in the schools and the libraries and stuff. I know that the Internet is really spotty at the school,” Katie Lehn, an Overland Park mother told KCTV-5.

“Overland Park made it really, really hard for Google, and Google has a lot of other cities and towns to work with,” noted Walch. “I have to say, if you’re on Overland Park Council now, you have to know that this is your last term.”

overland parkIndustry observers agree with Walch.

“Google maybe wanted to send a louder message that they wanted faster response from other communities to come,” said Donna Jaegers, a telecommunications analyst for D.A. Davidson & Co. “A month delay would not be enough to put off a design like that.”

“Google is sending a negotiating message to any other city: You take our terms, or we’re going to walk,” said Steve Effros, an industry analyst who headed the Cable Telecommunications Association for two decades.

Effros told the Associated Press Google was obviously making an example out of Overland Park, while getting special treatment from other nearby communities that incumbent cable and phone companies never got.

The message that Google is willing to walk away from lucrative, upscale communities like Overland Park over bureaucratic headaches has an impact on both Google and local government. Overland Park is an upscale community of 176,000 within metro Kansas City. The community’s median household income is more than $66,500 a year — excellent prospects to sign up for Google service.

blew itBut now Overland Park will have to wait even as neighborhoods around the community get the fiber optic service first.

“Overland Park wants Google Fiber,” said Overland Park Mayor Carl Gerlach. “The city council is ready to sign on the dotted line. … We’re willing to wait as long as it takes.”

Google isn’t ready to forgive and forget just yet, and communities like Overland Park cannot say they were never warned.

Milo Medin, Google’s vice president of access services, told the media in May that Google was picking communities that make their life easier as the fiber infrastructure is installed.

“In general, we go where it’s easy to build,” Medin said. “If you make it hard for me to build, and there are other places where it’s easy to build, I will probably go to those other places.”

Six months later, nothing has changed.

“We need to refocus our energy and our resources on the communities that are waiting for fiber,” said Google spokeswoman Jenna Wandres.

http://www.phillipdampier.com/video/KCTV Kansas City Overland Park on Hold With Google 10-25-13.mp4

KCTV in Kansas City reports Overland Park residents are unhappy Google Fiber is popping up everywhere, but not in Overland Park.  (3 minutes)

CenturyLink’s Nationwide Outage Hurt Schools, Farms, Local Economies; Get Your Credit

Phillip Dampier May 14, 2013 CenturyLink, Consumer News, Rural Broadband, Video 2 Comments

centurylinkCenturyLink’s massive nationwide broadband service outage on May 7 hurt Florida schools trying to administer online testing, small businesses in Nevada that were forced to close for the day, and frustrated nearly six million customers across both states and in Arkansas, Missouri, Louisiana, Texas, Kansas, Minnesota, Ohio, Wisconsin, Pennsylvania, Colorado, Washington, Virginia, Michigan, Montana, Oregon, Tennessee, and Illinois.

An unspecified router failure disrupted broadband service for up to eight hours, and it could not have come at a worse time for Lee County and Cape Charter Schools in Florida that had to postpone state-mandated tests that are completed by students online.

Dr. Lee Bush told WZVN when things like this happen it is not good for the students or area schools.

“There’s a window of time for these tests and there’s a short period of time left. It does affect us,” said Dr. Bush.

The Las Vegas Sun also found itself without Internet access for much of the day, which also brought the newspaper’s website down. Several area businesses that depend on the Internet decided to send workers home late in the morning after it became clear CenturyLink had no realistic expectation of when service would be restored.

The Clark County School District, which serves Las Vegas, also reported their broadband service was interrupted.

In Illinois, Michigan, and Wisconsin outages created a significant problem for farmers cut off from commodity trading markets during the morning hours.

“An early Tuesday morning in May is definitely not a good time to have a long-lasting service outage for agribusiness,” said Sam Haupmann, who advises small and medium-sized farms on telecommunications matters. “Connectivity is very important for the farm economy these days, and farmers can’t just switch to the cable company or a cell phone. There often is no cable company serving farms and cell phone service can be difficult in rural areas.”

Ask CenturyLink to credit your account for the May 7 outage.

Ask CenturyLink to credit your account for the May 7 outage.

Ed Perrine, the chief of operations of Network Tallahassee, a Florida provider, told the Tallahassee Democrat all of his operations went down in the outage, affecting at least 4,000 customers and the 600 to 700 businesses they serve on the Florida Panhandle alone.

Perrine is not too happy with early reports CenturyLink’s massive outage could have come as a result of botched routine maintenance right before the start of business on a weekday:

Perrine said he spoke with CenturyLink at 6 a.m. where they advised him the company was doing scheduled maintenance. At 7:35 a.m. they told him something had gone wrong during the maintenance and it was affecting customers in 13 states.

By 10:30 a.m., the company advised the outage had spread to 22 states.

Perrine said the company has not told him what is causing the outage, but said that just after 11 a.m., the company advised Perrine that they were in the process of restoring service.

The timing of the update is questionable according to Perrine, who said maintenance is normally scheduled on early Sunday morning so if something goes wrong businesses won’t be affected.

CenturyLink had no plans to issue automatic service credits to affected customers, but you can request a refund for a day of lost service by contacting CenturyLink by phone or e-mail.

http://www.phillipdampier.com/video/WBBH Fort Myers CenturyLink Outage 5-7-13.mp4

WBBH in Fort Myers explains how a nationwide CenturyLink Internet outage on May 7 hurt the local economy, affected area schools, and frustrated area businesses and residents. (2 minutes)

Our Response to Public Knowledge’s Harold Feld Regarding Tom Wheeler

Phillip "Friends Can Agree to Disagee" Dampier

Phillip “Friends Can Agree to Disagree” Dampier

Are we being unnecessarily pessimistic and cynical when we oppose the likely nomination of Thomas Wheeler to replace Julius Genachowski as the chairman of the Federal Communications Commission?

Some of our colleagues in the consumer-focused public policy arena suspect we might be.

Stop the Cap! is very skeptical that appointing a former cable and wireless industry lobbyist with 30+ years of experience is the best choice for consumers at the FCC.

Our friend Harold Feld from Public Knowledge, which has announced cautious support for Wheeler’s appointment, has a more optimistic view about his potential:

I understand where my friends are coming from when they look at Wheeler’s resume and think “oh God, another Washington insider, why can’t we ever get a real progressive!” But I cannot agree with Senator Rockefeller’s statement that “a lobbyist, is a lobbyist,” or the view of some that the taint of industry clings insidiously forever and corrodes the soul. It’s been ten years since Wheeler left CTIA, longer than that since he left NTCA. Had he really been interested in advancing the agendas of these industries, he was in an excellent position to do so when he headed up the Obama transition team. He did not. Indeed, Susan Crawford and Kevin Werbach, long-time stalwarts of the public interest who worked for Wheeler on the transition team, have joined other public interest luminaries as Wheelers strongest public supporters. Had Wheeler been working behind the scenes in the transition to promote the incumbents, I expect Susan and Kevin would have known.

I also recognize that support from public interest friends is also not conclusive. But it should surely weigh in the evaluation of Wheeler as much as any blog post. And I recognize I’m also a “Washington insider” and as likely to be led astray by my personal friendships and the whole “Washington Bubble” culture as any other human being. That’s why I’m glad people in the community are asking the right questions and putting Wheeler on notice that, like any Chairman, he needs to prove himself as a champion of the public interest. We at PK have also made it clear we expect Wheeler to not just talk a good game, but to get his hands dirty and make tough decisions that will piss off incumbents. And when we disagree, as we expect we will, have no doubt we will make our displeasure known.

Harold specifically commented on our piece reviewing Wheeler’s personal blog, in which Wheeler fell all over himself praising AT&T’s chief lobbyist Jim Cicconi, and seemed resigned to approving a proposed AT&T/T-Mobile merger with some preconditions:

It is certainly true that behavioral conditions often fall short, are short lived, and that companies generally find ways to work around them (and the FCC’s track record for enforcement is pathetic). Indeed, we at PK made these arguments in the context of the AT&T/T-Mobile merger for why no set of merger remedies could adequately address the harms such a merger would cause. But there is a huge difference between my belief that Wheeler was wrong about the best strategy to advance the public interest and accepting that he was motivated by a covert desire to support consolidation and deregulation.

It is more than likely we will have to do business with Tom Wheeler, and we can certainly understand efforts to paint a more optimistic and hopeful picture of the likely new chairman. But we would be dishonest if we said we have high hopes Wheeler will think first about ordinary Americans before steering the country’s telecommunications future. We have learned from the past.

Remember Your History: Catering to Big Special Interests is Bipartisan

cable ratesHaving covered the telecommunications industry since the 1980s when Dr. John Malone of Tele-Communications, Inc., was the American consumers’ worst nightmare, confronting today’s increasingly consolidated and expensive telecommunications marketplace is a case of “Back to the Future.” The deregulation and industry consolidation abuses in the 1980s riled up both Republicans and Democrats — wherever constituents flooded offices with complaints about the local cable monopoly. The “problem politicians” that reflexively defended the abusers were just as bipartisan. Sen. Tim Wirth (D-Colo.) primarily represented the interests of the cable companies that were headquartered in his state. Current Senate Majority Leader Harry Reid (D-Nev.) also defended the cable companies. Sen. John Danforth (R-Mo.) was outraged at the abuses cable operators like TCI heaped on Missouri consumers and not only introduced legislation to stop the abuse in 1992, he also was instrumental in overriding a presidential veto of the measure.

The first mistake one can make in this fight is characterizing this as “progressive” vs. “conservative.” Real conservatives want all-out competition to manage winners and losers. Progressives want to make sure in the absence of that competition, someone — anyone can act to check the power of concentrated markets that suppress competition, raise prices, and deliver less than compelling service. Five years ago, Barack Obama promised change and a D.C. reset that would have ended “politics as usual.”

The art of the possible — changing the perception that consumer interests take a back seat to the whims of professional lobbyists at the FCC has proved less than successful after four years with Julius Genachowski. President Obama is not completely responsible, but it would be dishonest not to hold him to a promise he would deliver “change we can believe in.”

Instead, at the FCC, we got “change we think we might be able to get away with, maybe, or not.”

Julius Genachowski remained silent on the AT&T/T-Mobile merger until the Department of Justice provided him with political cover to oppose it. He caved on strongly enforcing Net Neutrality, refused to make important regulatory declarations that would have satisfied federal courts the FCC has a right to oversee broadband policy, and near the end of his tenure, hobnobbed with the cable industry and declared his support for usage billing and capped Internet.

Where Does Mr. Wheeler Stand?

(Image: MuniNetworks)

(Image: MuniNetworks)

So we must ask ourselves, where does Mr. Wheeler, a man who spent most of his career as a consummate cable and wireless industry lobbyist, fall on these issues?

The best place those of us who have not shared lunch with him can make that determination is in his personal blog. Harold wants us to downplay some of Wheeler’s words written during his six years of blogging:

But in the ten years I’ve been blogging, I know that I’ve said many things that do not necessary reflect what I would have done if I had been the ultimate decisionmaker – as I have said on more than one occasion (noting that actual decisionmakers are not advocates). Certainly anyone who reads ten years worth of Tales of the Sausage Factory (has it really been ten years?) will have an excellent sense of my overall priorities and approach. But I can’t swear that all approximately 500 or so blog posts could hold up today as being either accurate predictions (like Wheeler, I too was a big believer in WiMax) or final expressions of what I would have done as Chair of the FCC.

We certainly agree that Wheeler’s predictions of industry trends like WiMAX, in hindsight, are not deal breakers (although they should serve as reminders that one should avoid picking too many winners and losers). But at the same time, Wheeler’s words on policy matters in nearly 60 articles since 2007 should not be ignored, rationalized away, or dismissed either. In some sense, this is comparable to the vetting process for an appointee to the Supreme Court. To get a feel for the philosophy of an individual, both the White House and Congress pour over one’s writings and public opinions. Being asked to accept someone who can reshape public policy for years based on the personal recommendation of others only goes so far.

Many of Wheeler’s views are profoundly concerning, because they seem to betray a telecom industry conventional wisdom about the state of technology, wireless spectrum, regulation, and competition. His familiarity and comfort working within the paradigm of big cable and wireless is strongly contrasted with his suspicions and surprise regarding interlopers like Google and Apple — dubbed by Wheeler as part of a “Silicon Mafia.” We sense Wheeler seems most comfortable expecting to oversee business as usual, while advocating and accommodating some minor innovation here and there.

What is almost completely absent in most of Wheeler’s writings is the perspective of, or concern for ordinary consumers. What would Mr. and Mrs. Joe Average think about yet another consolidating merger between AT&T and one of its smaller competitors? What impact would another cable merger have on the bills paid by ordinary people in Colorado, Nebraska, or Pennsylvania? Is it good for consumers to advocate eliminating wireless network redundancy, as Wheeler does, after major events from 9/11 to Hurricane Sandy to the recent Boston Marathon attack all reveal wireless networks are susceptible to call volume clogging and extended service outages?

Tom Wheeler is a long admirer of AT&T's top-lobbyist Jim Cicconi.

Tom Wheeler is an admirer of AT&T’s top-lobbyist Jim Cicconi.

More importantly, we are disturbed by Wheeler’s perspective about wired infrastructure that could have a major impact on the near future of rural telecommunications. Wheeler comes dangerously close to AT&T’s sentiments about its yesteryear rural landline network and its wish to switch those customers to wireless (with all the added costs, usage caps, and coverage issues). We cannot help but notice Wheeler frames the general issue much like AT&T does: an “evolution” that represents “weaning ourselves” from “the old wireline.” Ask yourself if AT&T is more or less comfortable knowing Mr. Wheeler’s attitudes about its wired telephone network. AT&T considers it an outdated money-loser and a nuisance in its rural service areas. Wireless is a license to print money, just as soon as the FCC and state regulators give the green light to go ahead. Is Wheeler to be the deciding vote?

We Don’t Believe Wheeler is an ‘Industry Plant’

Harold writes:

But while it is important to ask the right questions and give no one a free pass, it is equally important to evaluate the answers and the evidence fairly and accept their logical conclusions. The evidence that Wheeler would have approved the AT&T/T-Mobile merger had he actually been Chairman (rather than playing pundit) is pretty weak. To take that a step further and say that Wheeler’s justification for approving the merger as a means of reregulating the wireless industry was mere sham to hide his true sympathies seems to me exceedingly unjustified.

That mischaracterizes our sentiments about Mr. Wheeler. We do not believe he is some secret industry plant that is itching to deregulate the agency into a stupor. Nor do we believe a theoretical vote in favor of the AT&T/T-Mobile merger is evidence he is in AT&T’s back pocket specifically. Let us be clear: he served as a professional lobbyist for these companies for nearly 30 years. His job was to absorb and reflect the views of the nation’s biggest cable and phone companies both to politicians and regulators. Some remain friends and colleagues.

It is a safe bet most of the industry will welcome and celebrate Wheeler’s appointment. Many know him personally. Many others will feel safe that he is a reachable industry insider already familiar with the issues that concern them. This is what makes the D.C. revolving door so insidious. When you move from the regulated to the regulator (and back again), the only real outsiders are average consumers.

Here is an example of Wheeler admiring AT&T’s prowess in the early days of its attempted merger with T-Mobile. Notice how he characterizes the deal’s opponents:

“The most important times in any merger approval process are the first two weeks when the acquiring company gets to define the discussion and the last four weeks when the concerns raised by others and the analysis by the government congeals to define the issues to be negotiated in the final outcome. AT&T shot out of the blocks brilliantly, framing their action in terms of the spectrum shortage and President Obama’s desire to provide wireless broadband to rural areas. Over the coming months those who were caught by surprise, as well as those who would use the review process to gain their own advantages, will have organized to present their messages.”

Wheeler shows no evidence of being the FCC’s version of a game-changer like Elizabeth Warren. Instead, he’s an avowed admirer of AT&T’s top lobbyist Jim Cicconi. What will that difference mean? The New York Times, reporting more broadly on the problem of D.C.’s revolving door, provides some valuable clues:

Government officials and lobbyists agree that former agency officials have a much easier time getting phone calls or e-mail messages returned from their old colleagues, and that access often extends to greater credibility in arguing their clients’ positions.

One corporate lobbyist who worked as a regulator, asked whether he believed he had an inside edge in lobbying his ex-colleagues, said: “The answer is yes, it does. If it didn’t, I wouldn’t be able to justify getting out of bed in the morning and charging the outrageous fees that we charge our clients, which they willingly pay.”

The lobbyist, who spoke on condition of anonymity because of concerns about alienating government officials, added that “you have to work at an agency to understand the culture and the pressure points, and it helps to know the senior staff.”

Not quite

Not quite

The most likely outcome of a Wheeler nomination is that he will be quickly approved, maintain the agency’s relatively low profile, and avoid rocking the boat too much. Even he doubts the power of the FCC to effect regulatory change unless those regulated volunteer to submit to more regulation. That means more quid pro quo agreements attached to mergers, acquisitions, and other deals the industry brings the FCC for approval. But as this quote illustrates, the industry remains in the driving seat:

“[…] Jim Cicconi sits astride a process that could determine the future of wireless policy, first for AT&T and then by extension for everyone else. Quite possibly the result of this merger decision will be far wider than the merger itself. At the end of the day we may be talking about a new era of wireless policy based on the Cicconi Commitment.”

Wheeler argued that the inability of the FCC to muster the political will to deal effectively with net neutrality and other broadband regulation made a consent decree around AT&T/T-Mobile the best way to update consumer protection rather than leave these services essentially unregulated.

Wheeler’s recognition of the inability of the FCC to get virtually anything done comes with no assurance he will do any better. Harold himself admits that the FCC’s track record of enforcement is “pathetic.” Has Wheeler written on his blog that he would seek to change that?

Wheeler’s reflections on the failed T-Mobile/AT&T merger present a clear sign he considers it a missed opportunity, with the usual voluntary divestiture of certain assets here and there with time limited pre-conditions that carry all the impact of one of those class action settlements that nets consumers a coupon or a $2 refund. Everybody but consumers walk away winners.

The Justice Department’s antitrust division, in contrast, illustrated the usefulness of a backbone when it quickly declared the merger proposal monstrously anti-consumer and anti-competitive and announced it would sue to stop it. Deal over and dead. When is the last time the FCC issued such a clear-cut, high-profile decision all on its own? Why is it so hard for the FCC to see the same anti-competitive nightmare so visible at the Department of Justice? Public Knowledge and other consumer groups saw the dangers from day one. Does Mr. Wheeler agree with the Justice Department or does he think he can do business with that shrewd AT&T lobbyist Jim Cicconi to get such deals approved the ‘right way?’

Our view remains the country and the Obama Administration could do far better choosing someone to lead the FCC that has not made a career lobbying for big cable and phone companies. If we want to solve America’s rural broadband problems, enforce fair billing practices and Net Neutrality, find new creative ways to utilize and distribute wireless spectrum, and promote competition while restricting industry consolidation, would we do better choosing an ex-industry lobbyist or an engineer, network planner, professional regulator, or an antitrust attorney?

President Obama went with the ex-lobbyist.

AT&T Mobility Adds New “Because We Can” Mobile Administrative Fee in May

att feesAT&T Mobility will add a new “Mobile Administrative Fee” to wireless customer bills beginning this May to defray the costs of doing business.

Broadband Reports notes the new fee amounts to jacking up the cost of service without raising advertised rates.

In most states, the new “Administrative Fee” will amount to $7.32 a year, billed monthly.

AT&T’s website explains the new charge this way:

The Administrative Fee helps defray certain expenses AT&T incurs, including but not limited to: (a) charges AT&T or its agents pay to interconnect with other carriers to deliver calls from AT&T customers to their customers; and (b) charges associated with cell site rents and maintenance.

This is by no means the only “junk fee” AT&T slaps on customer bills that can add up to more than 8.5 percent of your average monthly bill. Among the others:

      • Federal Regulatory Fee
      • Telecommunications Relay Service Recovery Fee
      • Wireless Number Portability and Number Pooling Recovery Fee
      • Enhanced 911 Recovery Fee
      • Wireless Tower Mandates Costs
      • State Area Code Relief Costs
      • Customer Proprietary Network Information Notification Costs
      • Network Outage Reporting Costs
      • State Commission Annual Reporting Costs (Applies only in IN, KY, LA, NM, OH, VA, WI, WV WY)
      • Gross Receipts Surcharge (Missouri only)
      • Puerto Rico Regulatory Fee (Puerto Rico only)
      • Property Tax Surcharge (Puerto Rico only)

Some customers have attempted to break two-year service contracts penalty-free over the addition of new fees, but wireless carriers have made it increasingly difficult to escape, usually because they claim the imposition of new, non-mandated fees do not violate the fine print of their service contract. But complaining customers can usually get carriers to waive the fees as a courtesy. It could not hurt to ask.

Time Warner Cable and Its Kansas City Contractor Likely Targets for $100,000,000+ Lawsuits

Phillip Dampier March 20, 2013 Consumer News, Time Warner Cable, Video Comments Off on Time Warner Cable and Its Kansas City Contractor Likely Targets for $100,000,000+ Lawsuits
Heartland Midwest headquarters (WDAF-TV)

Heartland Midwest headquarters (WDAF-TV)

Time Warner Cable and its contractor Heartland Midwest are among the most likely targets for negligence lawsuits that could run well into the hundreds of millions of dollars after the Kansas City Fire Department blamed a contractor for piercing a natural gas line while trying to install fiber optic cable for the cable operator.

The resulting explosion on Feb. 19 destroyed portions of the Country Club Plaza, killed one employee of a landmark Kansas City restaurant that was flattened in the blast, and left 16 injured.

Attorneys are already laying the groundwork for several lawsuits that are expected to be filed shortly.

Heartland Midwest may be deemed the most culpable by those attorneys. Pieces of the contractor’s drill were found inside the broken gas line, according to a report from an investigations team. Time Warner Cable’s deeper pockets make them a natural target because they hired Heartland as a third-party contractor. A lawsuit could claim the cable company was negligent by hiring the contractor and inadequately supervising their work.

Because of the large amount of anticipated damages requested, legal experts expect lawsuits could also target the agency responsible for marking utility lines before digging —  they may have missed the buried gas line. Other targets: Missouri Gas Energy, the owner of the gas line, the Kansas City Fire Department, which may not have moved fast enough to evacuate the immediate area, and even the owners of JJ’s Restaurant which was destroyed in the explosion. Observers note it was their gas pilot light that ignited the natural gas vapor.

http://www.phillipdampier.com/video/WDAF Kansas City Potential lawsuits ahead after JJs blast 3-19-13.flv

FOX4 in Kansas City reports attorneys are laying the groundwork to file lawsuits against Time Warner Cable, its contractor, and others they may accuse of negligence in a February natural gas explosion that killed a restaurant employee. Damages could run more than $100,000,000.  (3 minutes)

Tech Companies, Consumers, Communities Push Back Against Georgia Anti-Broadband Bill

Mayor Guest

Mayor Guest

Despite protests from major technology companies, consumers, and local communities across Georgia, the House Energy, Utilities and Telecommunications Committee passed a slightly-revised HB 282, a bill that would largely ban communities from building their own networks to deliver 21st century broadband service. The bill has been moved out of the Rules Committee and will be debated on the House floor Thursday. Readers can find and contact their state representative (preferably leaving a phone message opposing HB 282) through this website. Do it this afternoon!

Last Thursday, community leaders appeared in Atlanta to oppose the corporate welfare protectionism that HB 282 represents.

“Let’s talk about economic development,” said Elberton Mayor Larry Guest. “Georgia should be promoting a pro-business, inclusive approach to broadband deployment, especially in rural areas of the state,” he said. “Competition ensures market-based pricing and faster delivery of state-of-the-art services. We have to do everything we can to attract jobs. If we don’t do that, business will not select rural Georgia. High speed access is essential to us.”

Mark Creekmore depends on his Internet connection in his Dawsonville home as part of his job and Windstream has let him down for at least three years. He pays for 12Mbps service and regularly receives around 600kbps service after 3pm because Windstream has hopelessly oversold its DSL service.

“No one should have to pay for Internet speeds they are not receiving and be told that because they live in a rural area, getting them fixed is just not a priority,” Creekmore complains. “That’s like saying: ‘Because you live in the sticks, you do not deserve what the city folks deserve despite the fact that you pay the same money for service that they do.'”

http://www.phillipdampier.com/video/WGCL Atlanta New Bill Hinders Broadband 2-26-13.mp4

WGCL, the CBS station in Atlanta, is asking tough questions about HB 282 and exactly who it will benefit. Some suspect the bill will protect Windstream from having to upgrade its broadband services, something essential to Dawsonville resident Mark Creekmore, who has to turn customers away because Windstream’s DSL service is so poor in his area.  (3 minutes)

Creekmore is incensed Windstream is behind a push to pass HB 282, which bill supporters claim will “stimulate investment in rural broadband,” at the same time the phone company leaves him and others with substandard speeds and service.

windstream performance“I do not think it is ethical for companies like Windstream, already benefiting from taxpayer dollars, to back a bill that will keep municipalities from offering their residents something better,” said Creekmore.

Creekmore opposes government waste, but is not opposed to local communities stepping up when telecommunications companies have let their customers down.

Despite claims HB 282 will promote rural broadband expansion, Windstream’s CEO Jeff Gardner told investors the opposite Feb. 19 in a conference call.

“We will finish most of our broadband stimulus initiatives which expands our addressability to roughly 75,000 new households,” said Gardner. “As we exit 2013, we will see capital spending related to these projects decrease substantially.”

Windstream’s broadband problems are not limited to rural Georgia. In rural Missouri, Windstream’s DSL service has performed so poorly in certain communities local businesses have had to shut down operations for the day when kids are out on “snow days” because service deteriorates to the point it becomes unusable.

Thomasville, Ga., public fiber to the home network delivers the speeds it advertises.

Thomasville, Ga., runs a public fiber to the home network that delivers the speeds it advertises.

“Windstream has made it clear that they have no plans to invest in areas where they don’t feel they can be profitable,” said Piedmont Area Chamber of Commerce president Scott Combs.

Because rural broadband problems remain so pervasive, a group of technology companies including Google and Alcatel-Lucent sent a letter to the chairman of the Georgia House Energy, Utilities and Telecommunications Committee protesting the bill:

The private sector alone cannot enable the United States to take full advantage of the opportunities that advanced communications networks can create in virtually every area of life. As a result, federal and state efforts are taking place across the Nation, including Georgia, to deploy both private and public broadband infrastructure to stimulate and support economic development and job creation, especially in economically distressed areas. HB 282 would prevent public broadband providers from building the sorely needed advanced broadband infrastructure that will stimulate local businesses development, foster work force retraining, and boost employment in economically underachieving areas.

Thus far, the only response has been to slightly ease the language in the bill, now defining suitable broadband at 3Mbps service, up from 1.5Mbps. Communities with municipally owned utilities would also be exempt from the prohibition on selling telecom services. But that is hardly enough.

“Three megabits is not adequate to do functions in a modern telecommunications world,” said Thomasville mayor Max Beverly.

Thomasville has its own public broadband network and the difference between it and providers like Windstream are quickly apparent.

While Windstream sells rural Georgians service at 12Mbps but actually delivers less than 1Mbps, Thomasville residents are excited about forthcoming upgrades to 20Mbps service that actually means 20Mbps service. Thomasville’s fiber network has proved so financially successful, the community eliminated its local property tax. If HB 282 passes, other communities will find constructing such networks nearly impossible.

Democracy Now! featured Chris Mitchell and Catharine Rice on March 4, who talked about how large telecom companies are lobbying to ban community-owned broadband networks, including those in Georgia. AT&T, Comcast, Time Warner Cable and others are having success in the southeastern United States with the help of Republican state lawmakers and conservative groups with ties to the Koch Brothers. (10 minutes)

Windstream’s Plans for 2013: We’re Nearly Done Expanding Broadband, Time to Cash In

windstreamlogoWindstream has announced the increased broadband investments that expanded DSL service to about 75,000 more homes and businesses and brought fiber connections to cell towers are nearly complete and the company intends to dramatically cut spending on further enhancements by the end of 2013.

Jeff Gardner, Windstream’s CEO, told investors on a conference call last week the company’s highest priority in 2013 is preserving its current dividend to create value for shareholders. Not on the priority list: improving broadband infrastructure to support video streaming services, further expanding broadband in areas it now bypasses, and boosting the quality of service it delivers to current customers.

Gardner called the company’s increased investment in 2011 and 2012 a result of “finite opportunities that provide[d] attractive investment returns.”

But most of that spending will come to an end next year.

gardner“We expect to substantially complete our capital investments related to fiber to the tower projects, reaching 4,500 towers by the end of 2013,” said Gardner. “In addition, we will finish most of our broadband stimulus initiatives […] to roughly 75,000 new households. As we exit 2013, we will see capital spending related to these projects decrease substantially.”

That could be bad news for communities in places like Wayne County, Mo., which suffers with inadequate broadband from the company. In some areas when local broadband traffic reduces DSL speeds to a crawl, area businesses are occasionally forced to shut down for the day.

Broadband and business services now account for 70% of Windstream’s revenue, but it has come with a price: increased investment, that Wall Street considers negative to the company’s value. To satisfy analysts and shareholders, Gardner made it clear improving the balance sheet is a major priority. He said he will continue to direct excess free cash flow first to preserve the company’s shareholder dividend, and then direct much of the rest to debt repayment.

That does not mean Windstream will end all investments in its business. The company now spends 12.4% on ongoing capital investments and will continue to do so, but much of the spending will cover network upkeep and supporting more profitable business services.

“Over the last four years, our acquisitions have been very targeted on businesses that are growing in the strategic growth areas that we’re focused on, and we’ve really changed the mix very significantly here, away from the consumer business toward the enterprise space, and I think that puts us in a very different position with respect to the stability of our revenue and OIBDA over time,” Gardner added.

Windstream plans to bring back its "price for life" promotion this year.

Windstream plans to bring back its “price for life” promotion this year.

Gardner noted Windstream is well-positioned to take advantage of the fact it has few competitors, which reduces pressure to invest and improve its networks to stay competitive.

“Our residential customers remain concentrated in very rural areas where there is less competition, which has contributed to a more stable consumer business,” Gardner admitted.

He added that those rural customers will have to rely on the company’s satellite partner Dish Networks for video services. Windstream will not build a “capital-intensive facilities based technology” to support online video. In contrast, CenturyLink has invested in Prism, a fiber-to-the-neighborhood service in several of its larger markets, to offer triple play packages of broadband, phone, and cable TV. Windstream has no plans to follow.

Despite investments in 2011 and 2012 to improve broadband service and speeds, Windstream’s DSL services have not kept up with its cable competitors.

During the last quarter, Windstream lost 2,000 broadband customers and 23,000 consumer voice lines (a 4.5% decline year over year).

To stem the tide of customers moving away from the phone company, Windstream is trying to sell value-added Internet support services, online backup, and faster speeds to maximize profitability. It will also add new customers made possible from federally funded broadband stimulus projects.

Windstream customers can expect to see increased promotional activity this year to win or keep their business:

  • Covering the costs of switching from another provider to Windstream;
  • A return to the “price for life” promotion, which promises stable rates as long as a customer stays with the company;
  • A substantial introductory discount on satellite TV when bundled with Windstream’s own services.

Former Bresnan Execs Conspire With Private Equity Firm to Abandon Broadband in Rural Kansas

Phillip Dampier February 19, 2013 BCI Broadband, Bresnan, Consumer News, NewWave Communications, Public Policy & Gov't, Rural Broadband, Video Comments Off on Former Bresnan Execs Conspire With Private Equity Firm to Abandon Broadband in Rural Kansas

allegianceMore than 20 cable systems across Kansas will be terminating television and broadband service after a private equity firm, working with former Bresnan Cable executives, deemed them unprofitable and not worth upgrading.

Residents of Conway Springs (pop. 1,250), Chetopa (1,125), Sharon (158), and Harper (1,473) are among those who will find their cable and broadband service discontinued in the coming weeks. Abandoned cable subscribers are being told to buy satellite dishes to continue watching television. No immediate broadband solution was available.

Allegiance Communications, which provides cable TV, broadband Internet, and VOIP telephony services to rural and mid-size markets in Arkansas, Kansas, Missouri, Oklahoma, and Texas was acquired last month by former executives at Bresnan Communications, itself bought out by Cablevision Industries. The deal was largely financed by BBH Capital Partners, a New York City-based private equity firm.

The purchase by BCI Broadband orphaned nearly two dozen cable systems that Allegiance owned and operated, but were excluded from the sale. Subscribers are being notified they are about to be switched off permanently in letters signed by Allegiance executives.

Several Bresnan former executives are behind BCI Broadband.

Several former Bresnan Cable executives are behind BCI Broadband.

The service will leave rural Kansans without broadband service, cable television, or an alternative to AT&T and other independent phone companies operating in the state.

“This was not an easy decision for us, nor is it one that we came to hastily. The costs of doing business in Conway Springs can no longer be profitable,” Allegiance wrote in its letter, according to KSNW-TV.

Local officials in affected communities are rushing to find an alternative, appealing to providers like Southern Kansas Telephone to see if they can pick up where Allegiance left off, but the phone company has yet to respond.

Allegiance claims the outdated cable systems served few subscribers and the new owners were not interested in investing funds to upgrade them.

BCI Broadband is a new company run by former executives forced out of Bresnan Communications when the company was sold to Cablevision. BCI Broadband claims it wants to invest in system upgrades to improve service to remaining subscribers.

“Historically when we have purchased cable systems and invested in upgrading to the latest technology in markets like Shawnee, that has inevitably led to more customers and the need for more staff,” said Shawn Beqaj, vice president of public and government affairs for BCI Broadband. Beqaj was the former vice president of public affairs at Bresnan.

There has been an accelerating trend of industry consolidation among rural cable operators, particularly by private equity firms that are interested in the stable earnings cable operators usually generate.

GTCR, through its portfolio company Rural Broadband Investments LLC , separately announced its plans to acquire NewWave Communications Co., in what it hopes is just the first of a series of acquisitions. NewWave’s purchase was financed by debt capital from SunTrust Robinson Humphrey, Inc., and Goldman Sachs Bank USA.

http://www.phillipdampier.com/video/KSNW Wichita Small towns losing cable service 2-7-13.mp4

KSNW-TV reports more than 20 Kansas communities will lose television and broadband service when Allegiance Communications switches off the cable systems. (2 minutes)

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