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AT&T, Verizon Break Out The Campaign Contribution Checkbooks Early, Sending $ to the Newly-Elected

Big Telecom is already trying to buy incoming members of Congress with lavish campaign contributions.

Big Telecom is already trying to buy incoming members of Congress with lavish campaign contributions.

Before constituents have a chance to make an impression on Capitol Hill’s incoming freshmen class, AT&T and Verizon have rushed significant campaign contributions to more than two dozen newly elected members of Congress.

Politico reports AT&T has cut checks to 31 new members of the House and Senate, Verizon sent 28 checks, and Comcast donated to 22 winners in the fall elections. Most of the money went to incoming Republicans who will control both the House and Senate starting in January.

All three companies are seeking allies in the fight against Net Neutrality and for a wholesale rewriting of the Communications Act, the nation’s most important telecom-related legislation.

Congressional observers predict revisiting the Communications Act would be a lobbyist bonanza, with potentially billions flowing into congressional coffers to win further industry deregulation. The last major overhaul in 1996 transformed broadcasting, allowing a handful of corporations to own the majority of radio and television stations and allowing large phone and cable companies to govern themselves with respect to broadband and competition. Cable and broadband prices soared as a result, while the number of competitors dropped due to industry consolidation.

The telecom companies are well ahead of technology players like Microsoft and Google, that have collectively sent contributions to fewer than a half-dozen incoming members and are barely active in Washington in comparison to the biggest phone and cable companies.

AT&T Sneaks Telecom Deregulation Amendment into Ohio’s Agriculture/Water Quality Bill

Phillip Dampier December 2, 2014 AT&T, Consumer News, Public Policy & Gov't, Rural Broadband 9 Comments
Ohio Gov. John Kasich is threatening to veto the state's Agriculture Bill if it reaches his desk with telecom deregulation inserted as an amendment.

Ohio Gov. John Kasich is threatening to veto the state’s Agriculture Bill if it reaches his desk with telecom deregulation inserted as an amendment.

AT&T’s lobbyists in Ohio have convinced state legislators to ignore a veto threat from the governor’s office and insert a deregulation amendment into an unrelated water quality and agriculture measure.

Retiring House Speaker Bill Batchelder (R-Medina) is shepherding AT&T’s latest attempt at total deregulation through the Ohio House of Representatives, claiming it will break down barriers for businesses in Ohio and give new businesses the infrastructure they need to make Ohio their home. Among Batchelder’s top donors is AT&T.

Critics contend the measure will disconnect up to 5% of rural Ohio from all telephone service because they live in “no signal bar” areas of the state.

The amendment, inserted into HB490 (at Sec. 4905.71), would end AT&T’s requirement to serve as a Provider of Last Resort, which has guaranteed that every Ohio resident seeking telephone service has had it for nearly 100 years. If the measure passes, AT&T can unilaterally disconnect service and leave unprofitable service areas, mostly in rural and poor sections of the state. Current Ohio law only permits a telephone company to end service if it can prove financial hardship and show that reasonable alternatives are available to affected residents. AT&T earned $128.75 billion in revenue in 2013 and is unlikely to meet any hardship test.

Although AT&T is unlikely to stop service in suburban and urban areas, ratepayers across the state would lose oversight protections from lengthy service outages, unreasonable billing standards and credit requirements, the ability to quickly connect or disconnect service and access to important low-income programs like Lifeline. Rural customers could be forced away from traditional landline and DSL service in favor of AT&T’s wireless network, which costs considerably more.

Current AT&T customers in Ohio can subscribe to landline service for around $20 a month in rural areas and broadband DSL for as little as $15 per month. AT&T’s wireless alternative costs $20 a month for voice service and at least $60 a month for wireless broadband (with a usage cap of 10GB per month and an overlimit fee of $10 per gigabyte). An average landline customer consuming 20GB of data would pay $35 a month for both voice and data services. The same customer using AT&T’s wireless voice and data alternative would pay $180 a month, mostly in overlimit penalties.

AT&T’s lobbying has riled Ohio’s Republican governor, John Kasich, who has threatened to veto any agriculture bill that reaches his desk with telephone deregulation attached.

att_logo“The telecommunications language will force the governor to veto this bill, as he has personally said and has also been repeated several times by other members of the administration,” Jim Zehringer, director of the Ohio Department of Natural Resources told the Ohio Senate’s Agriculture Committee during an informal hearing on the legislation. “We would be sacrificing all the great work done so far on this bill if these provisions are not removed.”

The AARP is concerned the measure will not only hurt rural Ohio, but elderly and poor residents who cannot afford wireless service.

“They will only have wireless telephone service with no price controls or guarantees for low-income Ohioans in these areas,” AARP Ohio wrote in a released statement about the proposal. “Additionally, there are areas of Ohio where wireless service is minimal, and to provide the speed needed for those receiving tele-health services in those areas will be even more expensive.”

Interested Ohio residents can share their feelings with their state legislators and the governor’s office.

  • Locate your Ohio House Representative: http://www.ohiohouse.gov/ or call 1-800-282-0253 and ask to be connected to your local representative.
  • Governor John Kasich’s Office Phone: (614) 466-3555

Fiber Games: AT&T (Slightly) Backtracks on Fiber Suspension After Embarrassed by FCC

HissyfitwatchAT&T CEO Randall Stephenson’s public hissy fit against the Obama Administration’s sudden backbone on Net Neutrality may complicate AT&T’s plans to win approval of its merger with DirecTV. forcing AT&T to retract threats to suspend fiber buildouts if the administration moves forward with its efforts to ban Internet fast lanes.

Hours after Stephenson told investors AT&T wouldn’t continue with plans to bring U-verse with GigaPower fiber broadband to more cities as long as Net Neutrality was on the agenda, the FCC requested clarification about exactly what AT&T and its CEO was planning. More importantly, it noted responses would become part of the record in its consideration of AT&T’s proposed acquisition of the satellite television provider. The regulator could not send a clearer message that Stephenson’s statements could affect the company’s $48.5 billion merger deal.

AT&T responded – four days after the FCC’s deadline – in a three-page letter with a heavily redacted attachment that basically told the Commission it misunderstood AT&T’s true intentions:

The premise of the Commission’s November 14 Letter is incorrect. AT&T is not limiting our FTTP deployment to 2 million homes. To the contrary, AT&T still plans to complete the major initiative we announced in April to expand our ultra-fast GigaPower fiber network in 25 major metropolitan areas nationwide, including 21 new major metropolitan areas. In addition, as AT&T has described to the Commission in this proceeding, the synergies created by our DIRECTV transaction will allow us to extend our GigaPower service to at least 2 million additional customer locations, beyond those announced in April, within four years after close.

Although AT&T is willing to say it will deliver improved broadband to at least “15 million customer locations, mostly in rural areas,” it is also continuing its fiber shell game with the FCC by not specifying exactly how many of those customers will receive fiber broadband, how many will receive an incremental speed upgrade to their existing U-verse fiber/copper service, or not get fiber at all. AT&T routinely promises upgrades using a mix of technologies “such as” fiber to the home and fixed wireless, part of AT&T’s broader agenda to abandon its rural landline service and force customers to a much costlier and less reliable wireless data connection. It isn’t willing to tell the public who will win fiber upgrades and who will be forced off DSL in favor of AT&T’s enormously profitable wireless service.

Your right to know... undelivered.

Your right to know… undelivered. AT&T redacted information about its specific fiber plans.

Fun Fact: AT&T is cutting its investment in network upgrades by $3 billion in 2015 and plans a budget of $18 billion for capex investments across the entire company in 2015 — almost three times less than what AT&T is ready to spend just to acquire DirecTV.

The FCC was provided a market-by-market breakdown of how many customers currently get U-verse over AT&T’s fiber/copper “fiber to the neighborhood” network and those already getting fiber straight to the home. But this does not tell the FCC how many homes and businesses AT&T intends to wire for GigaPower — its gigabit speed network that requires fiber to the premises. Indeed, AT&T would only disclose how many homes and businesses it plans to provide with traditional U-verse using a combination of fiber and copper wiring — an inferior technology not capable of the speeds AT&T repeatedly touts in its press releases.

That has all the makings of an AT&T Fiber Snow Job only Buffalo could love.

AT&T also complained about the Obama Administration’s efforts to spoil AT&T’s fast lane Money Party:

At the same time, President Obama’s proposal in early November to regulate the entire Internet under rules from the 1930s injects significant uncertainty into the economics underlying our investment decisions. While we have reiterated that we will stand by the commitments described above, this uncertainty makes it prudent to pause consideration of any further investments – beyond those discussed above – to bring advanced broadband networks to even more customer locations, including additional upgrades of existing DSL and IPDSL lines, that might be feasible in the future under a more stable and predictable regulatory regime. To be clear, AT&T has not stated that the President’s proposal would render all of these locations unprofitable. Rather, AT&T simply cannot evaluate additional investment beyond its existing commitments until the regulatory treatment of broadband service is clarified.

AT&T’s too-cute-by-half ‘1930s era regulation’ talking point, also echoed by its financially tethered minions in the dollar-a-holler sock-puppet sector, suggests the Obama Administration is seeking to regulate AT&T as a monopoly provider. Except the Obama Administration is proposing nothing of the sort. The FCC should give AT&T’s comments the same weight it should give its fiber commitments — treat them as suspect at best. As we’ve written repeatedly, AT&T’s fabulous fiber future looks splendid on paper, but without evidence of spending sufficient to pay for it, AT&T’s piece of work should be filed under fiction.

FCC to AT&T: Put Up or Shut Up; Agency Seeks Details About AT&T’s Fiber Pause Over Net Neutrality

Stephenson: No fiber for you

Stephenson: No fiber for you

AT&T’s decision to suspend fiber broadband upgrades over the Obama Administration’s strong support for Net Neutrality may backfire on the telecom giant’s multi-billion dollar bid to acquire DirecTV.

The Federal Communications Commission has dispatched a letter to Robert W. Quinn, Jr., AT&T’s senior vice President and federal regulatory & chief privacy officer, inquiring whether AT&T really meant what it said about plans to suspend fiber expansion and that might impact at least two million additional homes that are part of a broadband expansion commitment included in AT&T’s offer to acquire DirecTV.

The FCC’s Jamillia Ferris wants AT&T to clarify CEO Randall Stephenson’s comments at a recent investor event, requesting information that may reveal whether AT&T was using the suspension of its fiber buildout as a political weapon against Net Neutrality.

“We made some comments in the DirecTV announcement that we would build fiber to two million additional homes,” Stephenson said at a Wells Fargo technology conference last week. “We will obviously commit to that once the DirecTV deal is done, we will keep going. But what we have also announced on top of that is that we are going to deploy fiber to 100 cities. And look, we can’t go out and just invest that kind of money deploying fiber to 100 cities other than these two million not knowing under what rules that investment will be governed. And so we have to pause and we have to just put a stop on those kinds of investments that we are doing today.”

The FCC’s request suggests the company’s answers may impact how the FCC treats AT&T’s request for approval of its merger with DirecTV.

Requested from AT&T no later than Nov. 21:

(a) Data regarding the Company’s current plans for fiber deployment, specifically:

(1) the current number of households to which fiber is deployed and the breakdown by technology (i.e., FTTP or FTTN) and geographic area of deployment;

(2) the total number of households to which the Company planned to deploy fiber prior to the Company’s decision to limit deployment to the 2 million households and the breakdown by technology and geographic area of deployment; and

(3) the total number of households to which the Company currently plans to deploy fiber, including the 2 million households, and the breakdown by technology and geographic area of deployment;

(b) A description of

(1) whether the AT&T FTTP Investment Model demonstrates that fiber deployment is now unprofitable; and

(2) whether the fiber to the 2 million homes following acquisition of DirecTV would be unprofitable; and

(c) All documents relating to the Company’s decision to limit AT&T’s deployment of fiber to 2 million homes following the acquisition of DirecTV.

Big Cable, Telcos Spent $42 Million In 2013-2014 Lobbying for Deregulation, Against Net Neutrality

AT&T, Comcast, Verizon, Time Warner Cable and the cable industry’s chief lobbying group spent $42.8 million during the 2013-2014 election cycle to weigh in on issues including burying Net Neutrality, outlawing community broadband competition, winning tax breaks for themselves, and avoiding consumer protection regulations.

A Common Cause analysis of data from the Center for Responsive Politics and the Institute for Money in State Politics shows that the usual suspects poured money into political coffers on the state and federal level to influence lawmakers.

2014-contributions-from-net-1

On the federal level, murky party committees received the largest individual checks: a total of $862,223 for House and Senate Republicans and $552,605 for Democrats. Individual members of Congress also received their own contributions, including Republican House Speaker John Boehner ($98,175 from Comcast) and Democratic Senator Mark Pryor ($88,650 from Comcast, TWC, and National Cable and Telecom. Assn.) Pryor will need to spend his contributions quickly. He was de-elected by Arkansas voters last Tuesday.

Net Neutrality is a major topic on the minds of the cable and telco companies, as is ongoing deregulation and decommissioning rural landline service, and pushback on revelations AT&T and Verizon were only too happy to turn over your phone records to the federal government.

In the states, the bigger the issues coming up in the legislature, the bigger the campaign checks. In Florida, AT&T is the state’s single largest source of political donations, giving $1.53 million to state lawmakers in the past year and another $660,000 to Gov. Rick Scott (R) and his appointed heads of state agencies. AT&T is lobbying for eliminating Florida’s telecommunications tax, win the right to place cell towers wherever they wish without much interference from local officials, and further deregulation. Most of AT&T’s money goes into the hands of the state’s Republicans.

In New York and California, Democrats got a major chunk of money from Comcast and Time Warner Cable — New York Governor Andrew Cuomo received $60,800 each from both Comcast and Time Warner Cable (totaling $121,600). California Governor Jerry Brown received $54,400 from Time Warner Cable and $27,200 from Comcast. Both states are reviewing the merger of the two companies this year. AT&T and Verizon are also major donors – AT&T wants to dismantle the rural telephone network in California and Verizon is trying to convince the New York legislature to approve its own rural landline replacement – Voice Link. It also wants reduced scrutiny of its landline performance in New York and more access to New York City buildings where it faces resistance from property owners who want compensation from Verizon to install FiOS.

2014-contributions-from-net

AT&T Blackmails America: No (Phony) Fiber Upgrades Until You Kill Net Neutrality

Phillip Dampier November 12, 2014 AT&T, Consumer News, Net Neutrality, Public Policy & Gov't 1 Comment

ransomAT&T is putting its gigabit fiber network upgrades on hold as long as President Barack Obama continues to insist on robust Net Neutrality for American broadband.

AT&T Randall Stephenson told Wall Street investors attending this morning’s Wells Fargo Technology, Media, and Telecom Conference that the current state of “uncertainty” created after President Obama delivered remarks Monday in favor of strong Net Neutrality protections makes any investment in fiber upgrades too risky to continue.

“We can’t go out and just invest that kind of money deploying fiber to 100 cities […] not knowing under what rules that investment will be governed,” Stephenson said, excluding the two million customers already upgraded under AT&T’s Project VIP, AT&T’s effort to boost its wireless infrastructure in rural areas and upgrade U-verse to handle incrementally faster broadband speeds. “We have to just put a stop on those kinds of investments that we are doing today.”

But Stephenson’s accusation that the president’s strong support for Net Neutrality is responsible for putting AT&T’s plans on hold ignores the financial realities that have been a part of AT&T’s proposed upgrades since the company first announced them in April 2014.

Construction of Verizon’s fiber to the home FiOS network required significantly enhanced spending for several years, much to the consternation of Wall Street, that frequently criticized the project as too costly. In contrast, there have been few complaints about AT&T’s much larger 100 city fiber project because financial reports show no significant spending increases or large-scale capex investments by AT&T. In fact, on Friday — three days before the president made his remarks on Net Neutrality — AT&T announced investment cuts of at least $3 billion for 2015.

Stop the Cap! has reported AT&T’s fiber upgrades lack appropriate financial support and will require billions in increased investments to offer more than a handful of demonstration projects limited to new housing developments and multi-dwelling units where construction costs are considerably lower.

Stephenson admitted that most of the company’s Project VIP upgrade effort is now nearly complete, allowing the company to return to “normal” spending levels seen when major upgrades are not underway.

“You say okay, here has been the [increased spending in the budget], those projects are finished, we spiked it,” Stephenson said. “Now we’re bringing it down to a more normal rate.”

Stephenson reminded investors that they will see a dramatic savings in investment spending starting late this year.

“Just the cost [to AT&T over the last few years of Project VIP and] to be putting away this much investment, [it has been] a big operating expense block […] that we have been dragging through the last three years as we did all these buildouts,” said Stephenson. “You will see in 2014 the fourth quarter that [level of] capex start to tail off.”

The Menace of the Unburied Line: Cable & Phone Companies Create Hazards for Homeowners

One Alabama customer found her fence the home of not one, but two artistically-managed Charter Cable lines serving her neighbors.

One Alabama customer found her fence the home of not one, but two artistically-Amanaged Charter Cable lines serving her neighbors.

All across the country, people are encountering communications wiring that belongs underground or on a utility pole, but is instead scattered on the ground or left dangling on fences or in the street. Isolated incidents or a consequence of deregulation that has left community leaders’ hands tied? Stop the Cap! investigates.

A Louisiana woman eight months pregnant is suing Cox Communications Louisiana and its contractor after tripping over an exposed cable wire in her mother’s backyard the company didn’t bother to bury.

In Fort Myers, Comcast connected a neighbor’s cable service in a senior living community by scattering a cable across lawns and sidewalks for nearly a year before finally burying it.

In Alabama, Charter Cable turned cable wiring into an art form, attaching multiple homeowners’ cable TV wires in artistic designs to a neighbor’s fence, and he wasn’t even a customer.

Welcome to the scourge of the unburied, exposed cable wire. Typically called a “drop” by cable installers, these lines are common in communities where a cable or phone company uses a third-party contractor to manage buried lines. Some manage them better than others.

In the northern United States, replacement drops installed during the winter months often stay on the ground until spring because the ground in frozen, but in warmer climates in the southeast, cable companies are notorious for “forgetting” about orphaned cable lines that can take weeks or months to bury, often only after intervention by a local media outlet or politician.

Chardae Nickae Melancon’s complaint claims Cox installed cable service in June, 2013 and left the cable wire exposed in the backyard. In late August, Melancon claims she tripped and fell over the wire injuring her arm, right side, and other unspecified injuries. Her suit alleges Cox was warned the wire was installed improperly and only after her injury did Cox return to finish the job.

In Fort Myers, it took more than 11 months for Comcast to return and bury its line, snaked across lawns and sidewalks connecting several buildings in the retirement community.

Comcast left this cable lying across a sidewalk in a retirement community in Fort Myers, Fla. for 11 months.

Comcast left this cable lying across a sidewalk in a retirement community in Fort Myers, Fla. for 11 months.

“You know this [community] is 55 and older. We have got people in here that are 90 years old,” Bonnie Haines, a resident in the Pine Ridge Condo retirement community told WFTX-TV. “Could you imagine them walking or walking around that sidewalk and tripping over this, what would happen? They couldn’t see it at night. Fortunately for me I know it’s there. I’ve lived with it all this time but if somebody would come to visit an older person or something, they don’t know it’s there.”

Across the street lies another unburied Comcast cable.

“We’ve called multiple times. we’ve reported it multiple times,” said Eric Ray, the manager of the Pine Ridge Homeowners Association. “In fact, every time I see a Comcast truck in here I personally grab the driver, take him over to the spot, and he puts in a work order and takes pictures right in front of me and still no response.”

Comcast’s last reply before making the evening news:  “We’ll get to it soon.”

Twenty four hours after being a featured story on the station’s newscast, the cables were finally buried.

In Montgomery, Ala., an artistic cable installer has used one resident’s fence as the adopted home of Charter Cable’s lines. Jamie Newton, who isn’t a Charter customer, noticed an orange Charter Cable line attached to her fence one day after returning home. That was two years ago. Suddenly, an extra cable appeared, draped like Christmas tree garland.

http://www.phillipdampier.com/video/WFTX Ft Myers Residents worried about exposed cable tv wire 1-15-14.mp4

Residents of a Ft. Myers, Fla. retirement community worry residents as old as 93 could be seriously injured if they trip over this Comcast Cable left on the sidewalk for at least 11 months. (3:00)

“At first I was surprised, and then it turned into a little bit of anger and frustration,” Newton told WSFA. “I have small children, I have friends’ children over, and the neighborhood kids come and play in my backyard. It’s not safe.”

Charter Cable is not interested because Newton is not a customer. Charter in fact recorded just one complaint from a Charter customer six months earlier, and they claimed a “glitch” was responsible for the cable not being buried.

(Image: WEWS-TV Cleveland)

(Image: WEWS-TV Cleveland)

While some customers have been encouraged to remove offending lines that cross property lines themselves, some have gotten into trouble doing so, charged with destruction of private property. The most common mistake homeowners make is cutting or displacing cables placed on or in a utility easement, which can be difficult to identify.

Some of the worst problems occur with cables that served now ex-customers. Residents complain AT&T, Comcast and Charter are not responsive to requests from non-customers to deal with abandoned wiring in disrepair. An outside line supervisor in San Francisco tells Stop the Cap! AT&T has few provisions to manage cabling no longer in service for a paying customers.

The city of Cleveland, Ohio is a prime example of how AT&T deals with unused cables. Residents reports dozens of abandoned lines snipped at head level and allowed to dangle off utility poles, eventually to fall to street level where children can handle them. Time Warner Cable was also accused of allowing cables to hang over Cleveland streets. Some are left over after demolishing vacant houses but the most frequent cause of hazardous cables is competition. When a customer cuts cable’s cord, drops a landline, or flips between providers, installation crews often cut and leave old lines swaying in the breeze or draped over sidewalks.

The problem grew so pervasive in Cleveland, city officials requested telecom companies coordinate an audit of their cable networks and remove dangerous wiring before someone gets hurt. But all they can do is ask. Ohio’s sweeping telecom deregulation law stripped local authority over AT&T and Time Warner Cable. The city’s leverage is now based on creative code enforcement and embarrassing the companies in the local media.

“We don’t have any regulation for phone and cable companies and hanging wires create a hazardous situation and it’s going to have to be regulated,” said Cleveland councilman Tony Brancatelli. “One of these times it’s going to be a hot line.”

Local media reported nearly the same problem four years earlier in Cleveland, and efforts to keep up with cables left in disrepair seem to wane after the media spotlight moves on.

http://www.phillipdampier.com/video/WEWS Cleveland Neighbors worry kids will get desensitized to seeing low wires 4-3-14.mp4

Kids are at risk if they begin to disrespect hanging utility wires. An epidemic of abandoned cable and telephone cables are dangling over Cleveland streets and deregulation means cities have to ask providers nicely to deal with the problem. (3:00)

Time Warner Cable and AT&T have also pointed fingers at each other, implying the other is more responsible for the cables left hanging:

AT&T: “We certainly welcome attention on the topic of safety and any telephone wires that look out of place. To that end, we encourage you to share with your viewers the number for our statewide repair information line: 800-572-4545. Please do call this line to report locations of telephone wires that look out of place.  While your story pointed out that many of the problem lines you saw may not have been telephone lines, we look forward to removing or repairing any that we find, that indeed belong to our company.”

Time Warner Cable: “Maintaining line clearance is something we act quickly to correct anytime we identify a potential issue. Though it is not clear who owns the wires you cite in your story, when our lines need to be adjusted, we take immediate action.  If someone comes across a line they feel maybe too low, please call us and we will respond.”

One important tip from Stop the Cap! for both your safety and avoiding legal entanglements — don’t take on the job yourself.

Municipal officials tell us readers should call a local code enforcement officer and have them investigate utility cable issues. Unresponsive companies or those creating dangerous conditions for the public can be fined and most will respond quickly to an officer’s request to manage the problem, even when deregulated.

Customers allowing the cable company to install a temporary line in their own yard should check if they are signing a total liability waiver as part of the process. Doing so can limit your leverage if the cable company doesn’t return to bury the line.

http://www.phillipdampier.com/video/WEWS City of Cleveland promises to address low hanging wires 4-7-14.mp4

WEWS-TV in Cleveland followed up on their earlier report after getting no response from cable and phone companies and finding even more hazardous, abandoned wiring littering Cleveland. (3:15)

http://www.phillipdampier.com/video/WEWS Cleveland Major utility and cable companies meet with City of Cleveland 4-17-14.mp4

Cleveland officials asked cable and phone companies to send representatives to coordinate action to fix the problem, but deregulation makes the effort voluntary. (2:47)

AT&T Out of In-Flight 4G LTE Air-to-Ground Wireless Data Business; Will Focus on Overseas Acquisitions

Phillip Dampier November 10, 2014 AT&T, Competition, Consumer News, Wireless Broadband No Comments

att_logoAT&T has decided it is too risky to get into the in-flight connectivity business and has pulled the plug on a plan to launch 4G LTE air-to-ground wireless data service in the United States.

“As AT&T explores opportunities for future growth and diversification, expanding our international presence has remained an area of interest,” an AT&T spokesperson told Runway Girl Network, an air transport intelligence news service. “On Friday we announced our intent to acquire Mexico wireless company Iusacell. After a thorough review of our investment portfolio, the company decided to no longer pursue entry into the Inflight Connectivity industry.  We are focusing our capital on transformative investments, such as international and video.”

The sudden cancellation of the project came as a surprise, because AT&T had been planning an extensive network that would offer Wi-Fi to in-flight passengers and was discussing partnerships with vendors and airlines in late September.

AT&T bought Iusacell instead, for $2.5 billion. The Mexican cell carrier serves 8.6 million subscribers across 70% of Mexico. AT&T could eventually rebrand the venture as “AT&T” and market it as America’s first “North American Mobile Service,” covering over 400 million consumers and businesses in Mexico and the United States without roaming charges for AT&T customers who often travel to Mexico.

Iusacell’s network is fully compatible with AT&T’s GSM network, but lacks 4G LTE data service.

Wall Street Investors Suckered By Broadband, Wireless Myths on Usage Pricing, Network Investment

verizon-protestBig Telecom companies like Verizon and AT&T use phony numbers and perpetuate myths about broadband traffic and network investments that have conned investors out of at least $1 trillion in unnecessary investments and consolidation.

Alexander Goldman, former chief analyst for CTI’s American Recovery and Reinvestment Act grants, is warning Wall Street and investors they are at risk of losing millions more because some of the largest telecom companies in the country are engaged in disseminating bad math and conventional wisdom that relies more on repetition of their talking points than actual facts.

Goldman’s editorial, published by Broadband Breakfast, believes the campaign of misinformation is perpetuated by a media that accepts industry claims without examining the underlying facts and a pervasive echo chamber that delivers credibility only by the number of voices saying then same thing.

Goldman takes Verizon Communications CEO Lowell McAdam to task for an editorial published in 2013 in Verizon’s effort to beat back calls on regulators to oversee the broadband industry and correct some of its anti-competitive behavior.

McAdam claimed the U.S. built a global lead in broadband on investments of $1.2 trillion over 17 years to deploy “next generation broadband networks” because networks were deregulated.

Setting aside the fact the United States is not a broadband leader and continues to be outpaced by Europe and Asia, Goldman called McAdam’s impressive-sounding dollar figures meaningless, considering over the span of that 17 years, the United States progressed from dial-up to fiber broadband. Wired networks have been through a generational change that required infrastructure to be replaced and wireless networks have been through at least two significant generations of change over that time — mandatory investments that would have occurred with or without deregulation.

Over the past 17 years, the industry has gotten more of its numbers wrong than right. An explosion of fiber construction in the late 1990s based on predictions of data tsunamis turned out to be catastrophically wrong. University of Minnesota professor Andrew Odlyzko, the worst enemy of the telecom industry talking point, has been debunking claims of broadband traffic jams and the need to implement usage-based pricing and speed throttling for years. In 1998, when Wall Street was listening intently to forecasts produced by self-interested telecom companies like Worldcom that declared broadband traffic was going to double every 100 days, Odlyzko was telling his then-employer AT&T is was all a lot of nonsense. The broadband traffic emperor had no clothes, and statistics from rival telecom companies suggested Worldcom was telling tall tales. But AT&T executives didn’t listen.

fat cat att“We just have to try harder to match those growth rates and catch up with WorldCom,” AT&T executives told Odlyzko and his colleagues, believing the problem was simply ineffective sales, not real broadband demand. When sales couldn’t generate those traffic numbers and Wall Street analysts began asking why, companies like Global Crossing and Qwest resorted to “hollow swaps” and other dubious tricks to fool analysts, prop up the stock price and executive bonuses, and invent sales.

Nobody bothered to ask for an independent analysis of the traffic boom that wasn’t. Wall Street and investors saw dollars waiting to be made, if only providers had the networks to handle the traffic. This began the fiber boom of the late 1990s, “an orgy of construction” as The Economist called it, all to prepare for a tidal wave of Internet traffic that never arrived.

After companies like Global Crossing and Worldcom failed in the biggest bankruptcies the country had ever seen at the time, Odlyzko believes important lessons were never learned. He blames Worldcom executives for inflating the Internet bubble more than anyone.

A bubble of another kind is forming today in America’s wireless industry, fueled by pernicious predictions of a growing spectrum crisis to anyone in DC willing to listen and hurry up spectrum auctions. Both AT&T and Verizon try to stun investors and politicians with enormous dollar numbers they claim are being spent to hurry upgraded wireless networks ready to handle an onslaught of high bandwidth wireless video. Both Verizon’s McAdam and AT&T’s Randall Stephenson intimidate Washington politicians with subtle threats that any enactment of industry reforms by the FCC or Congress will threaten the next $1.2 trillion in network investments, jobs, and America’s vital telecom infrastructure.

Odlyzko has seen this parade before, and he is not impressed. Streaming video on wireless networks is effectively constrained by miserly usage caps, not network capacity, and to Odlyzko, the more interesting story is Americans are abandoning voice calling for instant messages and texting.

8-4WorldcomCartoonThat isn’t a problem for wireless carriers because texting is where the real money is made. Odlyzko notes that wireless carriers profit an average of $1,000 per megabyte for text messages, usually charged per-message or through subscription plan add ons or as part of a bundle. Cellular voice calling is much less profitable, earning about $1 per megabyte of digitized traffic.

Wireless carriers in the United States, particularly Verizon and AT&T, are immensely profitable and the industry as a whole haven’t invested more than 27% of their yearly revenue on network upgrades in over a decade. In fact, in 2011 carriers invested just 14.9% of their revenue, rising slightly to 16.3 percent in 2012 when companies collectively invested $30 billion on network improvements, but earned $185 billion along the way.

While Verizon preached “spectrum crisis” to the FCC and Congress and claimed it was urgently prioritizing network upgrades, company executives won approval of a plan to pay Vodafone, then a part owner of Verizon Wireless, $130 billion to buy them out. That represents the collective investment of every wireless provider in the country in network upgrades from 2005-2012. Verizon Wireless cannot find the money to upgrade their wireless networks to deliver customers a more generous data allowance (or an unlimited plan), but it had no trouble approving $130 billion to buy out its partner so it could keep future profits to itself.

Odlyzko concludes the obvious: “modern telecom is less about high capital investments and far more a game of territorial control, strategic alliances, services, and marketing, than of building a fixed infrastructure.”

That is why there is no money for Verizon FiOS expansion but there was plenty to pay Vodafone, and its executives who walked away with executive bonuses totaling $89.6 million.

As long as American wireless service remains largely in the hands of AT&T and Verizon Wireless, competition isn’t likely to seriously dent prices or profits. At least investors who are buying Verizon’s debt hope so.

Goldman again called attention to Odlyzko’s latest warning that the industry has its numbers (and priorities) wrong, and the last time Odlyzko had the numbers right and the telecommunications industry got its numbers wrong, telecommunications investors lost $1 trillion in the telecommunications dot.com bust.

As the drumbeat continues for further wireless consolidation and spectrum acquisition, investors have been told high network costs necessitate combining operations to improve efficiency and control expenses. Except the biggest costs faced by wireless carriers like Verizon are to implement strategic consolidation opportunities like the Vodafone deal, not maintain and grow their wireless network. AT&T is putting much of its spending in a proposed acquisition of DirecTV this year as well — at a cost of $48.5 billion. That could buy a lot of new cell towers and a much more consumer-friendly data plan.

Voice to text substitution (US)

year voice minutes billions texts billions
2005 1,495 81
2006 1,798 159
2007 2,119 363
2008 2,203 1,005
2009 2,275 1,563
2010 2,241 2,052
2011 2,296 2,304
2012 2,300 2,190

Cell phone network companies (if you can believe their SEC filings) are incredibly profitable, and are spending relatively little on infrastructure:

year revenues in $ billions capex in $ billions capex/revenues
2004 102.1 27.9 27.3%
2005 113.5 25.2 22.2
2006 125.5 24.4 19.4
2007 138.9 21.1 15.2
2008 148.1 20.2 13.6
2009 152.6 20.4 13.3
2010 159.9 24.9 15.6
2011 169.8 25.3 14.9
2012 185.0 30.1 16.3

Federal Trade Commission Suing AT&T Over Unfair Speed Throttles for Unlimited Data Customers

throttleThe Federal Trade Commission today filed a lawsuit against AT&T for its practice of subjecting grandfathered unlimited data customers to speed throttles that dramatically cut speeds up to 90 percent after customers use more than 3GB of data on AT&T’s 3G network or 5GB on its 4G network. Thus far, according to the FTC, AT&T has throttled at least 3.5 million unique customers a total of more than 25 million times.

The FTC’s complaint alleges that the company failed to adequately disclose to its customers on unlimited data plans that, if they reach a certain amount of data use in a given billing cycle, AT&T reduces – or “throttles” – their data speeds to the point that many common mobile phone applications – like web browsing, GPS navigation and watching streaming video –  become difficult or nearly impossible to use.

“AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” said FTC Chairwoman Edith Ramirez. “The issue here is simple: ‘unlimited’ means unlimited.”

FCC chairman Thomas Wheeler publicly complained about Verizon’s plans to start a similar throttling program on its wireless network, questioning the fairness of cutting speeds for certain customers while exempting others. Both Verizon and AT&T have claimed speed throttles are part of a fair usage policy that allows all customers to share its wireless resources. Broadband providers have often painted a picture of a “bandwidth hog” taking a disproportionate share of network resources away from other customers, but there is no evidence heavier users are creating conflicts for other users, especially as wireless carriers encourage customers to use more data.

throttle att

From AT&Ts website

The logic of rationing Internet use for unlimited customers while providing unlimited access to those willing to pay usage-based charges escaped the FTC, which is what brought the suit.

According to the FTC’s complaint, AT&T’s marketing materials emphasized the “unlimited” amount of data that would be available to consumers who signed up for its unlimited plans. The complaint alleges that, even as unlimited plan consumers renewed their contracts, the company still failed to inform them of the throttling program. When customers canceled their contracts after being throttled, AT&T charged those customers early termination fees, which typically amount to hundreds of dollars.

The FTC alleges that AT&T, despite its unequivocal promises of unlimited data, began throttling data speeds in 2011 for its unlimited data plan customers after they used as little as 2 gigabytes of data in a billing period. According to the complaint, the throttling program has been severe, often resulting in speed reductions of 80 to 90 percent for affected users.

According to the FTC’s complaint, consumers in AT&T focus groups strongly objected to the idea of a throttling program and felt “unlimited should mean unlimited.” AT&T documents also showed that the company received thousands of complaints about the slow data speeds under the throttling program. Some consumers quoted the definition of the word “unlimited,” while others called AT&T’s throttling program a “bait and switch.” Many consumers also complained about the effect the throttling program had on their ability to use GPS navigation, watch streaming videos, listen to streaming music and browse the web.

The complaint charges that AT&T violated the FTC Act by changing the terms of customers’ unlimited data plans while those customers were still under contract, and by failing to adequately disclose the nature of the throttling program to consumers who renewed their unlimited data plans.

FTC staff worked closely on this matter with the staff of the Federal Communications Commission.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of California, San Francisco Division.

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  • Howie: I feel that the taxpayers of New York State have the right to know how their tax money is being spent. If T-W wants to keep how it spends money on i...
  • AC: What I'd love to see is the total amount of federal money AT&T received and the promises they were to have done by now....
  • Seattle: They doubled the download speed but not the upload. So now my speed is 100-120 down but only 10 up....
  • Paul Houle: This the kind of "leadership" we are getting out of Cuomo, unfortunately. It reminds me of his "bold" initiative to bring more gambling to NY, so...
  • fjfdybvfgj: The Data Usage represented is usually the norm for most people by themselves. In a family of 5 and our usage is usually around 6TBs normally and is ~9...
  • Bryan: Awesome article Just got 12MB and U-200 with HD included free for $93 a month. Also made them throw in movie channels for a month free....
  • Mike: The U.S. government has been hijacked by murderous psychopaths. They seek global domination and, using the power of the U.S. military and intelligen...
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  • chris84: Smh comcast gave me the run around on the phone and around the city they are a joke sad part is i was in prison when i so called opened a comcast acco...
  • Conor D: Thank you so much for the article. We had U-verse 450 with 24 Mbps with 3 receivers. We were paying about $150 a month until the promotions just di...
  • Clyde: First file a report with your state's Board of Public Utilities...... Then follow the instructions at the link below. https://customer.comcast.com/h...
  • fjfdybvfgj: Can't wait to see them offer Unlimited Data with no throttling to compete with Tmobile (would need to be no contract of course like it should be). The...

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