Phillip Dampier: One customer calls FairPoint’s deregulation logic “moosepoop.”
In 2007, Verizon Communications announced it was selling its landline telephone network in Northern New England to FairPoint Communications, a North Carolina-based independent telephone company. Now, nearly a decade (and one bankruptcy) later, FairPoint wants to back out of its commitments.
In 2015, FairPoint stepped up its push for deregulation, writing its own draft legislative bills that would gradually end its obligation to serve as a “carrier of last resort,” which guarantees phone service to any customer that wants it.
The company’s lobbyists produced the self-written LD 1302, introduced last year in Maine with the ironic name: “An Act To Increase Competition and Ensure a Robust Information and Telecommunications Market.” The bill is a gift to FairPoint, allowing it to abdicate responsibilities telephone companies have adhered to for over 100 years:
The bill removes the requirement that FairPoint maintain uninterrupted voice service during a power failure, either through battery backup or electric current;
Guarantees FairPoint not be required to offer provider of last resort service without its express consent, eliminating Universal Service requirements;
Eliminates a requirement FairPoint offer service in any area where another provider also claims coverage of at least 94% of households;
Eventually forbids the Public Utilities Commission from requiring contributions to the state Universal Service Fund and forbids the PUC from spending that money to subsidize rural telephone rates.
Such legislation strips consumers of any assumption they can get affordable, high quality landline service and would allow FairPoint to mothball significant segments of its network (and the customers that depend on it), telling the disconnected to use a cell phone provider instead.
FairPoint claims this is necessary to establish a more level playing ground to compete with other telecom service providers that do not have legacy obligations to fulfill. But that attitude represents “race to the bottom” thinking from a company that fully understood the implications of buying Verizon’s landline networks in a region where some customers were already dropping basic service in favor of their cell phones.
FairPoint apparently still saw value spending $2.4 billion on a network it now seems ready to partly abandon or dismantle. We suspect the “value” FairPoint saw was a comfortable duopoly in urban areas, a monopoly in most rural ones. When it botched the conversion from Verizon to itself, customers fled to the competition, dimming its prospects. The company soon declared bankruptcy reorganization, emerged from it, and is now seeking a legislative/regulatory bailout too. Regulators should say no.
Last week, even FairPoint’s CEO Paul Sunu appeared to undercut his company’s own arguments for the need of such legislation, just as the company renewed its efforts in Portland to get a new 2016 version of the deregulation bill through the Maine legislature.
“We’ve operated in and we have experience operating basically in duopolies for a long time,” Sunu told investors in last week’s quarterly results conference call. “Cable is a formidable competitor. Look, they offer a nice package and a bundle and they – in certain areas, they certainly have a speed advantage. So we recognize that and so our marketing team does a really good job of making sure that our packages are competitive and we can counter punch on a both aggregate and deconstructive pricing.”
“Our aim is not to be a low cost, per se,” Sununu added. “What we want to do is to make sure that people stay with us because we can provide a better service and a better experience and that’s really what we aim to do. And as a result, we think that we will be able to change the perception that people have of Fairpoint and our brand and be able to keep our customers with us longer.”
Paul H. Sunu
Of course customers may not have the option to stay if FairPoint gets its deregulation agenda through and are later left unilaterally disconnected. In fact, while Sunu argues FairPoint’s biggest marketing plus is that it can provide better service, its agenda seems to represent the opposite. AARP representatives argued seniors want and need reliable and affordable landline service. FairPoint’s proposal would eliminate assurances that such phone lines will still be there and work even when the power goes out.
At least this year, customers know if they are being targeted. FairPoint is proposing to immediately remove from “provider of last resort service” coverage in Maine from Bangor, Lewiston, Portland, South Portland, Auburn, Biddeford, Sanford, Brunswick, Scarborough, Saco, Augusta, Westbrook, Windham, Gorham, Waterville, Kennebunk, Standish, Kittery, Brewer, Cape Elizabeth, Old Orchard Beach, Yarmouth, Bath, Freeport and Belfast.
At least 10,000 customers could be affected almost immediately if the bill passes. Customers in those areas would not lose service under the plan, but prices would no longer be set by state regulators and the company could deny new connection requests.
FairPoint argues that customers disappointed by the effects of deregulation can simply switch providers.
“The market determines the service quality criteria of importance to customers and the service quality levels they find acceptable,” Sarah Davis, the company’s senior director of government affairs, wrote. “To the extent service quality is deficient from the perspective of consumers, the competitive marketplace imposes its own serious penalties.”
Except FairPoint’s own CEO recognizes that marketplace is usually a duopoly, limiting customer options and the penalties to FairPoint.
Those customers still allowed to stay customers may or may not get good service from FairPoint. Another company proposal would make it hard to measure reliability by limiting the authority of state regulators to track and oversee service complaints.
Company critic and customer Mike Kiernan calls FairPoint’s legislative push “moosepoop.”
“FairPoint has been, from the outset, well aware of the issues here in New England, since they had to demonstrate that they were capable of coping with the conditions – market and otherwise – in their takeover bid from Verizon,” Kiernan writes. “Yet now we see where they are crying poverty (a poverty that they brought on themselves) by taking on the state concession that they are trying desperately to get out from under, and as soon as possible.”
Vermont Public Radio reports FairPoint wants to get rid of service quality obligations it has consistently failed to meet as part of a broad push for deregulation. (2:23)
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Kiernan argues FairPoint should be replaced with a solution New Englanders have been familiar with for over 200 years – a public co-op. He points to Eastern Maine Electrical Co-Op as an example of a publicly owned utility that works for its customers, not as a “corporate cheerleader.”
Despite lobbying efforts that suggest FairPoint is unnecessarily burdened by the requirements it inherited when it bought Verizon’s operations, FairPoint reported a net profit of $90 million dollars in fiscal 2015.
Years of broadcast and cable networks relying on cheap reality TV fare, game shows, and lurid news magazines to save money are coming to an end as media companies realize the only way to stop the viewing shift to Netflix, Hulu, and Amazon is to create better programming viewers want to see.
With online video services like Netflix spending millions to create original content like House of Cards and Fuller House, viewers are becoming disenchanted with shoveled reality fare and reruns littering basic cable networks.
A decade ago, cable networks started pushing the envelope on their programming lineups to boost ratings. Sober educational history documentaries on The History Channel began to make way in 2008 for reality shows like Pawn Stars and Ax Men, along with dubious pseudo-documentaries like Ancient Aliens and UFO Hunters. Consistent weather forecast information on The Weather Channel often had to wait for various weather chasing reality shows and other long form programming. Even The Learning Channel ditched educational programming as early as 2001 to feature “lifestyle” shows maligned and lampooned by critics as “freak show” television.
Broadcast networks suffering through an interminable advertising recession increasingly ditched scripted dramas for much cheaper reality and game shows. Even though some of these shows are considered popular, the total number of households viewing them have been in decline for years.
With the advent of series and movies created and funded by online video providers, traditional television networks and cable outlets have realized they can no longer rely on Law & Order reruns and shows like The Real Housewives of Dallas to keep viewers. They have to spend more money to create quality new shows.
Bloomberg News reports networks hit the panic button after learning Netflix intends to spend almost $5 billion this year alone on programming, far more than any broadcast or cable network would ever consider.
The new strategy in response: spend, spend, spend.
“All these companies have been raising the amount they’re spending on programming pretty consistently,” said Doug Creutz, an analyst with Cowen & Co. “TV is losing audiences, and you’re trying to have new stuff to keep audiences engaged with your programming.”
Discovery Communications, Viacom and Starz are among those planning spending boosts to deliver better programming to compete. Although that may be great news for television aficionados, consumers are likely to be handed the bill in the form of higher cable rates to cover the “increased programming expenses.”
The large broadcast networks, movie studios, and cable networks may have created this problem for themselves after they began dramatically boosting the cost of licensing movies and TV shows for ventures like Netflix, in hopes of limiting its growth while also profiting handsomely from their deep content libraries. In response to growing restrictions on licensing content, Netflix embarked on a plan to create some of their own exclusive content instead. Many entertainment executives did not take Netflix seriously until the arrival of House of Cards, a series that could easily have been created and financed by any major network.
Other online video companies quickly followed suit, often using the British TV model of creating affordable, high quality mini-series that might include 8-10 episodes per season instead of the usual two dozen common on American networks. Co-productions with content-starved networks abroad also helped share expenses, secure talent, and move into something beyond conventional programming.
Cable networks have also had increasing success creating shows not just for the American market, but also for export to the rest of the English-speaking world, particularly Great Britain, Ireland, Australia, and Canada.
Some Wall Street analysts like Rich Greenfield at BTIG Research have gone as far as predicting the traditional cable TV bundle is threatened with extinction as cost conscious viewers continue to abandon linear/live television for on-demand content like that offered by Netflix instead. That has delivered a three-way punch: pressures on revenue as program creation spending increases, growing cord-cutting, and cable rate inflation cable executives are increasingly desperate to control.
The day the 500 channel cable package model falls apart may not be too far off. The cost of programming at Discovery’s cable networks, other than sports, has grown 55% from 2013 to 2016, according to projections from researcher MoffettNathanson.
Discovery is using the money to push aside some of its near-endless reality TV fare for scripted programming, developing 10 shows with Lions Gate Entertainment. Viacom, another major cable programmer, saw expenses rise more than 25%, in part to create a new night of programming on VH1, doubling animation at Nickelodeon, and budgeting for more special events programming on BET. Some smaller cable operators were not impressed with the asking price and dropped all of Viacom’s networks from their cable systems.
Starz, dwarfed by HBO and Showtime, is spending $250 million on its own original programming including Outlander, Survivor’s Remorse and Power. Subscribers who want more will get it as Starz increases budgets enough to allow producers to create 80-90 original episodes this year, up from 75 in 2015. To introduce subscribers to the shows, Starz commonly offers cable subscribers free trials as part of ongoing cable company promotions.
If you run an entertainment studio, are employed in the entertainment field, or can act, these are good times. In fact, demand for scripted shows may be outpacing the capacity of studios to produce them.
John Landgraf, CEO of Fox’s FX Networks, asserted there’s “too much TV,” noting over 400 scripted shows were filmed last year.
Until the late 1980s, most of the demand for scripted shows came from NBC, CBS, ABC, and the then-new FOX, because they were the only ones with enough money to afford the high production costs. Today, cable subscribers foot the bill for most cable network original shows, causing cable rates to spiral. With Netflix ready to spend at least $11 billion on programming over the next five years, the days of rate hikes are far from over.
Phillip DampierMarch 2, 2016Public Policy & Gov'tComments Off on FCC Chairman Suggests He May Not Resign After President Obama Leaves Office
Wheeler
FCC chairman Thomas Wheeler has not promised to vacate his position as chairman after a new president takes office in January 2017.
It has been customary for the appointed head of the FCC to automatically resign as a new president takes office, but Wheeler is keeping his options open.
This was not the answer Senate Commerce Committee chairman John Thune (R-S.D.) was expecting to hear at today’s FCC oversight hearing.
Wheeler responded he was not ready to promise to cede the chairmanship and it would not be wise to give an “ironclad commitment” at this time.
If Wheeler does not resign, he can stay as chairman of the FCC until his term expires in January 2018, potentially serving as a thorn during the first term of a possible Trump presidency.
Sen. Bill Nelson (D-Fla.) noted it was unlikely a President Trump would renominate him on his own.
Via his company Canef SA, Altice founder Patrick Drahi secretly bought this sprawling estate in Cologny, near Geneva, Switzerland. (Image: Capital.fr)
Despite slashing jobs, ruthless cost cutting that degrades network quality for subscribers, and stiffing vendors, Patrick Drahi and his associates have spared no expense building a fabulous collection of Swiss real estate for themselves. If you plan to invest in property holding companies, an LLC will protect your other assets should something happen to one of your properties. And if you’re looking for a property on Koh Samui, consider finding a reliable company to help you navigate the best villas on Koh Samui for sale.
Drahi, the founder and president of Altice, the European cable and wireless conglomerate that today owns Suddenlink and some day soon may own Cablevision, has taken great lengths to hide his extravagant spending. He prefers to depict his carefully cultivated public image of frugality, seen publicly riding a bicycle to the office, eschewing secretaries and business cards, and claiming to be an expert at running a good business for less money.
Soon after Drahi signs acquisition papers for his latest deal, promising upgrades and enhancements to the public and regulators while telling investors he’s ready to cut to the bone, it becomes clear his promises to Wall Street and investors are the only ones that matter:
Within the Express-Expansion Group, of the 700 employees he inherited after acquiring the media group, 115 were gone after the deal was signed and Altice is preparing to jettison another 90 positions in the near future;
At one of his biggest acquisitions — Numéricable and SFR, despite a commitment not to layoff workers until 2017, unions estimate 700 positions vacated by employees have remained unfilled;
In Portugal, trade unions last month accused Altice of continuing to slash employee benefits, ending free subscriptions to PT’s Meo broadband, phone and television service for employees, reducing meal allowances and restricting the use of company vehicles (except by executives).
In 2000, during the “lean years,” Drahi managed to acquire this modest piece of property for a bit over $7 million. It’s one of his least valuable homes, and has since been put under his wife’s name and is undergoing extensive renovation. (Image: Capital.fr)
While employees watch company bean counters demand cutbacks that occasionally leave offices without basic office supplies, Drahi’s endless acquisition deals come with numbers that make your head spin:
At least $50 million dollars a month is paid to bankers to cover interest on Altice’s massive debts, which now range near €10 billion.
Altice’s finances seem so risky to many bankers, they charge Drahi 5-10% interest.
Altice’s endless promises of improved service through upgrades and better customer relations are little more than expensive fibs to their customers in France, who have endured rate increases and appallingly bad service.
The group reports “unprecedented levels of discontent” from consumers calling their legal information service for help taking SFR to court over its poor service and billing practices. Of all the legal disputes filed in 2015 against telecom companies, an amazing 44% targeted Drahi’s SFR Numéricable, which has only a 20% share of France’s mobile market.
Despite assurances of better service during 2015, customers continued to leave. In mid-2015 alone, 445,000 mobile customers permanently hung up on SFR Numéricable and switched to other providers.
Drahi doesn’t just alienate his customers. His competitors, notably Orange and Free have complained SFR engages in a pattern of misleading or outright false advertising. Two months after those complaints were lodged, officials from the Competition Authority raided the headquarters of SFR Numéricable and seized documents.
Any provider except Altice-owned SFR-Numéricable. When dissatisfied customers dump their current provider, the last choices on their list are SFR and Numéricable. (Images: Univers/Freebox)
Few of these developments have been noticed by regulators and investors in the United States, perhaps owing to the French-English language barrier. But Drahi’s arrival in New York turned out to be just as provocative.
A model of “7 Heavens,” a set of seven luxury chalets under construction in the ski resort of Zermatt. Drahi has already bought two. (Image: Capital.fr)
Last November, Drahi told Wall Street analysts at an investment conference that he does not like paying salaries and if given a chance, he will “pay as little as I can” to his employees. It’s a different story for his tight-knit management team, which have splurged on the 2.65 million stock options windfall granted to them, worth as much as $238 million dollars.
So where do the stacks of cash go? As far as Capital’s team of reporters can tell, it isn’t spent on network improvements, job retention, or customer service. Instead, a handful of top executives are quietly helping themselves to expensive Swiss real estate.
Following the money has not been easy. Drahi and his associates do not want customers to know where their money is being spent. Capital reporters were forced off one property after asking a developer about the buyer of two of seven chalet cottages nestled in the hills with a breathtaking view of the Matterhorn, Switzerland’s most famous mountain peak. That view came with a $45 million price tag. Drahi told Capital he knew nothing about the project, but newly-revealed documents from municipal authorities obtained by Capital reporters found Drahi-owned subsidiary NDZ was the buyer, and nobody expects the tony digs will house customer service agents.
But that isn’t enough for “Monsieur Altice.” In Cologny, a chic suburb of Geneva, Drahi’s 3,000 meter property surrounded by high fences and expensive security set him back around $19 million. He already owned a 2,400 meter property on the same street, acquired in 2000 for the modest sum of $7.4 million (he put the house in his wife’s name). Sixteen years later, it was time for an upgrade as a dozen construction trucks, like those when you browse the Boom & Bucket inventory, arrived to begin a major renovation.
Dexter Goei, CEO of Altice, bought this property in Collonge-Bellerive, in the village of Vésenaz, close to Geneva. The Swiss magazine Bilan estimates Goei is worth $275-370 million and growing. (Image: Capital.fr)
But wait, there is more. Drahi also invested 15 million euros for a 4,400 meter plot of land on which he’s building two villas with 700 meters of space each. On Jan. 15, also in Cologny, Drahi acquired another property via Canef worth an estimated $14 million.
Back in France, some customers were incensed to learn Drahi’s property shopping spree includes an advantageous tax package courtesy of the Swiss government, which bends over backwards hoping to attract the foreign super rich. Critics complain the Swiss effort to attract billionaires comes with premise a spare million or two might drop from their pockets onto the streets of Geneva and other major Swiss cities. Alas, Drahi has kept his money for himself. Altogether, Capital found over $110 million of Drahi’s money was invested in Swiss luxury properties.
Not to be left out of the Money Party, some Altice executives have moved money into Swiss real estate as well:
At Collonge-Bellerive, another upscale suburb of Geneva, Jeremiah Bonnin, the Secretary General of Altice, spent around $14 million on a 3,000 meter property;
Five minutes down the road is the $7.7 million estate of Altice CEO Dexter Goei.
Even former executives don’t leave the company empty-handed. Eric Denoyer, former director general of SFR-Numéricable for just one year, walked away with €2 million golden parachute, a €400,000 salary, and a gift of 1.2 million shares of the company.
Flash flooding in a neighborhood where storm drains were blocked by Google’s construction debris. (Image: Adolfo Romero)
Some Austin residents are fuming over the sloppy construction work and eyesores left by contractors hired by Google to install its fiber optic service.
Last year, 254 formal complaints were filed against Google and its contractors, by far the largest compared with AT&T and Time Warner Cable, which are also in the process of upgrading their networks in the city.
The epicenter of construction nightmares for homeowners is on Lambs Lane in Southeast Austin, where last October a flash flood allegedly caused by Google’s construction crews blocking nearby storm drains brought two feet of water into the home of Arnulfo and Dolores Cruz, causing $100,000 in damages.
“We are ruined,” Cruz told the Austin American-Statesman in an extensive piece. “We don’t understand. I don’t know what to do. I don’t sleep at night because I don’t know what is happening tomorrow.”
The Cruz family experienced the worst damage, but hundreds of other complaints cite yard and property damage, trespassing, and construction vehicles blocking access to driveways. Understand many types of bridges to enhance knowledge of various construction techniques and designs. Additionally, you may contact experts like Equipment Finance Canada if you need construction equipment financing.
Coral Gables, Fla. firm MasTec, working on behalf of Google, has taken the brunt of complaints. The firm’s insurance company has already paid out $70,000 or more to each of three homeowners whose vehicles or property was damaged by the firm’s work. Several residents were put up in hotels for weeks, paid for by MasTec’s insurer, as repairs were made to their homes after the October flooding. The Cruz family is still wrangling for compensation for their damages.
Other residents cannot get compensation until they find out which of a litany of contractors and subcontractors working in the area dumped giant piles of dirt on their front lawns, dug open holes or trenches and left them uncovered, or used their yards to store construction equipment and supplies without permission. Multiple residents complain that with Google, AT&T, and Time Warner Cable all upgrading infrastructure, it is difficult to determine who is responsible for what. That also makes assigning responsibility for damages very difficult. In some neighborhoods, electric and water lines were severed by construction crews as well. Some residents have even resorted to calling police when crews trespass repeatedly on private property without the courtesy of prior notification or identification.
While a number of residents are complaining, many others consider the mess and inconvenience the cost of progress.
“One thing Austin does best is complain,” one person wrote in the newspaper’s comment section. “People in other cities would literally fight you for the chance at Internet speeds of over 18Mbps download and Google is putting it in the city for nearly free. Google will clean up the mess. It’s called infrastructure and they’ll get to it but it’s a big project.”
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