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Verizon’s Broken Promise to Wire All of NYC With FiOS Results in Lawsuit

Two years after Verizon promised its FiOS fiber to the home service would be available to every resident of New York City, the city sued Verizon Communications on Monday, alleging Verizon failed to meet its commitment.

The 19-page lawsuit, filed in New York’s Supreme Court, contrasts the city’s interpretation of Verizon’s commitments laid out in a 2008 franchise agreement against Verizon’s claim it has met its obligations. Central to the case is the city’s claim tens of thousands of New Yorkers cannot get FiOS service from Verizon, even though Verizon’s fiber network may be running down the street.

“Verizon must face the consequences for breaking the trust of 8.5 million New Yorkers,” Mayor Bill de Blasio said in a statement. He added that, “It’s 2017 and we’re done waiting. No corporation — no matter how large or powerful — can break a promise to New Yorkers and get away with it.”

A 2015 audit conducted by the city and testimony given in public hearings confirmed Verizon had failed to wire every building for service, despite what the city believed was Verizon’s promise to do so.

Verizon defended its actions, claiming it had met its obligations to New York City by providing FiOS fiber-to-the-home infrastructure throughout the five boroughs. The problem, according to Verizon, is intransigent building owners that have obstructed Verizon’s entry to get service to tenants. Verizon’s defense does come with some evidence. The company has filed numerous complaints with New York’s Public Service Commission to gain entry to properties in the city that have either ignored Verizon’s efforts to wire their buildings or actively opposed it.

Some landlords claimed no tenants in their building wanted Verizon FiOS and the telephone company wasn’t welcome. Others accused Verizon installers of damaging buildings or performing shoddy work and sought assurances Verizon will meet the building owner’s installation standards. Some live-in building managers have even demanded kickbacks or free service in return for entry. New York State law gives Verizon a right of entry and the company has followed legal channels to eventually gain admittance.

Difficulties with landlords alone cannot account for many other instances where willing customers were told service was not available. In some cases, even city officials seeking FiOS were themselves told repeatedly it was unavailable.

Verizon’s defense is likely to come down to a single industry phrase — “homes passed.”

The former Bloomberg Administration signed an agreement with Verizon that committed Verizon to wire its fiber network citywide. Verizon interpreted the contract to mean installing fiber infrastructure that passes every major property in New York, but not wiring every property for the service. The current de Blasio administration argues the contract means Verizon should be able to reach every customer that wants FiOS service within 7-14 days of receiving an order.

Verizon’s lawyer indirectly conceded Verizon has not made the service available to every household that might want the service.

In a letter sent last week to Anne M. Roest, the commissioner of the city’s Department of Information Technology and Telecommunications, Craig Silliman, Verizon’s general counsel, wrote:

“[…]We now pass all households in the city and can provide service to over 2.2 million households within seven to 14 days of receiving a service request.”

According to data from Baruch College, New York City had 3,129,147 households as of 2015, leaving at least 900,000 households unaccounted for.

Verizon’s fiber network may run down the street of each of those homes, but the lawsuit contends Verizon has been unwilling or unable to wire them for service.

“Although Verizon claims it ‘passed’ all residential premises, Verizon still does not accept orders from all city residents,” the city audit concluded. “In fact, it still informs residents that service is ‘unavailable’ at an address if their network has not been created on the block.”

The city and several consumer and civic groups have implored Verizon to ‘speed it up’ for the last two years but contend Verizon’s response has been inadequate, which led to the lawsuit.

McConville

Common Cause New York has been pushing for more FiOS service for years and reports consumers are frustrated with Verizon’s inability to deliver service. They now suspect Verizon’s unwillingness to expand FiOS comes from a lack of investment to complete its fiber network.

“People continue to be very frustrated because it appears that Verizon is motivated by what will be most profitable for them — what buildings to wire and what buildings to ignore,” Common Cause New York’s executive director Susan Lerner told the New York Times. “This really is about undertaking an ambitious obligation and then deciding halfway through that it’s not worth it. We are very happy to see the city holding the vendor’s feet to the fire. This is absolutely what should be done.”

Verizon appeared frustrated for another reason, shared by company spokesman Raymond McConville.

“On a day where the city is preparing for the biggest blizzard of the season, it’s sad that the mayor’s focus is on pursuing a frivolous lawsuit,” McConville wrote in an email to the Times. “The de Blasio administration is disingenuously attempting to rewrite the terms of an agreement made with its predecessor and is acting in its own political self-interests that are completely at odds with what’s best for New Yorkers. We plan to vigorously fight the city’s allegations.”

And if that doesn’t work, McConville threatened Verizon may not seek a franchise renewal when the current one ends in three years.

“50 Shades of Grey” Community Broadband Ban Bill Ties the Hands of Missouri Communities

Emery

It’s 2017 and a lot of Missouri residents are still tortured by the lack of access to basic broadband service, and if a community broadband ban bill becomes state law it will remain that way for years to come.

SB 186 is essentially a copy of last year’s community broadband ban that eventually died in the legislature. Just like last year, many of the sponsors and promoters of the latest attempt to impose a municipal broadband ban have close ties to the American Legislative Exchange Council (ALEC) and receive copious amounts of money from Missouri’s largest telecom companies. Some even win awards from the state’s biggest telecom lobbyists.

State Sen. Ed Emery (R-Lamar) loves the headlines he attracts from throwing ideological bombs into the public debate (he called homosexuality a mental illness, compared public education to slavery and a pathway to prison, and questioned whether former president Barack Obama was actually an American citizen). But he is not in touch with the rural residents in his state who have had their pleas for broadband service ignored by AT&T and other telecom companies for years.

Emery is a big fan of ALEC and serves as a Missouri state chairman. In 2015 he told an audience at an ALEC event he found the group’s efforts inspiring and helpful. ALEC acts as a giant clearinghouse for corporate-inspired legislation that ends up in the hands of friendly state legislators. ALEC’s model bills, including one banning municipal broadband, win passage in part because state legislatures do not get the kind of media attention and public scrutiny seen in Washington. SB 186, its predecessor, and other similar bills introduced in other states are frequently ghostwritten by telecom company lawyers and lobbyists and are designed to stop municipal broadband networks before they can get started.

Emery’s current bill is designed to apply a “scorched earth” response to communities trying to find ways to get rural broadband service up and running after a decade of being ignored by private telecom companies. It’s corporate protectionism and welfare at its finest, with a thicket of language that would force public providers into price and speed regulation. Emery’s bill would interfere with the types of loan agreements communities could contemplate to provide the service, and the language required for a mandatory referendum is heavily slanted to suggest such service is redundant and unnecessary. Emery’s bill also offers assurances his business friends could get gigabit speeds from community-owned providers, but not necessarily consumers.

Like the failed broadband hit bill introduced in Virginia, SB 186 is an ironic piece of legislation, heavy-handed with regulation and micromanagement and anchored with bureaucratic requirements designed to guarantee disappointment and costly failure. Emery’s career in public life has been spent railing against costly and unnecessary overregulation, yet his bill exemplifies both in action.

SB 186 also protects the status quo for broadband in Missouri, which is dreadful outside of major cities. It would assure incumbent telecom companies won’t face any service-improving competition and keep municipalities off their turf. For example, Columbia Water and Light has a “dark fiber” institutional fiber network at its disposal that is woefully underutilized. In addition to helping provide some connectivity for local government functions, the city-owned network also leases connections to hospitals and other public buildings, as well as some businesses. But the utility does not sell internet service itself.

The city believes much of the fiber network’s capacity is sitting un-utilized and could prove a valuable asset to the local connectivity economy. With the fiber already in place, expanding the network could be a cost-effective/common sense way to reach city residents that want better internet service than what incumbents are offering, and the city is more than willing to open the network up to those incumbents as well. SB 186 could eliminate that option in Missouri, just to protect the same private companies that have delivered underwhelming service for years.

In cities like Centralia, now exploring enhanced smart grid technology to improve the area’s electricity infrastructure, SB 186 would make the upgrade much more costly. Smart grid technology relies on fiber optic technology, often laid deep into neighborhoods and office parks. Only a tiny portion of that capacity is used to monitor utility infrastructure. The rest of the bandwidth on the fiber optic cable — already in place, could easily offer gigabit broadband service to every resident and business, especially if the city wires fiber to or near individual utility meters. That wouldn’t be allowed under SB 186 either, so communities like Centralia could not recoup some of the cost of the fiber optic technology by selling broadband service. That’s great news for companies like AT&T, CenturyLink, and Charter Communications. It’s also a relief for the phone companies who need not invest in their networks to offer something better than 20th century DSL.

Rural America: not a broadband-a-plenty

Emery offers two contradictory defenses for his bill:

  1. It is necessary to protect taxpayers from municipal broadband which Emery calls “unsuccessful, leaving ratepayers to cover debt costs.” But when asked by local media for any examples of a Missouri public broadband project that has failed, he could not.
  2. “We need more private-sector opportunities and not drive them out or hinder offerings coming into a community.”

In other words, Emery believes all public broadband networks are failures -and- they represent a major threat to private telecom companies that will be discouraged from investing in broadband expansion because a publicly owned competitor could be ready to “drive them out.”

Of course, neither is true. In rural Missouri there is no line of eager telecom companies seeking to expand broadband service into unprofitable rural communities and where only one broadband provider exists, there is no pressure to improve service quality or speed. In the first instance, there is no investment by private companies to discourage and in the second, the presence of a new provider encourages upgrades and investment. It’s a concept called “competition.” Sen. Emery would have a difficult time providing the name(s) of telecom companies that exited a community because of the presence of a municipal broadband alternative.

Rural farms are among the least likely places to get adequate internet service.

Sen. Emery’s family has a feed and grain business background, and those businesses (as well as Missouri’s farmers) are among the hardest hit economically by the lack of suitable broadband. But Emery is now far away from the business his father and grandfather ran. These days, he harvests big dollar contributions from some of the country’s largest corporations and much of his last campaign was financed by just two families — one with a vendetta against unions and the other — Rex Sinquefield — bucking to be Missouri’s own version of the Koch Brothers, who has his own private agenda he’d like enacted into law. Sinquefield has close ties to the Grow Missouri PAC, that also has close ties to the Club for Growth, ALEC, and the Koch Brothers’ backed Americans for Prosperity. Birds of a feather flock together.

Missouri’s biggest telecom companies are also generous contributors to Sen. Emery, which isn’t a surprise considering his bill and voting record directly benefits their businesses in the state. That may explain why the Missouri Cable Telecommunications Association — the state’s top cable lobbying group — gave Emery its Legislator of the Year award. Not to be outdone, the phone companies’ Missouri Telecommunications Industry Association gave Emery its own Leadership Award. Anyone who can introduce a bill that eliminates the best prospect of competition in suburban and rural Missouri for years is probably worthy of both.

In return for favors like that, some familiar names appear at the top of Emery’s list of campaign contributors:

  • AT&T ($6,000)
  • Comcast ($4,000)
  • Verizon Communications ($4,000)
  • CenturyLink ($3,500)
  • Charter ($2,000)
  • Time Warner Cable ($1,500)
  • Charter Communications ($1,325)
  • Sprint ($1,000)

Emery clearly listens to their interests more than average Missouri consumers still searching for broadband service.

The St. Louis Post-Dispatch reported last summer that there are significant gaps in broadband coverage even in St. Louis County, where one million residents live. “Fringe suburban spots” too costly to meet Return On Investment requirements guarantee no service, indefinitely. In St. Clair County, 5,000 homes are without broadband for the same reason. In large parts of the state, what constitutes broadband no longer meets that definition — 25Mbps, as established by the FCC. Every telephone ratepayer pays a “universal service fee” on their phone bill, in part to extend broadband into rural areas. But that extension has been spotty because not every phone company accepts the money and the conditions that come with it to broaden their reach. That leaves many rural Missourians with <1Mbps DSL service. That’s the case in Wildwood, where streaming media is out of the question because internet speeds are too low.

The Broadband Berlin Wall: Wildwood, Mo. — Broadband service is easily available to the east of Highway 109. But to the west, service is spotty to non-existent.

Wildwood — in western St. Louis County, is living in “Third World conditions,” even though “we’re not in rural Timbuktu,” according to resident Marilyn Gilbert. It’s also comparable to Cold War-era Berlin, except in reverse. Eastern Wildwood offers residents broadband options from both Charter and AT&T. But the Broadband Berlin Wall dividing the community — Highway 109, separates the broadband haves’ from the have-nots’. The larger part of Wildwood to the west, now growing with new housing and businesses, is a broadband swamp with few, if any choices for local residents.

Gilbert “enjoys” AT&T DSL and speeds that never come close to 1Mbps. It is her only option.

“I tried to download my Windows update and it timed out,” she said. “The amount of time you waste waiting for things to open up or download!”

Remember, this is in St. Louis County, the old home for the headquarters of Charter Communications, which dominates the city of St. Louis.

Despite earning billions every year from the broadband business, Charter has refused to extend its lines of service into the western half of Wildwood, despite efforts to attract the company that date back six years. Residents report broadband availability is among their top concerns taken to local officials, who have in turn sought help from Charter, AT&T, and the state legislature.

The city of Wildwood’s efforts were met with a demand by Charter to pay the cable company $3 million in taxpayer funds to extend service. The city said no.

“The comment we hear constantly is that kids need high-speed (internet) in order to access their school work,” said Wildwood councilman Larry McGowen. “These days, internet is just like another utility. It has become every bit as important in people’s lives as electricity.”

But it apparently is not important enough to allow Wildwood and other communities the option of constructing their own local broadband solutions for residents if Emery’s bill becomes law.

Ironically, the same companies that refuse to extend their service into rural Missouri are also vehemently opposed to letting local governments do it in their absence.

The stalemate has caused some residents to sell their homes and move, just to get internet access. David Norell left town because he couldn’t survive with satellite internet service, which costs $80 a month and offers spotty service with a low data allowance.

That makes Emery’s bill, and others like it, a travesty. Banning local communities from doing the job large for-profit companies won’t seems nothing short of corporate protectionism. After all, as critics of Emery’s bill charge, how can a local government unfairly compete with a company that doesn’t compete at all? Also of concern is the fact those residents that do get token DSL service from AT&T may be trapped using it forever if Emery’s bill keeps better and faster service from co-ops and other public broadband options off the table.

If it seems like Sen. Emery is putting the interests of big telecom companies – many dues-paying members of ALEC – above those of his constituents, perhaps he is. Consider the fact Emery is a state chairman at ALEC, an organization that included this loyalty pledge in its draft state chair agreement:

I will act with care and loyalty and put the interests of the organization (ALEC) first.

Emery has taken heat for his ongoing love affair with ALEC before, including an ethics complaint about a $3,000 meal at the Dallas Chop House where Emery ate. ALEC’s corporate members picked up the tab. That kind of unethical conflict of interest, along with the aforementioned loyalty pledge, infuriated the St. Louis Post-Dispatch:

Mr. Emery and his ilk can believe what they want, but they should play no part in allowing corporations to hide their agendas, and their lobbying expenses, by pretending to be something they are not. The proof is in ALEC’s actions, which as Washington Post columnist Dana Milbank outlined, hid itself behind closed doors in a meeting last week in the nation’s capital, pushing reporters away while claiming they had nothing to hide.

No, ALEC exists solely to hide. To hide money. To hide agendas. To hide its hijacking of democracy.

Lawmakers who care about the constitution and their commitment to voters should be fleeing faster than the corporations who realize ALEC is simply a bad investment.

Emery at a 2015 ALEC event.

It was not an isolated incident. Ed and his wife Rebecca Emery also enjoyed a $141.10 meal paid for by the Missouri Telecommunications Association. It’s safe to assume nobody had just a small salad. Other meals and drinks were courtesy of AT&T and CenturyLink. (Peabody Energy footed the bill for the Emerys’ taxi rides back and forth.)

When the wining and dining ended, the lobbyists were back with campaign contribution checks in hand.

These kinds of municipal broadband bans are toxic to economic development for rural communities that already face built-in economic and infrastructure disadvantages. The 21st century digital knowledge economy has the potential to make rural America equally competitive, assuming there is adequate infrastructure in place to participate.

Relying on private investment alone can work in urban areas where broadband profits are easy because the essential infrastructure to provide the service was constructed and paid for decades ago, originally to deliver telephone and television service. Rural areas suffer from deteriorated wireline infrastructure some phone companies want to abandon altogether and no cable broadband service at all.

Charter and AT&T first answer to shareholders. Local governments answer to their residents. Legislators are supposed to do the same. For Mr. Emery, loyalty to the interests of ALEC and the state’s telecommunications companies seems clear. It’s too bad his bill suggests a lot less loyalty to the voters in his district that need internet access or better broadband are will assuredly not get it if this bill ever becomes state law.

How State Politics Screwed Up a Solid Broadband Plan for Western Massachusetts

While rural western Massachusetts is stuck in a rural broadband swamp of Verizon’s making, politics in the state capital and governor’s office are risking Yankee ingenuity for another “free market” broadband solution that won’t solve the problem.

The dedicated locals that created WiredWest, the grassroots-envisioned regional broadband solution for more than two dozen towns suffering with inadequate or non-existent broadband service, have toiled for nearly a decade to accomplish what Verizon (or a cable operator) has never managed to do – provide consistently available internet access. WiredWest spent years carefully listening and learning the needs and challenges of each of their member towns. Communities affected by broadband deficiencies in this part of Massachusetts range from the most prosperous areas of the Berkshires to those financially struggling with a range of economic challenges.

On August 13th, 2011, The WiredWest Cooperative in western Massachusetts was officially formed by charter member towns. The project has gained some town, lost some others as the region works towards faster broadband.

WiredWest’s original plan would have brought fiber broadband to practically everyone in the region in just a few years, with more prosperous and populous towns helping subsidize network construction costs for their more budget-challenged rural neighbors. The goal was to avoid the patchwork of broadband have’s and have not’s that many private providers have created across rural America.

Establishing a regional network instead of trying to launch dozens of smaller community-owned providers would help streamline costs, avoid duplicating services, and deliver continuity of service. The concept made plenty of sense to two dozen town leaders and the participating communities, most voting to support the regional approach. But it apparently didn’t seem to make a lot of sense to a bureaucratic state agency called the Massachusetts Broadband Institute (MBI) that suddenly questioned the project’s operating plan and has avoided releasing tens of millions of dollars stashed in its bank account designated for rural broadband network construction.

MBI’s detractors call the agency a “concern troll” and some question whether MBI’s objections are the result of the usual friction between out-of-touch state bureaucrats and the rural communities they are supposed to help, or something more insidious. Others are content stating MBI’s position simply does not make any sense.

MBI spent more than a million dollars of taxpayer funds on lawyers and a Bangalore, India-based consultancy to produce and defend a dubious hit piece “analysis” about WiredWest rife with misconceptions and factual errors. The MBI-sponsored report concluded WiredWest would simply never work. What works better for MBI is handing out $4 million in taxpayer dollars to Comcast, with tens of millions more to be spent on funding private rural broadband projects in the future.

Crawford

Earlier this month, broadcast activist Susan Crawford shared her blistering conclusions about the usefulness of MBI:

For an agency that has produced virtually nothing so far, MBI is a high-priced operation. As far as I can tell, last year MBI spent $1 million of those state funds on consultants, lawyers, and administrative costs in order to hand $4 million to Comcast to provide its usual service to about a thousand homes in those nine Massachusetts towns that already had some cable service. What’s odd is that MBI told the public it chose Comcast because the company had vast experience and could get the work done without involving MBI—so it cost $1 million in oversight expenses to choose a company that doesn’t need oversight.

Despite protests from many residents across WiredWest’s would-be service area, Massachusetts Gov. Charlie Baker sided with his bureaucrats and stalled rural broadband deployment further with a temporary hold, which some claimed gave MBI and community broadband opponents additional time to further undermine WiredWest’s efforts.

Most recently, the same agency that wrung its hands worrying about the efficacy of WiredWest had no problem offering a quick $20 million in grants to private companies for rural broadband solutions. Few in broadband-challenged western Massachusetts are likely to be happy about the results of the latest machinations of MBI’s “free market solution with public taxpayer funds.” Last week, the public got its first look at the submitted applications, largely underwhelming in scope and specifics. None come close to offering the kind of ubiquitous and affordable broadband WiredWest proposed.

MBI also tailored their request for proposals to arbitrarily limit applicants, declaring only companies with $100 million in yearly revenue and at least five years experience building, operating, and maintaining residential broadband networks need apply. Had Google Fiber proposed to wire the entire region with fiber optics in an application, MBI would have turned Google down for lack of experience. (Google Fiber launched service in late 2012.) In fact, no startup or municipal project of any kind could realistically apply. Comcast and Charter could, and both did.

MBI claims each town will make their own final decision, but many communities have already done that by choosing WiredWest. Some towns are frustrated by the state’s interminable delays and politics and are discouraged with the potential spectacle of MBI continuing to throw up roadblocks for political reasons. Those communities are planning their own alternative projects if WiredWest can never get off the ground. The only current alternative is hoping a private company will step up and deliver service. Six applicants responded to MBI’s request for proposals from private providers. Only two showed any willingness to offer service across all of broadband-challenged western and central Massachusetts. Two others were cable operators that have neglected expanding service on their own because it was not profitable to do so. Another two applicants only wanted to serve a handful of communities. Here is an overview of the proposals:

Crocker Communications: Short on specifics, Crocker’s proposal claims an interest in wiring almost 40 unserved communities for $59.15 million, including $18.33 million in taxpayer funds, split into individual grants for each community. But even Crocker, among the most ambitious and detailed applicants, cannot meet MBI’s revenue qualifications, so it attempts to claim a vendor relationship with Fujitsu Network Communications of Japan, which supplies network infrastructure. How Fujitsu would be financially involved in the project to minimize the chances of Crocker running into financial problems while building out its proposed network is not adequately explained. Crocker only specifies $5 million of its own assets will be on the line.

Crocker’s website promotes the company’s desire to have a bigger presence in the state thanks to its cooperation with MBI. Crocker currently provides internet service to customers of a Leverett-based community broadband project. Coincidentally, Peter d’Errico of Leverett’s Broadband Committee was one of the contributors to MBI’s sponsored report slamming the WiredWest project as unrealistic and underfunded. We’re not sure what d’Errico thinks about Crocker Communications’ proposal, which asks for grants as little as $150,000 to help wire one community — New Ashford.

In an aspirational executive summary, Matthew Crocker, president of Crocker Communications, offers an admission there are “inherent challenges in fulfilling the Request For Proposals.” His conclusion: “If this were easy, it would be well underway.”

Crocker’s proposal won’t be easy for roughly 30% of those living in the nearly 40 communities his company proposes to serve. That’s because his company won’t be serving them. Crocker’s proposal only suggests he will deliver service to about 70% of the service area. MBI wanted proposals that would reach 96% of the population. But there will be plenty of time to contemplate these points. Crocker’s proposal warns residents may have to wait until 2021 before they can get service. That will give would-be customers four years to save enough money to pay Crocker’s proposed installation fees: “under $2,000 for 70% of homes passed” or “$3,000 for 96% of homes passed.” Ouch.

Whip City Fiber: Even more murky than Crocker Communications’ proposal, Westfield Gas & Electric’s “Whip City” fiber service submitted a plan offering to serve any of the 40 communities MBI identifies as underserved, but the details aren’t there, except to describe the service the company already provides to its own customers. The actual number of towns to be served and the schedule to launch service are all: TBD = To Be Determined.

Mid-Hudson Data: The most modest of proposals from this Catskill, N.Y. based company seeks $260,000 to offer 279 homes fiber service and wireless for another 20 in the community of Tyringham. Customers would pay an installation fee of $150. While potentially good news for customer living near George Cannon Road, it isn’t much help to the rest of the region.

Fiber Connect, LLC: Another modest proposal from this regionally based ISP offers to provide broadband service for Alford, Becket, New Marlborough, Otis, Tolland and Tyringham. The proposal notes the company is already running a pilot broadband program in Monterey and Egremont. One potential stumbling block is a poorly explained installation fee ranging from $0 if municipalities agree to a “fixed average cost” that could be included in grant funding or a municipally guaranteed lease-to-own payment to $299 if a customers apply for a mysterious promotion or rebate, or $999 which is defined as the basic “initial installation cost.”

Charter Communications: Formerly Time Warner Cable, Charter is hunting for taxpayer-funded grants to expand broadband service to Egremont, Hancock, Monterey, New Salem, Princeton and Shutesbury. All of those communities are near existing Charter/Time Warner Cable systems and the company spared no time in their application promoting their existing close ties with MBI to bring broadband to Hinsdale, Lanesborough, and West Stockbridge. Charter claims it can expand its cable service into the nearby communities in a “reasonable amount of time” but does not get more specific than that.

Comcast: Boils down its application to “we’re doing you a favor, but you pay” language reminding MBI the communities Comcast now proposes to serve: Goshen, Montgomery, Princeton and Shutesbury don’t come close to Comcast’s demand for return on its investment. But since taxpayers are helping to foot the bill….

The one noticeable difference Comcast has over all the rest of the applicants is a page-and-a-half of details about the various regulator-imposed fines and penalties it has had to pay recently for being an ongoing menace to its own customers. Is it arrogance for a company to assume such a vast number of damaging disclosures would not lead a responsible grantor to put the application in the circular file, or is it something else? After all, Comcast was already awarded up to $4 million in taxpayer funds in Massachusetts as a gushing press release reported in August, 2016:

WESTBOROUGH – The Massachusetts Broadband Institute at MassTech (MBI) and Comcast have reached an agreement that will extend broadband access in nine municipalities in Western and North Central Massachusetts, a project which is estimated to deliver broadband connectivity to 1,089 new residences and businesses, and will bring the overall coverage level in each town to 96% or above. The grant will provide up to $4 million in state funds to reimburse partial project costs for Comcast, which has existing networks in each of the towns, to construct broadband internet extensions to additional homes and businesses.

“This agreement further demonstrates our administration’s commitment to tackling broadband connectivity challenges for unserved residents and businesses,” said Governor Charlie Baker. “This public-private partnership will deliver sustainable, reliable, and cost-effective broadband connectivity to nine rural communities that previously faced significant coverage gaps, allowing nearly 1,100 households and businesses to participate more fully in the digital economy.”

“Our results-oriented approach to bridging broadband access gaps is connecting thousands of rural residents to the modern internet,” said Lieutenant Governor Karyn Polito. “We will continue to employ a dynamic, flexible approach to the Last Mile project, and seek solutions that meet the unique needs of communities and residents unserved by broadband access.”

The construction of the broadband extensions in Buckland, Conway, Chester, Hardwick, Huntington, Montague, Northfield, Pelham, and Shelburne is estimated to be completed within two years from the start of the project. The public-private partnership will extend high-speed internet service to unserved residents at speeds that meet or exceed the FCC’s definition of broadband service, through a hybrid fiber/coaxial-cable network.

Wired West Responds With a New Plan

Faced with insurmountable political obstacles, the folks behind WiredWest have bowed to the reality of the current political landscape and reintroduced themselves and their newest plan to get western Massachusetts wired for fiber optic broadband while trying to avoid any further encounters with MBI’s speed bumps and obstacles.

If WiredWest made one mistake, it was forgetting to establish the one connection that apparently matters more than anything else in Massachusetts: a political connection with state lawmakers. But the indefatigable group has not given up, and if the MBI is being honest about being an impartial partner in improving rural broadband in Massachusetts, there is still a better option available to communities than the six proposals recently submitted to MBI. That option is WiredWest.

In its latest proposal WiredWest would continue to play a significant role in the network after being built, with proven service plans that will deliver real broadband service to residents at rates comparable to what private companies charge. But the project will rely on member towns to construct their own fiber networks using private contractors and state and local funding. That puts more responsibility and network ownership in the hands of each individual town, an idea some towns originally rejected as too expensive and cumbersome. But MBI holds the money and has apparently rewritten the rules, so what MBI wants is what MBI will get.

The added cost to the project and the communities involved is significant: there will be some towns that cannot afford or manage the responsibility of constructing their own fiber networks and will likely drop out of the project. The new network plan will also increase costs WiredWest originally hoped to avoid. The group’s financial model also effectively subsidized some of the costs for the smallest and least able communities — a model that could be gone for good.

Each participating town network that does eventually get built will be connected in a ring topology to MassBroadband123, the state’s “middle mile” fiber network that is run privately by Axia Networks. At this point, it appears 14 communities are still on board with WiredWest, seven are “considering” the new WiredWest plan, and another 16 are “pursuing other options” but have not ruled out staying with WiredWest.

It is our recommendation that communities do everything possible to stay loyal to WiredWest, which has a proven track record of being responsive and accessible to communities across the region. Bucking the state’s inexcusable political interference by remaining united sends a strong message that local communities know best what they need, not a high-priced consultant, Springfield-based lawyers and bureaucrats, or the governor. None of those people have to live with the consequences of inferior or non-existent broadband and none have given the problem the kind of serious attention WiredWest has. The biggest challenge to WiredWest isn’t its financial sustainability, it is politics, and that needs to stop.

We’ve reviewed the submissions from MBI’s latest round of grant funding for private projects and they are all inadequate. While many of the companies involved are well-meaning and we believe could play a role in improving rural broadband, most of the applications seem to have been rushed and many lack specifics.

The region should not accept any plan offering only 70% broadband coverage, much less a proposal that will force another four-year wait for broadband (we credit Crocker Communications for at least including a specific timetable, something many of the other proposals did not.) Installation fees up to $3,000 are also unaffordable, with or without a financing plan.

Some analysts still worry if WiredWest can attract enough customers to be sustainable. If it isn’t, most of the private projects MBI has received applications for certainly are not either. Assuming customers can afford a few thousand dollars for installation — a major impediment to getting new customers, there is no guarantee which homes will get service and when. Competitively speaking, considering the only available alternative in most cases is spotty 1-6Mbps DSL from Verizon — a service the company has lost interest in improving or expanding — Verizon is likely to receive the same treatment it gets in other communities where better alternatives exist — a mass exodus of customers cutting Verizon’s cord for good. In fact, Verizon may ultimately sell its landline network in western Massachusetts to another company as it continues to disengage from its wireline businesses. It is highly unlikely any competitor of WiredWest will guarantee access to at least 25Mbps broadband.

WiredWest proposes to charge $59 for 25Mbps or $75 for 1,000Mbps broadband. Digital phone service is $19 a month. An installation fee of $99 will also apply. That is not out of line with what cable companies and other gigabit providers have charged, and they have won a comfortable market share. Private cable and phone companies also continue to raise rates on broadband, if only because they can, providing additional competitive insulation.

MBI’s grants should also not be the end of the story. New York last week rescued up to $170 million from the FCC’s Connect America Fund (CAF) to expand broadband deployment in unserved rural areas of New York State — money Verizon forfeited by expressing no interest in rural broadband expansion. That precedent opens the door for other states to recapture similar federal grants, including those that could target western Massachusetts where Verizon has also declined to accept CAF money. That could ease some of the money worries about WiredWest’s construction costs as well.

At the end of the day, area residents have turned up repeatedly at various events across the region holding signs supporting their choice in local providers: WiredWest. Nobody was holding up a sign hoping Comcast or Charter would be the company that finally brings broadband to their communities. The irony of using taxpayer dollars to fund Comcast in particular is not lost on their customers — many that loathe the company and wish they had another choice. Handing $20 million to that cable giant to expand in western Massachusetts guarantees their newest customers won’t have a choice either. Isn’t it time to give these communities what they want? They clearly want WiredWest.

Siren Song: Altice USA CEO Asks Workers to Trust Him Despite Ruthless Cost-Cutting Reputation

Goei

The CEO of Altice USA took time away from his luxurious homes in Switzerland and New York this week to sit down with concerned middle and working-class Cablevision employees at a meeting held at an unassuming company garage in the Bronx.

Dexter Goei has worries of an organized workforce on his mind. A recording of the meeting provided to Stop the Cap!, showed Goei spent most of his time trying to convince employees they could trust him to protect their future employment at the cable operator.

Since Altice acquired Cablevision in the U.S., the French media have criticized the ‘naiveté of American regulators’ that largely accepted the promises and commitments of the rapidly growing international cable and wireless company at the same time Altice was regularly accused of reneging on the promises it made to regulators in Europe, especially in France. The company has been fined at least twice for breaking those commitments.

Altice’s entrance into the United States began with the acquisitions of Suddenlink, a relatively small cable company serving forgotten small cities in states like Texas and West Virginia and the should-have-been-acquired-by-Comcast-or-Time-Warner-Cable-years-ago oddity Cablevision, which made money for its founding family the Dolans for decades, selling cable mostly in suburban downstate New York.

In America, those acquiring a rival operator are usually asked to show how a deal is “in the public interest” while also submitting to a review to ensure the transaction does not irreparably harm competition. For Suddenlink customers, almost anything Altice could do would be an improvement for a cable company run by a guy who admitted on national television that the days of big investments by cable companies in service improvements were over. It was time to reap the profits, to paraphrase then-CEO Jerry Kent. And so they did, coming up with innovative usage caps and overlimit penalties for customers who dared to use the cable company’s internet service to circumvent a costly cable television package.

Cablevision, in contrast, was usually better regarded than the cable giants that surrounded it. Although technologically aggressive, Comcast canceled most of the goodwill earned for its service improvements by treating customers like patrons of an S&M club. Time Warner Cable was also loathed for its “last to do anything” upgrades, disengaged customer service, and reliable rate hikes, but at least they learned from earlier customer service mishaps and generally relied on a policy of being nicer to customers that threatened to leave.

Cablevision innovated on ways to keep customer loyalty after Verizon FiOS arrived to compete in large sections of its service area. The company spent millions on a major Wi-Fi network for the benefit of its commuting customers, launched broadband speed upgrades earlier than most, and after one embarrassing episode with the FCC showing their speed claims were not met by reality, they have usually overachieved ever since.

Drahi

In 2016, almost everything except Comcast changed. Time Warner Cable was successfully sold to Charter Communications and a self-styled ‘Baron of the Stock Exchange‘ — Patrick Drahi, managed to invade the United States and successfully acquire the two cable operators, despite admitting he would gut spending and wring hundreds of millions in savings out of the transactions for the benefit of his investors.

Mr. Drahi’s penchant for ruthless cost-cutting isn’t new, and he’s been dubbed “The Slasher” in Europe since decimating the budget at his French wireless and broadband company SFR-Numericable. French unions hate him, and not just those representing workers at his telecom businesses. Since the Altice Media Group took control of several major print publications in France, independent photographers have complained Altice slowed payments to a crawl, leading to an open letter to the French government from several press photography agencies demanding action. To date, Altice owes more than a half million dollars in outstanding licensing payments.

Critics contend this is nothing new for Altice, often denounced for not paying vendors (or paying them only after they agree to provide discounts) or alienating employees with radical cost cutting and cutbacks. Customers don’t like what they see either, with more than a million dropping SFR for other providers.

But that was not a story Goei was prepared to share with Cablevision workers in the Bronx.

Instead, Mr. Goei told employees he turned his back on a lucrative career on Wall Street after the great financial meltdown of 2008 and saw more potential running cable companies in Europe and the United States. Goei told the workers Altice’s business plan is to acquire cable and telecom companies and reinvest the profits in improved customer service and better technology for customers. Actual customers of Altice’s cable companies in Europe are still waiting for those improvements.

The French loathe SFR-Numericable, giving it one out of five stars in reviews.

SFR-Numericable, which Goei claimed this week won acclaim from French regulators for being the most reliable in the country, gets scathing reviews criticizing the company for its very frequent service outages, tricky marketing, and incoherent customer service. “Legalized banditry,” claimed one customer. Another described the offshore customer care center as “the Moroccan nightmare,” with more than a few call center workers demonstrating less-than-capable comprehension of French. Service outages are rampant and represent the single biggest reason customers have canceled service.

Goei complained that acquisitions and upgrades have been complicated in Europe by former managers grabbing their golden parachutes and abandoning the acquired companies (without mentioning Altice’s well-known reputation for draconian salary cuts and downsizing) and slowdowns from underperforming suppliers (despite the fact some vendors in France complained their invoices went unpaid for weeks or months, leading to complaints to government regulators).

Forthcoming upgrades are one of the reasons Goei was in the Bronx to sell employees on the merits of Altice Technical Services (ATS), a spinoff entity expected to eventually manage all of Altice’s technical infrastructure and the technicians that will care for it.

“We don’t want to contract out,” explained Goei, who aspires to manage Altice’s forthcoming upgrades effectively in-house through ATS instead of going to outside contractors. To manage this, Goei needs to convince Altice USA’s technical employees to leave Altice and join ATS.

Will ATS protect workers and customers or simply help Altice rid itself of regulator-imposed conditions for its acquisitions?

Goei’s statements seemed to suggest that most will need to make that transition if they want to remain a part of Altice for more than five years, hinting ATS will increasingly manage more and more of Altice’s technical needs, eventually making Altice USA employees potentially redundant.

Goei also hinted ATS might perform work for more than just Altice, which underlined concerns for union organizers that ATS is being established as an independent contracting entity that would not be subject to any regulatory job protection conditions that came with the approval of Altice’s acquisition of Cablevision.

Altice’s plans to rip out and replace coaxial cable with an all-fiber network will likely provide work for the next 7-10 years, notwithstanding the ambitious five-year timeline Altice gave for the fiber upgrade. But employees peppered Goei with questions about job security, benefits like vacation pay, and exactly who will be running ATS and what their opportunities for advancement are.

The transition to ATS might effectively be in name only, because Goei claimed ATS will have full access to employees’ files and work history with Altice and Cablevision, and if managers make the transition to ATS, employees could report to the same manager or supervisor they did under Altice.

“We’re not bringing in some Mexican guy” to run things Goei said to nervous laughter and raised eyebrows from the almost all-minority audience.

Goei’s question and answer session is unlikely to assuage concerns ATS could evolve into little more than Altice’s version of an independent subcontractor with enhanced loyalty to Altice USA. Despite assurances Altice is not looking for excuses to radically trim its workforce, Altice’s history shows job cuts are an integral part of what the French business press calls “The Drahi Method.”

At France’s SFR, Drahi made clear he is looking to cut at least 5,000 paid positions, reducing the workforce from 14,700 to 9,000, starting in July. Observers suspect Altice’s reliance on ATS to act as an umbrella technical department for all of Altice’s North American acquisitions guarantees workforce reductions, if only to eliminate redundancy. Altice has already shown a willingness to lay off employees at its Cablevision and Suddenlink call centers.

But there is one area where Altice is willing to spend.

Le Temps reports Drahi is opening the checkbook to beef up its Geneva executive headquarters in Switzerland, increasing the workforce tenfold and centralizing business operations for the Altice empire. The office is packed with ex-Wall Street bankers and businessmen with a reputation for ruthlessness. Goei’s office is in the building, as is the company’s director — Michel Combes. Combes was notoriously hired away from Alcatel right after demonstrating a talent for swinging the job cutting ax. They are joined by Burkhard Koep, a former Morgan Stanley investment banker in charge of mergers and acquisitions.

The top shelf executives have moved themselves and their families from London, New York, Paris, Tel Aviv and Lisbon to the posh neighborhoods around suburban Geneva, where homes are more likely to be called estates.

The Geneva office conducts business through heavy reliance on videoconferencing and racking up frequent flier miles traveling abroad. Often absent is Drahi himself, who prefers to conduct business from his Zermatt-based luxury cottages. As much as executives spend their time pondering the next acquisition, Le Temps reports they also spend their weekends trying to renegotiate the company’s enormous debt load by seeking refinancing at lower interest rates.

“They play a bank against each other by saying: we will refinance to 6% the debt you loaned us at 7%,” reported the news outlet.

But Altice’s Geneva headquarters did not come for free. Drahi recently introduced a new franchise fee obligating each cable or telecom unit to pay 2-3% of their revenue to Mr. Drahi’s Switzerland office. In the first year that is expected to raise at least $550 million dollars. While popular with Swiss tax authorities, the substantial royalty payments are expected to reduce available cash for upgrades and debt service. Nobody is sure where the money will ultimately end up.

Alaska’s Telecom Companies Will Waste $365 Million in Taxpayer Funds Building Duplicate 4G Networks

A new fiber provider is expected to vastly expand Alaska's internet backbone, but there are not enough middle mile networks to allow all Alaskans to benefit.

Quintillion, a new underseas fiber provider, is expected to vastly expand Alaska’s internet backbone, but there are not enough terrestrial middle mile networks to allow all Alaskans to benefit.

A federal taxpayer-funded effort to improve broadband access in rural Alaska will instead improve the bottom lines of Alaska’s telecommunications companies who helped collectively “consult” on a plan that will pay $365 million in taxpayer subsidies to companies building profitable and often redundant 4G wireless networks.

The Alaska Plan, which took effect Nov. 7, is a decade-long effort to subsidize telecom companies up to $55 million annually to encourage them to expand broadband service to 134,000 Alaskan households that get either no or very little internet service today. The Alaska Telephone Association (ATA) — an industry trade association and lobbying group, claims if the plan is successful, only 758 Alaskans will still be waiting for broadband by the year 2026.

But critics of the plan claim taxpayers will give millions to help subsidize private telecom companies that have plans to spend much of the money on redundant, highly profitable 4G wireless data networks that will cost most Alaskans large sums of money to access.

One company — AT&T, which refused to participate in the plan, is still taken care of by the plan, receiving $15.8 million dollars from taxpayers for doing absolutely nothing to improve broadband service in Alaska. The plan directs the money to AT&T to provide phase-down, high-cost support, which drew a sharp rebuke from Republican FCC commissioner Ajit Pai, who questioned why taxpayers had to subsidize AT&T for anything.

“The order claims this a ‘reasonable’ accommodation but cannot explain why the nation’s second largest wireless carrier needs ‘additional transition time to reduce any disruptions,’” Pai wrote.

quintillionThe biggest weakness of the plan, according to its critics, is its lack of support for middle-mile networks — wired infrastructure that connects providers to a statewide broadband backbone that can manage traffic needs without having to turn to slow-speed satellite connectivity. One of Alaska’s biggest challenges is finding low-cost connectivity with Canada and the lower-48 states. Much of the state relies heavily on GCI’s still-expanding TERRA network, which provides fiber as well as microwave connectivity to 72 towns and villages in rural Alaska. Quintillion, a new player, is working on stretching fiber connectivity through the Northwest Passage. Its forthcoming 30 terabit capacity fiber network offers the possibility of dramatically lower broadband rates and no more data caps, assuming providers have the network capacity to connect their service areas and the nearest fiber access point.

Instead of subsidizing the development of middle mile networks for this purpose, the authors of The Alaska Plan have instead favored wireless connectivity, including the very lucrative 4G wireless networks cellular providers want to expand. By definition, the broadband plan accommodates the limitations of wireless by easing broadband speed requirements for providers. To earn a subsidy, providers need not offer the FCC’s minimum speed to qualify as broadband — 25Mbps.

gciInstead, the ATA managed to convince regulators that 10/1Mbps service was good enough — speed that can be achieved by the DSL service phone companies favor. This is well below Alaska’s Broadband Task Force goal of 100Mbps for every state resident by 2020. Another free pass built into the plan is allowing providers to collect subsidies even when they do not offer 10Mbps because of network limitations, including lack of suitable middle mile networks. In those cases, the only speed requirement is 1Mbps download speeds and 256kbps uploads, the same as satellite broadband providers.

Commissioner Pai complained those are broadband speeds reminiscent of the internet a decade ago and hardly represents a vision for a faster future.

In a rare moment of bipartisanship at a divided FCC, Commissioner Mignon Clyburn joined Commissioner Pai dissenting from Alaska’s plan.

“It is clear that Alaska’s ‘majestic geography’ makes deployment difficult, but without affordable middle-mile connectivity, high-cost program support spent on the last mile does little to improve communications service to Alaskans,” Clyburn wrote. “Commissioner Pai and I supported an approach that would have taken the $35 million a year in duplicative universal service money and use[d] it to support a middle-mile mechanism that would enable many Alaskans in the Bush to receive broadband for the very first time. The status quo is simply not good enough, and the cost of doing nothing is far too high.”

Pai

Pai

Both Clyburn and Pai also complained federal tax dollars will be used to build duplicative 4G wireless networks that will primarily benefit providers. From Commissioner Clyburn’s statement:

We do not subsidize competition. We do not provide duplicative high-cost support to carriers in the same area and we do not subsidize carriers where other unsubsidized carriers are providing service. That underlying principle should be applied here as well. With Alaska’s “sublime scale,” we should instead be directing support to areas that are unserved, not subsidizing competition in areas that already receive mobile service. And just what is the cost to the American consumer of continuing to support overlap in these areas? About $35 million a year!

The companies benefiting from federal tax subsidies include: ASTAC, Copper Valley Wireless, Cordova Wireless, GCI, OTZ Wireless, which covers Northwest Alaska, TelAlaska Cellular, covering Interior and Northwest Alaska, and Windy City Cellular, covering Adak.

Clyburn

Clyburn

Pai called many of the spending priorities a waste of money that will still leave 21,000 Alaskans without 4G LTE broadband and another 46,000 without 25Mbps fixed broadband:

All together these wasted payments total $365 million, or about one quarter of the total Alaska Plan pot. That’s $365 million that could be used to link off-road communities to urban Alaska as requested by the Alaska Federation of Natives, the Bering Straits Native Corporation, the Chugachmiut rural healthcare organization, and many others. That $365 million is more than eight times the $44 million grant from the Broadband Initiatives Program that launched the TERRA Southwest middle-mile network that connected 65 off-road communities in 2011.

With the federal government now pouring federal tax dollars into Alaskan broadband, the state government has been using that as an opportunity to slash state investments in internet access.

A bill from Rep. Neal Foster (D-Nome) to upgrade all rural school districts to 10Mbps broadband for $6.2 million died in committee without any hearings, according to the Alaska Commons. State Rep. Lynn Gattis (R-Wasilla) proposed killing a $5 million broadband grant to schools, and the House Education subcommittee also recommended eliminating the Online with Libraries (OWL) program. Both programs ultimately survived, but not before the state legislature significantly cut the budgets of both programs.

Guttenberg

Guttenberg

State Rep. David Guttenberg (D-Fairbanks) hopes the results from last week’s election in Alaska will allow him to position stronger broadband-related legislation in the state legislature.

Guttenberg wants to reinstate a long-cut Broadband Task Force and Working Group while also creating a public Broadband Development Corporation that would build and own middle mile broadband infrastructure and sell it to telecommunications companies that have refused to build those types of networks on their own.

A lot of members of the ATA are lining up in opposition, the newspaper notes, because they won’t directly own the infrastructure. Guttenberg’s view is that the needs of the many outweigh the needs of deep-pocketed telecom companies.

“If you want to build a strong state, if you want to build a strong community, we need to start putting those pieces together,” Guttenberg said of broadband infrastructure last year. “If you give a kid a laptop or a pad in a school district, it’s pointless if he can’t get online.”

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