Stop the Cap! » FairPoint

The Death of the Landline? AT&T Ditches Yellow Pages, Pay Phones Disappear; So Do Customers

Phillip Dampier — Thu, 12 Apr 2012 19:02:17 +0000

As AT&T joins Verizon selling off its Yellow Pages publishing unit and payphones keep disappearing from street corners, the media is writing the landline obituary once again.

CNN Money asks today whether we’re witnessing the death of the landline.

In as little as 20 years, the concept of a wired phone line may become the novelty a rotary-dial phone represents today. Yes, traditional phone lines will still be found in businesses and in the homes of those uncomfortable dealing with a mobile phone, but America’s largest phone companies are well aware the traditional telephone line is in decline.

Click here to view the embedded video.

The Bell System, as it was known until the 1980s, used to comprise AT&T, Bell Labs, Western Electric, Long Lines, and two dozen local “operating companies” like New York Telephone, Mountain Bell, etc. This AT&T documentary, from 1976, explores how “the phone company” used to function. New innovations like “lightwave” are showcased, promising to deliver voice phone calls over glass fibers one day.

Much of the technology seen in the documentary may be unfamiliar if you are under 30 (and check out how customer records were maintained back then), but those who remember renting telephones in garish colors from your local phone company will recognize the phones that occupied space in your home not that long ago. The only part of the landline network that hasn’t changed much in the last 40 years is the wiring infrastructure itself, which has been allowed to deteriorate as customers continue to depart.

Why was the company so darn big back then? Because it had to be, the documentary says, to serve a big America. Hilariously, the company defends its then-status as a “regulated monopoly” telling viewers “[a] regulated monopoly works well in communications because you don’t duplicate facilities and you produce real economies over the long haul.” (14 minutes)

CNN reports nearly one-third of all American homes no longer have landline service, double the rate from 2008, triple that of 2007. Verizon is feeling the heat the most, with revenue down 19% over the last five years. AT&T has seen their revenue drop 16.5% over the same period.

But things are not all bad for phone companies willing to spend money upgrading their networks. Verizon’s top-rated FiOS fiber to the home service is a compelling competitor to Comcast and Time Warner Cable. AT&T’s U-verse has gotten a respectable market share larger midwestern cities and draws customers who like its DVR box and the chance to stick it to the local cable company they’ve hated for years.

But where both companies have decided against investing in upgrades — notably in their rural service areas — the traditional phone line is trapped in time. Only the network it depends on is changing, and not for the better.

Click here to view the embedded video.

Back in 1993, AT&T produced seven advertisements dubbed the “You Will” series, showcasing future technologies AT&T would “deliver to you.” Eerily, the vast majority of these predictions came true, but mostly from companies other than AT&T. While the phone company predicted what would eventually become E-ZPass, Apple’s iPad, Apple’s Siri, the smartphone, Skype, Amazon’s Kindle, the cable industry’s home security apps, video on demand, and GPS navigation, most of those innovations were developed and sold by others.

AT&T spun away Bell Labs and became preoccupied selling Internet access, cell phones and reassembling itself into its former ‘hugeness’ through mergers and buyouts. With limited investment in innovation, AT&T risks being left as a “dumb pipe” provider, selling the connectivity (among many others) to allow other companies’ devices to communicate. (Alert: Loud Volume at around 2 minutes) (4 minutes)

Verizon decided to ditch its rural service areas to FairPoint Communications in northern New England and Frontier Communications in 14 other states. The results have not been good for the buyers (and often customers). FairPoint went bankrupt in 2009, overwhelmed by the debt it incurred buying phone lines in Vermont, New Hampshire, and Maine. Frontier has watched its sales fall ever since its own landline acquisition, and the company has gotten scores of complaints from ex-Verizon customers about broken promises for improved broadband, billing errors, and poor service.

Analysts predict AT&T will start dumping its rural landline customers in the near future as well, letting the company focus on its U-verse service areas. But who will buy these cast-offs? CNN reports nobody knows. CenturyLink and Windstream, two major independent phone companies, don’t appear to be in the mood to acquire neglected landline facilities they will need to spend millions to repair and upgrade.

One thing is certain — both AT&T and Verizon are tailoring business plans to favor Wall Street approval. The companies’ decisions to temporarily boost revenue selling pieces of its operations has helped stock prices, but has also made the companies shadows of their former selves. Nearly 30 years ago, customers still paid the phone company to rent their home telephones, relied extensively on the companies’ lucrative White and Yellow Pages for directory information, and discovered new technology innovations like digital switching thanks to Bell Labs, the research arm of AT&T — today independent and known as Alcatel-Lucent. Today, people in some cities cannot even find a telephone company-owned payphone.

Click here to view the embedded video.

WJBK in Detroit this week ventured out across Detroit to see if they could find a pay phone that actually works. That old phone booth on the corner is long gone, and some admit they haven’t touched a pay phone in 20 years. (2 minutes)

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Even the 1%’ers Have to Deal With 1Mbps DSL: FairPoint & Comcast Say No to Wealthy Enclave

Phillip Dampier — Wed, 04 Apr 2012 17:58:18 +0000

No broadband for you...

Sometimes even money doesn’t talk… or buy you faster broadband service.

That is a lesson some of New Hampshire’s wealthiest residents — company presidents, top-dollar lawyers, and the trust-fund endowed — in Rindge and Grafton County are learning only too well.

It seems neither Comcast or FairPoint Communications has shown much interest in extending today’s definition of “broadband” to the multi-million dollar homes on Hubbard Road.

“Every year, I start working up the telephone chain, calling people at Comcast. I’m looking for the vice president, or whatever, in charge of infrastructure so I can call him, bribe him, plead with him to connect me,” said Leigh Eichel, who moved to the ritzy cul-de-sac in 2005. “I’ll pay anything!”

Eichel and his friends told their story to David Brooks of the Nashua Telegraph, who used the plight of the 1%’ers to ponder whether broadband should be a universal right.

A century ago, the government decided that mail service to all American homes was necessary and launched Rural Free Delivery. Then it decided electricity was necessary and created regulated utilities that guaranteed connection. It did the same with telephones, creating the universal access fund that collects money from all phone bills to subsidize land lines to the remotest home.

But nothing similar has happened with Internet service, which is mostly unregulated by government. The market has been largely left to its own.

The result is scattered empty spots like Hubbard Road, which should be broadband heaven.

... or you.

Comcast continues, for the seventh year running, to show zero interest in wiring the wealthy enclave. That left residents trying to make do with satellite broadband, which they cried was too slow and usage-capped.

Eichel finally managed to cajole FairPoint Communications, the bankrupt phone company that bought out Verizon landlines in northern New England, to extend DSL to the neighborhood, but they did it on-the-cheap, leaving residents with sub-par service barely capable of breaking 1Mbps, when they’re lucky.

Welcome to broadband equality of a different kind, whether you are fighting AT&T from a family farm in Wisconsin for better-than-1Mbps DSL or a super-wealthy executive in New Hampshire suffering with FairPoint’s alleged broadband and utterly rejected by Comcast.

Particularly appalling for the well-traveled Hubbard Road residents: the realization that Singapore’s equivalent of a seedy Motel 6 has basic broadband service that beats the pants off New England’s dominant phone company.

Even Money Won't Talk

“I was staying in a budget hotel; there weren’t even windows in the room. Hey, I was spending my own money,” Eichel’s neighbor Rick Slocum told the newspaper. “[They had] 12Mbps broadband — the connection [was] 10 times as fast as my home.”

Brooks concludes New England wants the same thing most of the rest of the country wants — universal fiber-to-the-home access, which delivers 100-1000Mbps, depending on the provider.

They, like most everyone else, will have to wait. Like AT&T U-verse and Verizon FiOS, FairPoint’s very-limited fiber offering FAST has reached a limit of its own — the amount the phone company is willing to spend rebuilding their network. Future expansion plans are now on hold.

Slocum ponders the speed needs America will have in the future, and wonders if even fiber optics will one day need to be replaced for something even faster.

Brooks responds with a prediction. As long as Comcast and FairPoint are in charge, whatever it is, Hubbard Road probably won’t have it.

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

Phillip Dampier — Mon, 19 Mar 2012 15:01:55 +0000

Won 1.1 million new customers in 2011

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

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

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

Stalled growth

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

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

Other key findings include:

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

Now serving 10.3 million

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

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

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

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

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

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AT&T’s Broadband Answer for Rural America: Sell Rural DSL Operations To Someone Else

Phillip Dampier — Tue, 06 Mar 2012 21:35:11 +0000

AT&T to Rural America

While Verizon leverages its 4G LTE wireless network as a rural broadband solution, AT&T shows no signs of sharing Big Red’s enthusiasm (and investment).

In fact, while AT&T celebrates the end of its U-verse fiber-to-the-neighborhood expansion and admits it has no answer to America’s rural broadband problem, the always excellent DSL Prime by Dave Burstein reports AT&T is mulling a sale of its rural DSL operations to a third party provider, essentially letting the new owner(s) deal with the rural broadband problem:

[AT&T] is “doing a rapid tech evaluation” of whether they can upgrade their DSL + wireless to “a competitive broadband product.” But Randall “doesn’t see a solution.” If that’s confirmed, “we’re looking for others who might want the properties.” [...] It’s unclear if any of the “rural carriers” – Century, Frontier, Windstream – have the financial ability to make an attractive offer. If operators can’t raise the money, [AT&T] would need to make a financial transaction.

Verizon has sold off its entire “wireline” (landline infrastructure and business) operation in smaller, rural states — often properties it acquired years earlier from GTE — to focus on more lucrative urban markets. AT&T could either spinoff its broadband operation to a third party to run or follow Verizon and sell off entire rural service areas not already upgraded for AT&T’s more modern U-verse.

Likely buyers include FairPoint Communications, Frontier Communications, CenturyLink, and Windstream — all independent traditional landline operators trying to focus on less-competitive rural markets pitching DSL broadband service.

AT&T has shown little interest investing in rural service areas located primarily in the southern and central United States. As Karl Bode writes on Broadband Reports, AT&T is on record stating that they can’t find an “economically viable” way to upgrade these users, despite a looming increase in faster and less expensive last mile DSL technologies.

As AT&T has sought to redefine itself as a wireless company, the buildout of its wireless network could bring AT&T to also eventually pitch 4G wireless Internet service to its former DSL customers. But like Verizon, those plans would likely include severely usage-capped service, while leaving its traditional DSL product starved for investment.

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Telco’s Ethernet Over Copper Can Deliver Faster Speeds, If You Can Afford It

Phillip Dampier — Mon, 13 Feb 2012 20:38:35 +0000

Ethernet over Copper is becoming an increasingly popular choice for business customers stuck in areas where companies won't deploy fiber broadband (Graphic: OSP Magazine)

With Verizon and AT&T effectively stalling expansion of their respective “next generation” fiber and hybrid fiber/coax networks, and independent phone companies fearing too much capital spent improving their networks will drive their stock prices down, telephone companies are desperately seeking better options to deliver the faster broadband service customers demand.

The options over a copper-based landline network are not the best:

ADSL has been around for more than a decade and is highly distant dependent. Get beyond 10,000 feet from the nearest switching office and your speeds may not even qualify as “broadband;”
DSL variants represent the second generation for copper-broadband and can deliver faster speeds, but usually require investment to reduce the amount of copper between the customer and the switching office;
Fiber networks are more expensive to build, and some companies are using it to reduce, but not eliminate copper wire in their networks. But companies traditionally avoid this solution in rural/suburban areas because the cost/benefit analysis doesn’t work for shareholders;
Ethernet Over Copper (EoC) is increasingly the solution of choice for independent phone companies because it is less expensive to deploy than fiber and can quickly deliver service at speeds of up to 50Mbps.

Unfortunately for consumers, EoC is typically way above the price range for home broadband. Most providers sell the faster service to commercial and institutional customers, either for businesses that have outgrown T1 lines or where deploying fiber does not make economic sense. Some companies have tried to improve on DSL by bonding multiple connections together to achieve faster speeds, but Ethernet is quickly becoming a more important tool in the broadband marketing arsenal.

With phone companies pricing EoC service from several hundred to several thousand dollars a month, depending on the speed of the connection, they hope to remain competitive players against a push by the cable industry to more aggressively target business customers. In more rural areas, phone companies lack cable competition, so they stand a better chance of success.

Fierce Telecom‘s Sean Buckley published an excellent series of articles outlining the current state of EoC technology and what phone companies are doing with it:

AT&T: Inherited EoC from its acquisition of BellSouth, and barely markets it. Instead, AT&T uses it as a quiet solution for challenging customers who cannot affordably be reached by fiber. AT&T will either deliver the service over copper, copper/fiber, or an all-fiber path depending on the client’s needs.
CenturyLink: No phone company is as aggressive about EoC as CenturyLink. When CenturyLink acquired Qwest, interest in the technology only intensified. EoC is a CenturyLink favorite for small businesses that simply cannot get the speeds they need from traditional DSL. Most EoC service runs up to 20Mbps.
Verizon: Verizon’s network is the most fiber-intense among large commercial providers, so EoC is not the first choice for the company. However, it does use it to reach multi-site businesses who have buildings and offices outside of the footprint of Verizon’s fiber network/service area.
Frontier: In the regions where Frontier acquired Verizon landlines, EoC has become an important component for Frontier’s backhaul traffic. EoC has been deployed to reach cell tower sites and handles broadband traffic between central office exchanges and remote D-SLAMs, used to let the company sell DSL to a more rural customer base. Frontier looks to EoC before considering spending money on fiber service, even for commercial and institutional users.
Windstream: EoC is the way this phone company gets better broadband speeds to business customers without spending a lot of money on fiber. Small and medium-sized customers are often buyers of EoC service, especially when DSL can’t handle the job or the company requires faster upstream speeds. Windstream markets upgradable EoC capable of delivering the same downstream and upstream speeds and can deliver it more quickly than a fiber project.
FairPoint: Much of this phone company’s EoC efforts are in territories in northern New England acquired from Verizon. FairPoint targets small and medium sized companies for the service, especially those who have remote offices or clinics that need to be interconnected. FairPoint has also gotten more aggressive than many other companies working with ADSL2+ or VDSL2 to deliver faster broadband to office buildings and complexes more economically than fiber.
SureWest: This company is strong believer in fiber to the premises service, so its interest in EoC has been limited to areas where deploying fiber makes little economic sense. In more out-of-the-way places, EoC is becoming a more common choice to pitch businesses who need more than traditional broadband.
Hawaiian Telcom: HawTel uses copper-based EoC to provide connectivity across the diverse Hawaiian Islands. Speeds are generally lower than in mainland areas, partly because HawTel still relies heavily on traditional copper-based service. But fiber-based EoC is increasingly available in more densely populated areas.

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Western Massachusetts Fiber Network Underway, But Who Will Sell Service to Consumers?

Phillip Dampier — Tue, 13 Dec 2011 00:57:00 +0000

If they build it, will Verizon, Time Warner Cable, or Comcast come?

The Massachusetts Broadband Institute (MBI) has just received a major shipment of cable it will use to construct part of its 1,300-mile fiber optic network, designed to provide better-than-dialup service to over 120 communities in western and north central Massachusetts. That is, if providers show any interest in selling access to it.

The news that the broadband blockade in the western half of the state may finally come to an end is being trumpeted by local newspapers and TV newscasts from Springfield. WSHM used the occasion to celebrate with current AOL dial-up user Ryan Newhouser, of Worthington:

A high-speed informational highway will be set up with thousands of miles of high-speed fiber optic cables. Those fibers will now be installed on utility polls across Western Mass.

Now residents sitting at their computers in frustration can finally look forward to high-speed internet access.

Perhaps.

As Stop the Cap! first explored earlier this year, the new fiber network is good news for western Massachusetts. But it alone will not deliver service to the masses who desperately want faster Internet access.

The incumbent phone and cable companies have certainly not shown much interest. Verizon treats western Massachusetts much the same way it served its landline customers in the rest of northern New England (Maine, New Hampshire, and Vermont.) The company’s landline network was allowed to deteriorate along with Verizon’s interest in providing service in the largely rural states. Eventually, it sold its operations north of Massachusetts to FairPoint Communications. Comcast and Time Warner Cable are missing in action in many parts of the region as well. As big phone and cable companies concentrate investments in more urban areas like Boston, many residents in places like Worthington can’t buy broadband service at any price.

MBI optimistically hopes the presence of its new fiber backbone and middle-mile network will change all that. But outside of AT&T’s apparent interest it to provide service to its cell towers, there has been no publicly-expressed enthusiasm by Verizon or cable operators to begin serious investment in broadband expansion across the region.

The Last Mile Network Challenge

So what is holding western Massachusetts back? The same thing that keeps broadband out of rural areas everywhere — the “last-mile” problem. Traditionally, operators target urban and suburban areas for their investments because the construction costs — wiring up your street/home/business — can be recouped more easily when divided between a pool of potential customers. Every provider has their own “return on investment” formula — how long it will take for a project to pay for itself and begin to return profit. If your street has 100 homes on it, the chances of recouping costs are much higher than in places where your nearest neighbor needs binoculars to see your house. Pass the ROI challenge and providers will invest capital to wire your street. Fail it and you go without (or pay $10,000 or more to subsidize construction costs yourself.)

That is why eastern Massachusetts has plentiful broadband and the comparatively rural western half often does not.

MassBroadband 123 is the state’s solution to the pervasive lack of access across the western half of The Bay State. It will consist of a fiber backbone and “middle mile” network, solving two parts of a three-part broadband problem. The project’s commitment to deliver open access to institutions and commercial ISPs across the region is partly thanks to the availability of broadband grant money, particularly from the federal government.

Projects similar to MBI’s MassBroadband 123 typically include the hoped-for-outcome that private companies will step up and invest to ultimately make service available to end users. Unfortunately, large incumbent providers often remain uncommitted to wiring the last-mile, and communities promised ubiquitous broadband end up with an expensive institutional network that only serves local government, public safety, schools, libraries, and health care facilities.

Thankfully, it does not appear MBI is depending on Verizon, which has shown no interest in spending significant capital on its legacy landline network or cable operators that are unlikely to break ground in new areas.

Communities are increasingly learning if they don’t have service today, the only real guarantee they will get it is by providing it themselves. That is where WiredWest comes in. It is a community-powered partnership — a co-op for broadband — pooling resources from 22 independent towns (with 18 more expected to join) to build out that challenging last mile, and deliver future-proof fiber to the home service. No last generation DSL, slow and expensive fixed wireless, or limited capacity coaxial cable networks are involved.

WiredWest Members

Founding member towns span four counties, including Berkshire County towns of Egremont, Great Barrington, Monterey, New Marlborough, Otis, Peru, Sandisfield, Washington and West Stockbridge; Franklin County towns of Ashfield, Charlemont, Conway, Heath, New Salem, Rowe, Shutesbury, Warwick and Wendell; Hampshire County towns of Cummington, Heath, Middlefield and Plainfield; and the Hampden County town of Chester.

Most of the construction costs for the new network will likely come from municipal bonds, because government grants typically exclude last mile network funding. Commercial providers often lobby against municipal-funded networks as “unfair competition,” a laughable concept in long-ignored western Massachusetts, where Verizon pitches slow speed DSL, if anything at all.

WiredWest compares rural broadband with rural electrification. Community-owned co-ops provide service where few private companies bothered to show interest:

Think back to the rural electrification of America. Then, as now, it wasn’t profitable enough for private companies to build out electrical service to rural communities. Imagine where those communities would be today if the government hadn’t stepped in to help fund this essential service – which over time has sustained itself and become a profitable enterprise.

Rural fiber-to-the-home is affordable when you use an appropriate financing and business model that isn’t subject to the same short-term measures of profitability as a private company. A municipal model for example, allows capital investment that can be written off over a longer period of time.

This type of business model isn’t limited to community-owned broadband. Other countries that treat broadband as an essential utility have, in some cases, boosted broadband beyond a simple cost/benefit “ROI” analysis.

Constructing a broadband network for western Massachusetts still presents some formidable challenges, however:

There is a serious imbalance in government grant programs. A largesse of government funding for institutional broadband has delivered scandalously underused Cadillac-priced networks communities, libraries and schools cannot afford to operate themselves once the grant money ends. Meanwhile, funding to cushion the cost of wiring individual homes and businesses is extremely scarce. Isn’t it time to divert some of that money towards the most difficult problem to overcome — wiring the last mile?
Government impediments to community broadband must be eliminated. Repeal laws that restrict public broadband development. Early experiments in municipal telecom networks have taught valuable lessons on how to operate networks efficiently and effectively. But the broadband industry engages in scare tactics that highlight failures of older public projects like community Wi-Fi in an effort to keep superior publicly-owned fiber-to-the-home networks out of their markets.
The public is not always engaged on the broadband issue and accepts media reports that misunderstand institutional broadband as a solution for those stuck using dial-up. No matter how good a network is, if the “last mile” problem remains unsolved, the closest consumers like Mr. Newhouser will get to fiber service is looking at the wiring on a nearby telephone pole. In many communities, fiber broadband paid for by public tax dollars is only accessible at the local public library. Taxpayers must demand more access to networks they ultimately paid for out of their own pockets, and should support existing public broadband initiatives wherever practical.

Click here to view the embedded video.

WSHM in Springfield says if you don’t have broadband in western Massachusetts now, it should be coming to your area soon. But will it? (3 minutes)

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FairPoint’s Funny Numbers: Counts Customers Who Can’t Buy DSL ‘Broadband-Ready’

Phillip Dampier — Thu, 01 Dec 2011 19:53:25 +0000

FairPoint Communications is under fire for counting customers “broadband ready” when, in fact, they can’t buy DSL service from the northern New England phone company at any price.

One of the commitments FairPoint made to regulators who approved their buyout of Verizon landlines in Maine, New Hampshire, and Vermont in 2007 was that the company would expand broadband availability to at least 87 percent of residents in states like Maine. In October, FairPoint claimed it had met that target, but now the Office of the Public Advocate has found instances where the phone company counted customers who live too far away from the phone company’s facilities to buy the service as “served.”

FairPoint is apparently counting most customers within a DSL-equipped exchange as reachable by broadband, even if only some of them actually are. The rest either live too far away to get proper broadband speeds, or are connected to inferior lines that will not sustain a serviceable connection.

Maine’s Public Utility Commission (PUC) is upset FairPoint seems to be padding the numbers in its favor. Maine’s Public Broadcasting Network talked with commissioners:

“I just find it hard to reconcile that it’s in the public interest to include in the definition of addressable lines, a line on which no customer can be connected and to which Fairpoint has made no planning or economic commitment to serve in the future,” said Vendean Vafiades. She, along with fellow commissioner David Littell, voted in favor of a decision which is likely to require Fairpoint to re-calculate the 87 percent figure using a stricter methodology.

“And I do believe that Fairpoint has a commitment to be economically viable in this state and to provide good quality service. And at a minimum I think Fairpoint should be required to provide actual access to meet its merger condition and obligations,” said Vafiades.

The holdout vote was that of PUC Chairman Tom Welch, who sympathized with Fairpoint on this issue.

The vote in Maine is likely to force FairPoint, which had hoped it was “all done” fulfilling broadband obligations, to spend more to upgrade its network to sufficiently service customers it promised it would.

FairPoint defends their interpretation of the numbers, noting the company has spent more than $169 million across their northern New England territories on broadband, making good on their commitment. The state’s consumer advocate and PUC disagree, so now all parties will be re-evaluating their numbers, and FairPoint customers still waiting for DSL might still have a chance to get it after all.

Maine’s Public Broadcasting Network reports on the controversy over FairPoint’s promise to serve at least 87% of Maine with broadband service. Maine’s public utility commissioners voted to ramp up the pressure on Fairpoint Communications with regard to their broadband rollout. The expansion of high-speed internet to most areas of Maine was one of the conditions of Fairpoint’s purchase of Verizon’s former landline operation in 2007. (3 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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Special Report: AT&T and Verizon’s Deteriorating Legacy Landline Networks

Phillip Dampier — Tue, 15 Nov 2011 04:56:46 +0000

Verizon Communications and AT&T together represent the largest providers of legacy copper wire landline phone service in the United States. Over the past ten years, the traditional landline business has taken a beating as consumers increasingly turn their backs on the technology Alexander Graham Bell helped invent more than 100 years ago. No utility service faces more customer defections than the phone company, and providers are increasingly rewriting their business models or lobbying to abandon unprofitable service areas altogether.

For some customers, investments in network improvements have brought advanced fiber optics straight to the home. But in smaller communities, customers are making due with a deteriorating network phone companies no longer want to maintain.

The Glorious Growth Years

Back in the late 1980s, before most of us realized there was an Internet (or that you might be able to access it from home), the concept of connecting computers together to share information meant buying a 300-1200bps modem and using your home phone line to dial up hobbyist computer bulletin boards, CompuServe, PeopleLink, Delphi, GEnie, and QuantumLink.

Landline service was never perfect, but it worked reliably enough to make and receive phone calls and connect to low speed data networks. As the 1990s arrived, an explosion in data and wireless services would bring both growth and unprecedented challenges for traditional telephone companies. Businesses demanded access to additional phone lines to power dedicated data lines and fax machines. Residential customers wanted extra phone lines as well, mostly to keep data traffic off the primary house line. It was the era of frenzied area code splits, cell phones for all, and talk America could even run out of seven digit phone numbers to assign to all of the new lines.

NYNEX is today known as Verizon

As revenue and earnings exploded with the installation of new voice, data, and fax lines, Wall Street investors soon took notice. Sleepy and safe phone company stocks were suddenly hot, and a deregulation-fueled consolidation frenzy soon resulted as phone companies merged and acquired one another. Among the Bell System operating companies, familiar names like NYNEX, Bell Atlantic, BellSouth, Southwestern Bell, Pacific Telesis, Ameritech, and US West were gone, replaced by AT&T, Qwest, and Verizon. Independent phone companies were not immune to the merger and acquisition game. Today’s largest independent phone companies including Frontier Communications, CenturyLink, FairPoint, and Windstream have all grown mostly through buyouts of other providers.

The Bottom Drops Out

The rapid growth years of the traditional wired phone line came to an end around the same time as the dot.com crash and accompanying recession from 2000-2002. While cell phone growth would continue, new competitors — especially cable-delivered “digital phone” service and other Voice Over IP providers like Vonage seriously cut into market share and revenue. The need for additional phone lines to access the Internet subsided with the growth of DSL and cable broadband. As household income stagnated, choices began to be made about where to cut back, and the traditional landline was a popular favorite. Why pay for both a landline and a cell phone? The cell phone stayed, the landline went. Even dedicated fax machines are increasingly deemed unnecessary in an e-mail world.

The growing realization that the traditional copper wire telephone line was at risk of being the next “horse and buggy business” forced companies to consider a handful of options: ride out the landline declines and lower shareholder expectations, transform their existing networks to sustain new products like faster broadband and television service to give customers reasons to stay, or transition focus on business customers who bring more revenue.

AT&T and Verizon have adopted all three strategies, depending on where customers happen to live.

AT&T: If You are Still Waiting for DSL From Us, Forget It

In October, John J. Stephens, chief financial officer and executive vice-president at AT&T made it clear to investors the company’s interest in growing its legacy wired business had come to an end. The company had lost landline customers for years, most switching to cell phone alternatives, sometimes sold by AT&T itself. Spending enormous sums to upgrade AT&T’s copper landline network just didn’t make financial sense in every area. Instead, AT&T split its operating territories in two: those suitable for upgrades to the company’s U-verse/IP platform, and those in smaller communities who will soon find themselves pushed to switch to AT&T wireless service instead. That makes the prospects for customers still waiting for wired DSL service from AT&T pretty dim.

“We’ll continue to focus on transforming [existing] DSL lines into high speed [U-verse].” Stephens said. “In those areas where we don’t have U-verse, I think our plans have been fairly clear. We expect to have an LTE [wireless mobile broadband] rollout to 97% of the country. [...] We believe that’s going to be able to provide a wireless solution at a high speed, good quality, good cost on a profitable basis for us. That’s the long-term solution to the non-U-verse areas.”

AT&T’s lobbyists have signaled this agenda for years, pressing state and federal lawmakers to get rid of “universal service” requirements that mandate reliable, basic landline telephone service to any customer in their service area who requests it. AT&T wants the definition of “basic telephone service” expanded to allow the company the option of discontinuing its landline network and selling rural residents cell phone service instead. The expense associated with maintaining AT&T’s degrading copper wire network is always cause for grumbling on Wall Street, most recently after this year’s repair costs from storms that impacted some of AT&T’s service areas. Storm damages brought outages in the southern United States, flooded regions along the Mississippi, and rained-out areas of California.

Those problems were exacerbated when AT&T’s repairs don’t always correct the problems. Repeated outages blamed on inadequate repairs and investment brought negative publicity for the phone company, as well as a number of requests to disconnect service as customers find other providers.

In places where AT&T will never deploy U-verse, AT&T has been content asking lawmakers to ease up on the phone company, urging that minimum service standards and oversight be abolished, along with the power of regulators to fine the company for repeated transgressions. AT&T argues increased competition makes regulation unnecessary.

AT&T: Wants to eliminate universal service for rural America.

AT&T’s bean counters have calculated investment in U-verse only makes sense in urban-suburban areas. In more distant suburbs and rural areas, the return on investment isn’t fast enough to justify spending money up-front on service improvements. Maintaining the decades-old landline network doesn’t make much sense to AT&T either. Instead, the company sees wireless service as the best prospect to serve its rural customers (and deliver the company higher profits from the more expensive service plans that come with the phones).

“What I see happening with LTE and data is just a huge growth opportunity,” said Ralph de la Vega, CEO and president of AT&T Mobility & Consumer Markets. “We mentioned today that our smartphones now make up 52% of our postpaid base. But I think the way we need to think about smartphones in the future is the smartphone is going to equal the phone in the future. It will be 100% in the next 2 or 3 years. These devices are so good and the costs are coming down so much that I think in the future, you could look at close to 100% penetration.”

Some customers may find AT&T penetrating their wallets, but for the phone company, better days may be ahead:

Moving customers to the wireless platform exposes them to higher revenue, higher-priced wireless service plans;
Basic cell phones, which come with lower-priced voice plans are being increasingly replaced with smartphones which come with required, extra-cost data plans;
Getting rid of the rural landline network slashes AT&T’s upkeep costs and holds customers in place with two-year service contracts common with wireless phones.

Consumers happy with their existing landline service may be less than impressed with AT&T’s cellular network coverage, its dropped call-problem, and the company’s alternative for rural broadband – heavily usage-capped and expensive LTE network access. AT&T sells wired DSL plans for as little as $14.95 a month with a 150GB usage limit. AT&T’s wireless LTE network will cost considerably more and is accompanied with usage limits a fraction of that amount.

Verizon: A Tale of Two Networks

Big Red has two wired landline networks: screaming fast FiOS fiber to the home for some, slow speed DSL over a decrepit copper wire network for everyone else.

Verizon is less opaque than AT&T regarding which service areas it treats as valued assets and which aren’t worth the time of day. The company began selling off its undesirable customers several years ago, starting with Hawaii. Northern New England was next, followed by several former GTE territories Verizon acquired in 2000.

While Verizon enjoyed the proceeds of the tax-free transactions, most of the impacted customers did not. Hawaiian Telcom floundered for a few years with bad service and an outrageous debt load before declaring bankruptcy. Maine, New Hampshire and Vermont suffered through a year-long transition to buyer FairPoint Communications, complete with poor service and notoriously inaccurate billing before that company also declared bankruptcy. Former Verizon customers in the Pacific Northwest, Indiana, and West Virginia (among others) are coping with Frontier Communications own billing and service problems.

The FairPoint Trust called the $2.3 billion acquisition of Verizon’s New England operations “disastrous.” It also echoed what Verizon obviously understood itself: its landline operation in New England had been allowed to deteriorate into “inferior assets that had no future.”

Frontier Communications itself judged the network it purchased from Verizon in West Virginia in need of serious upgrades and repairs. Critics of the deal called Verizon’s West Virginia network “a technical disaster area.”

But while Verizon is capable of landline neglect, it is also the only major phone company delivering true fiber-to-the-home service over its award winning (and expensive to build) FiOS network.

The feast or famine approach Verizon has used for capital investments has resulted in amazing service for some, a loss of reliable service to many others.

FiOS has allowed Verizon to remain a serious player, particularly in the northeast, despite the onslaught of competition from Cablevision, Comcast, and Time Warner Cable. Average revenues earned from FiOS customers are much higher than what the company earns from customers on its copper wire telephone network.

Some Verizon shareholders have never liked the price for the company’s fiber future. When the economy tanked in late 2008, an indefinite suspension of FiOS expansion soon followed, leaving Verizon’s network expansion plans in limbo. The company is still slowly completing the portion of its fiber network promised under existing agreements, but has avoided introducing the service in new cities and towns. At the same time, Verizon is loathe to maintain investment in its antiquated copper wire landline network, which in some areas was supposed to be retired in favor of FiOS.

Bistro Chat Noir: Reliable Verizon phone service is not on the menu.

As long as Verizon’s older network can be held together, with fingers crossed, customers still have a dial tone. But when things start to fail, customers are in for serious headaches. They are popping aspirin almost daily at Bistro Chat Noir, a prestigious French restaurant along Madison Avenue on Manhattan’s Upper East Side. If you plan to dine there, it is best to bring cash. Even if the management wanted to take your Visa or Mastercard, the restaurant’s phone lines are out so often, they can’t easily process your payment.

These days, the resourceful owners rely on a neighbor’s graciously shared Wi-Fi connection (presumably powered by competitor Time Warner Cable) to process credit card transactions manually.

Waiting for FiOS

The New York Times wrote Verizon’s atrocious level of service isn’t isolated to one bistro:

“Obviously, this is not the way we want to do business,” said Ms. Latapie, who has started giving clients her personal cellphone number to avoid missing reservations when the restaurant’s phone is not performing properly. “When people can’t get through, I tell them it’s Verizon. And if they live in this area, they know — because they have the same problem.”

However irritating, sporadic utility failures are not uncommon. But along a a stretch of Madison Avenue in what is arguably the city’s most expensive shopping and eating district, phone and Internet blackouts have become a nightmarish routine of life for many expensive restaurants, stores and hotels.

For weeks now, mundane tasks — making dinner reservations and paying for purchases by credit card — have become a frustrating challenge.

“We are in the highest rent district in North America and we don’t have communication,” said Jillian Wright, whose spa on East 66th Street is on the second floor of a brownstone building and not ideal for walk-ins. Ms. Wright said she was losing clients daily, and her spa’s phone number goes straight to a voicemail message apologizing to clients for Verizon’s service.

The service failures have affected dozens of businesses, primarily in the East 60s along Madison Avenue. The scope of the problem varies, with some businesses having no phone or Internet service at all for the past several weeks and others experiencing blackouts that last days or a few hours.

Meetings with Verizon officials have deteriorated into spin-and-excuse sessions where company officials promise results but continue to deliver lousy service. It turns out the problem is Verizon’s ancient copper wiring found underneath the streets in the area. Just two feet away from Verizon’s cables are steam heating pipes, which warm the tunnels and create major condensation problems. Couple that with water runoff from the streets above — salt-laden in the winter time — and you have a recipe for corrosion that destroys reliable phone service.

Eventually, Verizon plans to wire FiOS fiber across a large section of Madison Avenue, but with the company’s unwillingness to invest appropriate sums to get the job done, business and residential customers are simply kept waiting.

Or they can switch to Time Warner Cable, and many are.

Your Telephone Is Temporarily Out of Service…

A traditional overhead phone cable is packed with cable pairs for neighborhood phone service

Verizon’s service woes are not just for big city dwellers. Residents in Virginia are coping with Verizon landline problems in suburban neighborhoods, too. Verizon employees openly admit they are fighting a losing battle with management to replace defective cables and equipment that should have been replaced years ago. Management keeps winning and customers keep losing.

“When we come to this area, we dread it,” admits Alex Long, a cable splicer at Verizon for 22 years.

Long just pulled up to a pole off Burksdale Road in Norfolk and found nothing he had not seen many times before — untrimmed tree branches overgrown into the overhead wires. The branches had managed to rub the phone cable’s insulation down to bare copper wire.

As a result, whenever it rains, telephone service in the neighborhood becomes sporadic. If tree branches don’t knock service out, cable-chewing squirrels do. The lines, the equipment, and the technology is well past its prime, but Verizon management insists repair crews fix what is already there instead of replacing it with something better. It’s all a matter of money, and Verizon wants to spend as little as possible on its copper landline network.

Long’s experiences were the highlight of a piece published by the Virginian-Pilot, which has heard complaints from readers about dreadful Verizon phone service across the region.

The repairman discloses Verizon technicians have known about the bad cable for at least five years, but requests to replace it have been repeatedly rejected.

“The cable’s totally shot,” Long told the newspaper. “It needs to be replaced, and the company’s budget doesn’t allow for it. That’s what engineering keeps telling us.”

In Hampton Roads, Va., it is a case of the fiber haves and have nots. The parts of Hampton Roads that have been upgraded to Verizon’s fiber to the home network are virtually trouble-free in comparison to neighborhoods where copper cables still deliver service. Verizon’s legacy network is of such concern, the Virginia State Corporation Commission has increasingly taken a close look at the level of service Verizon is providing in non-FiOS areas.

William Irby, director of the commission’s Division of Communications, has heard plenty of concerns that Verizon is neglecting their copper network in favor of FiOS fiber.

Verizon’s copper wire neglect might not be such a big problem had the company provided a date certain for upgrade relief. But with FiOS expansion also stalled, some cities are now wondering if Verizon is abandoning them.

Boston is one of them.

Left Behind: The Cities Without FiOS

Verizon FiOS is well-known in eastern Massachusetts. There are those who have it and those who want it. Verizon had been aggressively pursuing franchise agreements with 111 communities across the state until the company announced it was putting on the brakes and ceasing further expansion efforts in new areas. That leaves Boston and other communities like Quincy behind because they didn’t sign agreements with the company fast enough.

Verizon FiOS customers get the good life: $90 a month for a triple-play package with a $300 Visa debit card reward for signing up.

“If you’ve got FiOS, lucky you,” shares Quincy resident Roger Jones. “If you don’t, good luck.”

Jones says Verizon has left Quincy with a neglected landline network the company doesn’t seem interested in maintaining, much less replacing with fiber optics.

“The company believed in fiber optics because they saw the opportunities fiber could deliver, like additional revenue from selling TV channels,” Jones says. “But then Wall Street caught up to them and said it was all too much. I might even understand that, except they won’t spend a nickle maintaining what they already have either, unless the regulators twist their arms and threaten fines over the bad service.”

Jones says his Verizon phone line was out three times earlier this year.

“Three strikes and they were out — I switched to Comcast,” Jones says. “A Verizon repair guy that came to my house the third time said all of his relatives switched to Comcast because service got to be so unreliable with Verizon’s old network.”

Back on Burksdale Road in Norfolk, Long was trying to track down another customer’s phone troubles — a loud hum on their line. Hours later, Long decided it was a futile effort and began looking for an unused replacement pair of good wires he could switch to for the customer. With the growing number of Verizon customers disconnecting their landline service permanently, that task gets easier every day.

Long told the newspaper it was no surprise Burksdale Road customers were experiencing problems. Closures which were designed to protect the cable where it splits off individual phone lines were supposed to be water and air-tight. Instead, he was working with a deteriorating rubber enclosure that showed its age after years of service. Unfortunately, he explains, Burksdale Road customers will simply have to make due.

Not only won’t Long be able to replace the deteriorating infrastructure he finds, he’ll be forced to improvise with Verizon’s latest cost-cutting solution for wet cables — covering them with sheeting that resembles a plastic garbage bag. Even that is nothing new for Burksdale Road. Several houses down, a cable “rain-slicker” was already tightly wrapped around a section of cable where the rubber closure had gone missing altogether.

After getting the dial tone back, Long handed the customer his business card with his direct number and apologized.

“You may have problems again,” he said, advising the customer to call him directly the next time his phone line stops working.

Verizon better hope the customer doesn’t call the local cable company to switch providers or disconnect his landline altogether.

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The Consumer’s Guide to Universal Service Fund Reform: You Pay More and Get Inadequate DSL

Phillip Dampier — Tue, 01 Nov 2011 17:04:05 +0000

Phillip Dampier on USF Reform: It might have been great, it could have been a lot worse, but ultimately it turned out to be not very good.

Last week, the Federal Communications Commission unveiled their grand plan to reform the Universal Service Fund, a program originally designed to subsidize voice telephone service in rural areas deemed to be unprofitable or ridiculously expensive to serve. Every American with a phone line pays into the fund through a surcharge found on phone bills. Urban Americans effectively subsidize their rural cousins, but the resulting access to telecommunications services have helped rural economies, important industries, and the jobs they bring in agriculture, cattle, resource extraction, and manufacturing.

The era of the voice landline is increasingly over, however, and the original goals of the USF have “evolved” to fund some not-so-rural projects including cell phone service for schools, wireless broadband in Hollywood, and a whole mess of projects critics call waste, fraud, and abuse. For the last several years, USF critics have accused the program of straying far from its core mission, especially considering the costs passed on to ratepayers. What originally began as a 5% USF surcharge is today higher than 15%, funding new projects even as Americans increasingly disconnect their landline service.

For at least a decade, proposals to reform the USF program to bridge the next urban-rural divide, namely broadband, have been available for consideration. Most have been lobbied right off the table by independent rural phone companies who are at risk of failure without the security of the existing subsidy system. Proposals that survived that challenge next faced larger phone company lobbyists seeking to protect their share of USF money, or by would-be competitors like the wireless industry or cable operators who have generally been barred from the USF Money Party.

This year, FCC Chairman Julius Genachowski finally achieved a unanimous vote to shift USF funding towards the construction and operation of rural broadband networks. The need for broadband funding in rural areas is acute. Most commercial providers will candidly admit they have already wired the areas deemed sufficiently profitable to earn a return on the initial investment required to provide the service. The areas remaining without service are unlikely to get it anytime soon because they are especially rural, have expensive and difficult climate or terrain challenges to overcome, or endure a high rate of poverty among would-be customers, unable to afford the monthly cost for the service. Some smaller independent phone companies are attempting to provide the service anyway, but too often the result is exceptionally slow speed service at a very high cost.

The new Connect America Fund will shift $4.5 billion annually towards rural broadband construction projects. Nearly a billion dollars of that will be reserved in a “mobility fund” designated for mobile broadband networks.

The goal is to bring broadband to seven million additional households out the 18 million currently ignored by phone and cable operators.

The FCC believes AT&T will take a new interest in upgrading its rural landline networks, even as the company continues to lobby for the right to abandon them.

Unfortunately, the FCC has set the bar pretty low in its requirements for USF funding. The FCC defines the minimum level of “broadband” they expect to result from the program — 4/1Mbps. That’s DSL speed territory and that is no accident. The phone companies have advocated a “less is more” strategy in broadband speed for years, arguing they can reach more rural customers if speed requirements are kept as low as possible. DSL networks are distance sensitive. The faster the minimum speed, the more investment phone companies need to make to reduce the length of copper wiring between their office and the customer. Arguing 4Mbps is better than nothing has gotten them a long way in Washington, but it also foreshadows the next digital divide — urban/rural broadband speed disparity. While large cities enjoy speeds of 50Mbps or more, rural towns will still be coping with speeds “up to” 4Mbps.

The FCC does not seem too worried, relying heavily on a mild incentive program to prod providers to upgrade their DSL service to speeds of 6/1.5Mbps.

The irony of asking AT&T to invest in an aging landline network they are lobbying to win the right to abandon is lost on Washington, and future speed upgrades for rural America from companies like Verizon are in serious doubt when they sell off their rural areas to companies like FairPoint and Frontier and leave town.

Critics of USF reform suggest the program is still stacked in favor of the phone companies, and considering the state of their copper wire networks, would-be competitors are scratching their heads.

The cable industry, in particular, is still peeved by reforms they feel leave them at a disadvantage. Of course, Washington may simply be recognizing the fact cable companies are the least likely to wire rural America, but when they do, the service that results is often faster than what the phone company offers. The nation’s biggest cable lobbyist — ironically also the former chairman of the FCC, Michael Powell — still feels a little abused after reading the final proposal.

“While we are disappointed in the Commission’s apparent decision to ignore its longstanding principle of competitive neutrality and provide incumbent telephone companies an unwarranted advantage for broadband support,” said National Cable & Telecommunications Association President Michael Powell, “we remain hopeful that the order otherwise reflects the pro-consumer principles of fiscal discipline and technological neutrality that will bring needed accountability and greater efficiency to the existing subsidy system. We are particularly heartened by the Commission’s efforts to ensure that carriers are fairly compensated for completing VoIP calls.”

Wireless operators are not happy either, because the arcane requirements that come with the USF bureaucracy were written with the phone companies in mind, not them. Small, family-owned providers find it particularly difficult to do business with the USF, if only because they don’t have the staff or time to navigate through endless documents and forms. Phone companies do.

Your phone bill is going up.

Many consumer groups are relieved because it could have been much worse. The FCC could have simply capitulated and adopted the phone companies’ wish-list — the ABC Plan. Thankfully, they didn’t, but the FCC has naively left the door open to substantial rate increases for consumers by not capping the maximum annual outlay of the fund. That follows the same recipe that invited higher phone bills and questionable subsidies awarded in an effort to justify the original USF program even after it accomplished most of its goals. Consumers may face initial rate increases of $0.50 almost immediately, and up to $2.50 a month five years from now.

The FCC, unjustifiably optimistic, suspects phone companies and other telecommunications interests won’t gouge customers with higher prices. They predict rate increases of no more than 10-15 cents a month. I wouldn’t take that bet and neither will consumer groups.

“We’re going to press the FCC to ensure that these are temporary increases, because history has shown that these types of costs tend to stick around and go on and on and on,” said Parul Desai, policy counsel for Consumers Union.

An even bigger question left unanswered is just how far the FCC will get into the broadband arena when it refuses to take the steps necessary to ensure it has an admission ticket. The agency has avoided classifying broadband as a telecommunications service, an important distinction that would bolster its authority to oversee the industry. Without it, some members of Congress, and more importantly the courts, have questioned whether the FCC has any business in the broadband business. Just one of the many high-powered players in the discussion could test that theory in the courts, and should a judge throw the FCC’s plan out, we’ll be back at square one.

Click here to view the embedded video.

Verizon’s chief lobbyist Tom Tauke spent a half hour last weekend on C-SPAN taking questions about USF reform and the side issues of IP Interconnection and Net Neutrality policies. Tauke supports consolidation of small phone companies into fewer, larger companies. He also expands on his company’s lawsuit against Net Neutrality, which fortuitously (for Verizon) will he heard by the same D.C. Court of Appeals that threw out the FCC’s fines against Comcast for throttling broadband connections. Politico’s Kim Hart participates in the questioning, which also covered wireless spectrum issues impacting Verizon Wireless, AT&T’s stumbling merger deal with T-Mobile, and Verizon’s latest lawsuit against the FCC for data roaming notification rules. (28 minutes)

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FairPoint: The Little Company That Couldn’t, Wants To Be Deregulated

Phillip Dampier — Mon, 17 Oct 2011 17:43:45 +0000

FairPoint Communications, which took control of Verizon landlines in Maine, New Hampshire, and Vermont in 2009 and then promptly went bankrupt is now appealing to New Hampshire’s regulators and legislature for deregulation.

Teresa Rosenberger, the company’s New Hampshire president, told the Nashua Telegraph that before FairPoint Communications took over Verizon’s northern New England landlines in 2009, that means of communication was the “only game in town.” Now that Verizon’s “monopoly” no longer exists, FairPoint wants the “shackles [removed from] our ankles.”

Setting aside the fact Verizon and FairPoint both faced identical competitors — Comcast and AT&T in parts of the state, the primary difference between the incumbent landline phone company and its cable competition is that the latter enjoys the right to choose its customers. Landline providers must deliver universal access to basic service, something both FairPoint and Verizon managed for more than a century.

Rosenberger claims that with the rapid decline of landlines, FairPoint should be free from regulatory constraints it argues limits its ability to compete on pricing and service. Rosenberger uses FairPoint’s biggest failure — its rapid loss of customers — as the core argument for allowing deregulation, which would deliver few checks and balances from state regulators.

FairPoint’s market share in New Hampshire is now down to 49% and dropping. Its competition — Comcast and wireless mobile providers, now account for the majority of phone lines in the state. FairPoint’s line losses spiked when the company took over providing service in northern New England from Verizon Communications. Many FairPoint customers would describe that level of service as poor, with billing and service complaints reaching epic proportions before the company ultimately declared bankruptcy.

Rosenberger points out that the traditional way utility services deal with changing business models is to sell off non-performing or excess assets. Electric utilities sell excess power, but phone companies like FairPoint have few things other providers want.

In particular, FairPoint is upset it is saddled with a statewide network of telephone poles that “nobody wants.”

“We lose a ton of money on these poles” when work has to be done on them, Rosenberger told the newspaper. “There is the flag rate, the excavation fee, paying for a cop out there – and that’s before taxation and reporting requirements.”

FairPoint notes their competitors gets to use those poles, and are not necessarily contributing their fair share towards their upkeep.

FairPoint isn’t asking to abandon its universal service obligation, something AT&T has lobbied for throughout its territories. But it does want to do away with pricing regulations and reporting requirements. If FairPoint offers a business customer a special discount rate, it must file that rate publicly with state regulators, which is public information. FairPoint says its competitors may be using that information to undercut them in contract negotiations. But the public price regulations are in place to prevent a phone company from offering dirt cheap service for a select few, effectively subsidized by other ratepayers.

FairPoint also wants quality of service reporting regulations eased, and that comes as a concern to some New Englanders who lived through FairPoint’s messy transition from Verizon service. Even today, there are ongoing disputes over whether FairPoint is meeting state obligations on everything from how quickly they answer customer calls to whether or not service problems are resolved on a timely basis.

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