A Kansas utility board overseeing telecommunications regulation in the state is embroiled in scandal after accusations surfaced that AT&T and the Kansas Corporation Commission, the state’s utility board, met secretly to negotiate a custom-written deregulation bill favoring the telephone company.  Senate Bill 384 would deregulate rural telephone exchanges, increase telephone rates for low income families and seniors, allow AT&T to discontinue printing phone directories, and eliminate price caps on basic residential phone service.

Hearings over the proposed legislation exploded when Steve Rarrick, an attorney with the consumer protection Citizens’ Utility Ratepayer Board (CURB), told committee members documents requested by the Board were withheld.  Rarrick also revealed extensive private discussions between AT&T and the KCC to work out the deregulation regulation — negotiations that were kept secret.

“It is disturbing that the KCC believes it is appropriate to meet and communicate in secret with a regulated utility about deregulation legislation the regulated utility is sponsoring,” Rarrick told the Topeka Capital-Journal.

Last week, a KCC board member with direct ties to AT&T resigned from the Commission “for personal reasons.”  In addition to his involvement in AT&T’s regulatory reform agenda, KCC commissioner Michael Moffet of Lawrence had the ultimate conflict of interest — an ongoing personal relationship with a female staff member at the Commission.  Staff members prepare recommendations for the Commission regarding matters coming before it.

Moffet worked for politically-connected Public Strategies, a notorious Texas-based astroturfer and corporate lobbying group hired by SBC Communications (now AT&T) back in 2004 when he was appointed to the Commission by then-governor Kathleen Sebelius.  He was reappointed for a second term by current governor Mark Parkinson, but a hold was placed on his Senate confirmation of a second term.  His biography (since deleted from the Kansas government website – linked to Google cached version) softens his former employer considerably, calling Public Strategies “a Texas public affairs consulting company.”

Moffet

Senate Bill 384 is just the latest in a series of AT&T-sponsored initiatives towards deregulating its operations.  The bill’s provisions would gut decades of regulations covering everything from rates to mandates for Internet access.

AT&T Kansas president Dan Jacobsen defended the 15-page bill, claiming it comes in response to increased competition and a 35 percent loss in landlines.  Jacobsen said AT&T cannot competitively respond tied down with years of “obsolete” regulations.  Jacobsen also proposed expanding what constitutes “effective competition,” a provision that can reduce regulatory oversight once achieved.

Jacobsen claims rural residents will receive the same prices that competition generates in urban areas. Unfortunately for rural residents, urban customers traditionally pay higher phone bills because of extended local calling areas.  Most rural residents pay considerably less because their local calling area is generally much smaller, sometimes only covering a handful of nearby communities.

Jacobsen

Jacobsen also said customers will not be forced into bundled service packages, promising that customers seeking a traditional voice landline will always be able to obtain one from AT&T.

The disposition of Senate Bill 384 is itself creating a number of questions.  Despite clear recommendations in an internal KCC staff report recommending new price caps on the state’s phone companies, the Commission took the direct opposite position, seeming to advocate AT&T’s legislation which would dramatically deregulate providers.  The KCC staff found that competition was more rhetoric than reality, and the lack of it has kept Kansans paying higher phone bills in areas that were previously deemed “competitive” and subject to fewer regulations.

Rarrick warned that supporting AT&T’s custom-written bill would result in much higher bills for state residents.  Rarrick pointed to a similar experience in California, where AT&T pushed through a regulatory scheme that tied prices to an inflation index.  The result was massive rate hikes for residential customers — 23 percent last year and another 22 percent this year.  Since 2006, deregulation has cost Californians plenty — a 226 percent increase in the price of directory assistance calls, 85 percent for call waiting and 345 percent to keep your number unlisted in the phone directory.

“Do we want to move with complete price deregulation when you’re seeing some red flags?” he said.

The Capital-Journal reports consumer groups are also opposed to AT&T’s proposal.

“AARP opposes Senate Bill 384 because it will allow telephone companies to raise rates for service for which there is little competition and eliminate necessary consumer protections and fail to provide a positive benefit for consumers,” said Dave Wilson, state president of AARP Kansas.

This isn’t the first time Moffet has openly supported AT&T’s agenda.

At a 2007 hearing about increasing consumer protections and lowering rates for consumers, Moffet turned the hearing upside down when he asked witnesses to testify about the implications of eliminating state regulatory powers over AT&T.  That’s an AT&T legislative favorite – the elimination of state telecommunications regulations in favor of federal regulations and guidelines widely seen as lacking consumer protections and oversight powers.

The proposal would have made it easier for AT&T to cut off past due customers and raise customer rates.

Back then, Rarrick told the Joplin Globe, “If they go through with that, consumers are going to lose protection they’ve had for 24 years. If I were a telephone company and didn’t want to comply with state rules, I’d be thrilled.”

Our Take — An Editorial

Dampier

This latest in a series of controversies continues to shine a spotlight on the perennial problem of the legislative-private sector revolving door.  It should come as little surprise that a paid lobbyist representing the interests of AT&T/SBC would appear amenable to his former employer’s positions on legislative matters coming up for Commission review.  That then-governor Sibelius would appoint such a industry-connected person to the KCC is political malpractice against her fellow Kansans.  It will also come as no surprise if Moffet finds future employment at AT&T or another telecommunications provider or affiliated consultants group.

Consumers must insist those appointed to oversee the state’s regulated businesses not come from those businesses (or their lobbyists or consultants), or at the very least must be required to recuse themselves from anything involving their former employer.  Also demanding rules that forbid an exiting Commissioner from simply flipping hats to become a lobbyist or paid employee at a business he or she formerly oversaw would dramatically slow the spinning of that revolving door.

An intimate relationship with a staff member and Commissioner is extremely serious, and represents more bad judgment.

As for AT&T’s proposed legislation, it belongs in the shredder.  Even disregarding the controversy coming from the upheaval on the Commission, and the accusations of secret negotiations and withheld documents, ordinary consumers can readily identify sections of the bill that will harm their interests and finances.  Here is just a sampling:

• A provision to strip price caps from any telephone company exchange serving 75,000 or more customers;
• A provision that deregulates phone companies exposed to at least two “competitors,” which in this case are defined as one mobile phone company and one unaffiliated telecommunications provider, regardless of whether it offers equivalent levels of service or even reaches your home, such as the case with cable operators who refuse to wire outlying areas, or cell phone companies that deliver no bars to your neighborhood.
• Permission to jack rural customer rates up $1 a month each year starting back in 1997 (an illustration of how long AT&T has been trying to get away with this) until such time as rates are equalized with the average price charged rural customers across Kansas.  If you’re in a high priced service area, there is no provision to roll back your rates, however.  But if your phone company charges considerably less, it can now charge considerably more until it achieves parity with a statewide average cost for rural phone service.
• AT&T’s idea of a give-back to consumers is a provision requiring free touch tone service for residential customers, like you didn’t have that already in nearly every area.
• Any bundled service packages are automatically price-deregulated;
• The California Trick: “On and after July 1, 2008, the local exchange carrier shall be authorized to adjust such rates without commission approval by not more than the percentage increase in the consumer price index for all urban consumers, as officially reported by the bureau of labor statistics of the United States Department of Labor, or its successor index.”
• The definition of what constitutes a “broadband network” in the eyes of AT&T is any connection that exceeds 200kbps.
• No audit is permitted of the company’s requested initial rates, to determine whether that initial pricing is fair and reasonable.
• Starting in 2012, phone companies no longer have to submit pricing and service information (a tariff) to the KCC for services it sells to residential or business customers.  The KCC would no longer be able to easily red flag problematic pricing.
• Beginning July 1st, phone companies can opt out of state regulations as a “local exchange carrier” and instead receive far easier regulatory treatment under “telecommunications carrier” provisions.
• AT&T is relieved of being the “carrier of last resort,” a provision that guarantees every American access to basic telephone service.  When delivered unprofitably, the Universal Service Fund kicks in a payment to ensure phone companies don’t lose money on very rural, difficult-to-reach customers.  Although AT&T claims it will continue to offer voice service to every customer in “its service area,” what defines a service area could eventually exclude exceptionally rural customers.  AT&T also reserves the right to provide voice service “using any technology” which could convert unprofitable wired customers into being served by a basic wireless radio-based system, which could indefinitely keep those customers from receiving high quality phone service, much less obtaining any broadband service.
• Relieve AT&T of the state requirement to provide at least basic, reasonably-priced “dial-up” Internet access.
• AT&T can quit publishing phone directories any time it chooses.

AT&T couldn’t have done better writing Senate Bill 384 themselves.  Oh wait… they did!

Since utility boards in some states seem to have an inherent inability to read and measure the impact of these company-friendly proposals that do absolutely nothing for consumers but enrich providers and free them from pesky oversight and regulatory requirements, consumers must remain forever vigilant and suspicious of these industry-sponsored giveaways, letting their elected state representatives know they recognize funny business when they see it.  If an ordinary consumer can bullet point more than a dozen bad ideas after less than an hour skimming the bill, why can’t those who purport to serve our interests do likewise?

Providers have a love-hate relationship with fiber optics.  When confronted with a competitor rebuilding their network to provide fiber to customer homes, many providers lampoon and mock fiber’s capabilities, claiming it’s more light than substance.  But when a provider itself wants to do fiber on the cheap, which means not actually providing true fiber-to-the-home service, they’ll bandy about marketing slogans like “100% fiber optic network” or “advanced fiber network.” Fiber is better, and those who have it want to promote it.  Those that don’t want to pretend they do.

Bell has decided it can deliver truthiness in fiber optic broadband by simply chopping a letter off the end of the word ‘fiber.’

Fibe is a close cousin of AT&T’s U-verse system.  It uses fiber optics part of the way, but relies on the same old copper phone wire that’s hanging on those phone poles in your front or back yard.  Because of the shorter distance of copper involved, Bell can use more advanced VDSL2 technology for a faster connection.

That’s certainly an improvement over Bell’s anemic DSL service, difficult to provide to many Canadians spread across the countryside.  But don’t mistake it for Verizon FiOS, or any other true fiber to the home service.  After learning the details, you won’t mistake it for a great consumer value either.

Fibe offers some urban and suburban Canadians new choices in broadband speed: 6/1Mbps, 12/1Mbps, 18/1Mbps and 25/7Mbps at prices ranging from $31.95-52.95 per month ($5 higher for standalone broadband service).  Prices may be slightly lower in some areas depending on what’s on offer from competitors.

But Bell also brings an uninvited guest to the party: Internet Overcharging usage limits.  They also reserve the right to throttle your speeds lower when using high traffic applications.

Check out the company’s marketing rhetoric next to the limitations:

• “Fibe 6 will light up your online life.” The bulb burns out after 25GB of consumption, and your online life is in the dark until the next billing cycle begins.
• With Fibe 12, “You’re totally cool and connected online.” Unfortunately, after 50GB of usage, -you- are left out in the cold.
• “Digital defines who you are. At any given time, you are networked and on your game.” With Fibe 16, the game is over after using 75GB.  Then you can redefine yourself with a good book for the rest of the month.
• “You’re a master of the digital universe. A power++ online user who blazes through bytes and is always looking for more upload speeds. Nothing less than the awesome power of Fibe 25 will do.” Fibe 25, like Fibe 12, sputters out after 75GB of usage.  Then Bell is the master… of your wallet.  There’s nothing like blazing fast speed that gets a bucket of cold water thrown on it with a usage limit and overlimit penalty.  Nothing else will do… for Bell.

Bell is among the more nervy providers out there.  After creating Internet Overcharging schemes that force customers into low usage allowance plans, the company offers to sell you “usage insurance” to protect you from their own paltry limits!  For an additional $5 per month up front, you get protection from their overlimit penalties for up to 40 additional gigabytes of usage.  Of course, you pay the fee whether exceeding the limit or not.  If you don’t have Overcharging Insurance, look out.  Overlimit penalties start at $1/GB and run to $2 and beyond for some smaller allowance plans.  For now, Bell limits the maximum overlimit penalty to $30 per month, but that can change at any time, as Rogers customers have found out.

Fibe appears to be primarily available in parts of Toronto and the GTA.  Selected customers may also receive a letter offering 50 percent off their IPTV video package for one year.  Expect the service to primarily launch in larger cities.  Living in a rural community in a province like Alberta, Saskatchewan or Manitoba?  Don’t hold your breath waiting for these kinds of services to arrive anytime soon.

[flv width=”640″ height=”405″]http://www.phillipdampier.com/video/Bell Entertainment Overview.flv[/flv]

A Bell-produced overview of their new Fibe IPTV service.  (6 minutes)

[flv]http://www.phillipdampier.com/video/WSYR Syracuse Cut Your Phone, Cable and Internet Costs 1-25-10.flv[/flv]

Consumer Reports February 2010 issue rates service providers and gives advice to consumers about where and how to get the best deal for telephone, cable, and broadband service.  WSYR-TV in Syracuse breaks it down.  (2 minutes)

New Zealand Telecom

Telecom New Zealand is under fire as consumer groups, business leaders, and customers condemn the company for a second major outage wiping out wireless mobile broadband and cell phone service for tens of thousands of customers on the South Island.  Dunedin, Invercargill, Timaru and Queenstown were among the areas worst affected for the service problems impacting the company’s much-touted “XT” WCDMA network.  Affected customers could not access mobile broadband, send or receive text messages or phone calls for several days.

Company officials believe a piece of hardware installed at multiple cell tower sites is responsible for the network outages.  It’s just the latest of a never-ending series of problems for New Zealand’s largest telecommunications provider.

In December, a botched software upgrade brought another major outage for the provider, which now risks being defined by customers as unreliable.

Telecommunications Users Association chief executive Ernie Newman said, “From here, it looks bizarre. Even third world countries don’t experience outages of that magnitude and length.  The first time before Christmas people were forgiving. This week has made people think. But they cannot afford a third time.”

The expensive promotional campaign launching the “XT” 3G UMTS network was itself highly controversial when the company decided to use British actors in its advertising campaign, annoying New Zealanders.  Although a company official touted the “world class advanced XT network” as capable of speeds better than 20Mbps, the company’s website notes average customers are more likely to find speeds somewhere in the 3Mbps/750kbps range.

“After marketing XT as a Rolls-Royce brand, Telecom will be looking at ways to rehabilitate it in consumers eyes,” telecommunications analyst Rosalie Nelson told the New Zealand Herald.

The damage control teams have moved into place, and Telecom today announced a $5 million (NZ Dollars) compensation package for customers south of Taupo who were impacted:

Customers whose service was degraded on Wednesday 27 January:

• Prepaid consumer customers – $10 credit
• Postpaid consumer customers – One week’s worth of plan charges, including Telecom Extras, such as texting or data packages
• Telecom Retail SME customers and Gen-i corporate customers – Two weeks’ worth of plan charges, including Telecom Extras, such as texting or data packages

Customers whose service was severely impacted for up to three days between Wednesday 27 January and 10pm Friday 29 January:

• Prepaid consumer customers – $20 credit
• Postpaid consumer customers – Two weeks’ worth of plan charges, including Telecom Extras, such as texting or data packages
• Telecom Retail SME customers and Gen-i corporate customers – Four weeks’ worth of plan charges, including Telecom Extras, such as texting or data packages

Telecom is also donating more than $250,000 to community projects across the lower South Island.

The company’s problems got extensive media coverage, including daily reports on New Zealand’s national news.  Customers were outraged, many spending hours trying to reach Telecom by phone.  Many others argued their way out of service contracts, penalty-free, and switched to Vodafone, the country’s other major wireless provider.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/TV New Zealand Telecom Outage 1-27 1-29-10.flv[/flv]

TV New Zealand’s One News ran several days of reports on the service outage, all presented here in this compilation. (17 minutes)

[flv]http://www.phillipdampier.com/video/Telecom Parody 1.mp4[/flv]

Telecom New Zealand has been on the receiving end of parodies assaulting the company’s quality of service.  This one calls on residents to switch providers. (Strong Language Warning – 2 minutes)

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Telecom XT Parody.flv[/flv]

Another parody reworks one of the promotional advertisements Telecom ran to introduce its XT service to New Zealand. (2 minutes)

Rogers Wireless has withdrawn a proposal placed before Canadian regulators to force its competitors to pay up ex-customers’ unpaid cell phone bills.

In mid-January, Rogers filed a request with the Canadian Radio-television and Telecommunications Commission (CRTC) requesting the agency force other cell phone companies to make good on any past due balances left when customers switched providers.

When other providers didn’t get on board, the company withdrew the proposal.

Rogers’ proposal would have left a customer’s new cell phone provider on the hook for any past due charges left on that customer’s final bill.  With early termination fees running well over $100, that’s a big tab to drop on Canadian cell phone companies, particularly for new entrants in the marketplace.

Providers would have had to require verification of a “clean break” from a previous provider before taking on new customers, creating bureaucratic red tape, and a built-in incentive to hold customers in place.  But the company first advocated the proposal as a solution to the problem of past due balances.

“Customers porting out mid-contract with unpaid balances are costing Rogers, and most probably other wireless carriers as well, millions of dollars each year,” the company said. “The task of collecting these unpaid balances is made much more difficult once a customer ports their number to a new carrier as the relationship has been terminated.”

Rogers claims the problem of unpaid balances on canceled service became a problem after the advent of number portability in 2007.  Customers switching providers can keep their existing cell phone number.  With even greater competition in the Canadian wireless marketplace, customers are more willing than ever to take their business elsewhere, occasionally not paying their last bill.

Critics accused Rogers of trying to throw roadblocks up to make switching a hassle.

Michael Janigan, executive director at the Public Interest Advocacy Centre, a consumer watchdog, told CBC News Rogers’ move is an attempt to slow down the loss of Rogers’ market share.  Rogers’ new competitors, including Wind Mobile, and better prices from Telus and Bell are prompting customers to switch.

“This is the clear downside of long-term contracts for a supplier and now they want regulation to solve a problem brought about by market forces,” he said.

The provision would have benefited Rogers in at least two ways:

1. It would give Rogers advance warning a customer was prepared to switch, as soon as a new provider inquired as to that customer’s final balance.  That would allow Rogers to reach out to the customer with special incentives like retention deals, which could persuade a customer to stay;
2. Competitors would have had to build in a delay before they agreed to finalize a provider change, so they didn’t expose themselves to past due penalties from the former provider.  That inconveniences customers who would have to wait for their old provider to send a balance verification.

When asked why Rogers simply didn’t turn over past due balances to collection agencies, the company claims that method is not particularly effective.

“Collections and risk management systems are in place to mitigate the impact, but … the effectiveness of these measures is limited, especially in cases where the unpaid balance is significant,” the company said.

Some other Canadian providers weren’t impressed with Rogers’ proposal.

“Telus couldn’t disagree more with Rogers on their proposal,” said spokesman Jim Johannsson. “It’s not consumer focused, it’s not transparent, doesn’t promote consumer choice and runs counter to everything we are striving for as an industry.”

The blowback from customers was far worse.  A sampling:

“Canada has diversified its wireless market from Robbers and Bhell to allow for companies like Wind to offer much better prices/services & “CUSTOMER SERVICE”. What exactly is Robbers going to do? Send Jack Bauer? Their sub-par overpriced service deserves this. As Canadians we need to start a revolution against these monopoly giants who just leech off vulnerable middle-class Canadians. Even after we wash our hands of them, they still reach for our wallets.”

“Burn your bridges Rogers, keep tickin’ off your customers, and have the gall to expect their competitors to help them. It’s a tough world when you are not a monopoly, eh?”

“Rogers, they’re leaving you high and dry after you sucked the life out of your customers.  You expect respect when none is given. How the tides have turned.”

A few days after comments like that, Rogers flip-flopped and caved:

“We decided to withdraw it as it just didn’t seem appropriate,” said Jan Innes, a Rogers spokesperson.