New York State taxpayers will contribute $212 million to expand broadband to reach 89,514 homes and institutions in mostly in rural upstate communities that either lack internet access or have to endure very slow speed DSL service from the phone company. All recipients have agreed, as a condition of receiving the money, not to impose data caps on their customers.

This week, New York Governor Andrew M. Cuomo announced the latest winning projects that will receive grants from a second round of funding from the New NY Broadband Program, part of the governor’s effort to achieve 100% broadband penetration in the Empire State.

Gov. Cuomo

Twenty six cable and phone companies, mostly for-profit businesses, will share awards ranging from $226,184 for Cable Communications of Willsboro to reach 558 homes in the Essex County communities of Willsboro and Essex, on the border of Lake Champlain and the state of Vermont to $47,770,970 for Armstrong Telecommunications to reach 16,545 homes in Allegany, Cattaraugus, Erie, Livingston, Steuben, and Wyoming counties in the Finger Lakes Region and Southern Tier.

“Broadband is today what electricity was nearly a century ago – essential to creating economic opportunity, driving innovation and an absolute necessity for our way of life,” Governor Cuomo said. “These awards will provide homes and businesses with access to the high-speed internet required to participate and succeed in the modern economy, and are a major step toward broadband for all in New York.”

Grant recipients provided $56,253,037 in private matching funds, with New York taxpayers picking up the remaining 75% of the total expansion cost — about $2,366 per home or business.

A separate agreement with the New York State Public Service Commission obligates Charter Communications (formerly Time Warner Cable) to embark on its own company-funded expansion program to expand service to approximately 145,000 unserved and underserved premises. Charter has identified Columbia, Erie, Jefferson, Onondaga, Oswego, and Sullivan as “Year One Priority Counties” where most upgrades will be taking place in 2017, including expansion to reach 100Mbps speeds during the first six months of this year.

The winning providers had to guarantee they would upgrade speeds to at least 100Mbps except in the “most remote areas” where 25Mbps is acceptable. Although the state targeted 50% private sector co-investment, providers ultimately came closer to the absolute minimum of 20% in matching funds. They must also guarantee that broadband service will be available to customers for no more than $60 a month to qualify for the grant. Cable Communications of Willsboro, for example, now offers 8/1Mbps for $59.95 a month. Presumably it will have to boost speeds as part of its grant award.

The grant program was also designed to favor applicants offering fiber-to-the-home or hybrid fiber/cable (HFC) technology currently favored by cable operators. DSL and fixed wireless applicants had to give evidence the governor’s need for speed would be delivered using those technologies. All applicants must also agree not to impose data caps of any kind for New York residents.

New York is a rare exception to rural broadband expansion in states that mostly rely on politicians begging and pleading with providers to expand their service areas. At best, this has delivered modest results without access to supplemental funding to achieve Return On Investment requirements private companies demand.

As New York progresses through multiple rounds of bidding, each new round becomes more challenging because of the increasing expense to reach each remaining unwired rural home, business, and farm. In the current round, the costs to wire a single home are at least four times more than what Verizon spent to extend its FiOS service to a new home or business in downstate New York.

To meet 100% penetration, some properties will require a $20,000 or more investment to extend service. Gov. Cuomo has decided that broadband should be treated as a necessary utility, not a convenience. In effect, New York wants universal service standards to be applied to broadband, regardless of cost.

All projects must be finished by the end of 2018. The Broadband Program Office is currently finalizing a Request for Proposals for the Program’s upcoming Round III, which will launch within 30 days. This round will seek to complete the goal of bringing high-speed internet access to New York’s remaining unserved and underserved communities. Round III will be paid for by the $170 million in Connect America Funds Verizon forfeit because of their lack of interest in expanding rural broadband service. New York officials successfully petitioned the Federal Communications Commission to reallocate those funds to the state to disburse to reach the remaining rural areas still without suitable internet access.

Phase 2 Awardees

Pai

As a result of the multibillion dollar cable merger between Charter Communications, Bright House Networks, and Time Warner Cable, the three companies involved freely admitted: your cable bill was unlikely to decrease, you won’t have any new competitive options, there was no guarantee your service would improve, or that you would get faster broadband service than what Time Warner Cable Maxx was already delivering to about half its customer base.

While shareholders and Wall Street bankers made substantial gains, top Time Warner Cable executives walked away with multimillion dollar golden parachute packages, and Charter took control of what is now the country’s supersized, second most powerful cable operator, regulators also required the dealmakers share at least a tiny portion of the spoils with customers.

Then President Donald Trump’s FCC chairman — Ajit Pai — took leadership of the telecom regulator. Now all bets are off.

Pai is reconsidering the settled deal conditions imposed by the FCC under the last administration, and wants to give Charter Communications a free pass to let them out of their commitment to compete. Last week, Pai circulated a petition among his fellow commissioners to roll back the commitment Charter acknowledged to expand its service area to at least one million new homes that already get broadband service from another cable or telephone company.

Former FCC chairman Thomas Wheeler sought the competition requirement to prove that cable operators can successfully run their businesses in direct competition with each other, potentially inspiring other cable companies to face off with incumbent operators outside of their own territories. A paradigm shift worked for Google, which inspired ISPs to boost speeds in light of its gigabit Google Fiber service, which reset customer expectations.

The FCC order approving the merger deal was hardly onerous, requiring Charter to compete head-to-head for customers in places the company can choose itself. Lawmakers eliminated exclusive cable franchise agreements years ago, but established major cable operators like Charter have gone out of their way to avoid competing in areas that already receive cable service. While Wheeler may have hoped some of that competition would be directed against fellow cable companies, Charter CEO Thomas Rutledge quickly made clear to investors and the FCC Charter would continue to avoid direct cable competition, instead promising to expand service into non-cable areas that already get DSL service from the phone company or no broadband at all.

“When I talked to the FCC, I said I can’t overbuild another cable company, because then I could never buy it, because you always block those,” Rutledge said. “It’s really about overbuilding telephone companies.”

Charter’s CEO believes most phone companies are not competing on the same level as cable operators and are unwilling to make the necessary investments to upgrade their aging wired infrastructure to offer faster internet speeds. That makes competing with telephone companies like Windstream, Frontier, and Verizon’s DSL-only service areas a much better proposition than trying to compete head-to-head with Comcast, Cox, or Cablevision.

Rutledge’s clear views about Charter’s expansion plans apparently never made it to the American Cable Association, a cable industry lobbying group that defends the interests of independent and smaller cable operators. Despite Rutledge’s public statements, the ACA and its members are afraid Charter could expand on their turf anyway, potentially forcing small cable operators to compete with the same level of service Charter offers. The horror.

The ACA’s arguments found a sympathetic audience in Mr. Pai and now he wants to let Charter off the hook, at the expense of competition and better service for consumers.

Under the proposal circulated by Pai, Charter would still be required to expand its cable broadband service by at least one million new homes, but those homes would no longer have to be in areas outside of Charter’s existing service footprint. In practical terms, this would mean Charter would focus on wiring areas not far from where it provides service today — ‘DSL or nothing’-country. Charter would also be able to fritter away the number of expansions required by counting newly constructed neighborhood developments it would have likely wired anyway, as well as upgrading its remaining shoddy legacy cable systems — some still incapable of offering broadband or phone service.

The ACA’s talking points prefer to emphasize the David vs. Goliath scenario of a big bully of a cable company like Charter being forced to compete (and likely obliterate) existing small cable operators:

“The overbuild condition imposed by the FCC on Charter is stunningly bad and inexplicable government policy,” said ACA president and CEO Matthew Polka, in a statement. “On the one hand, the FCC found that Charter will be too big and therefore it imposed a series of conditions to ensure it does not exercise any additional market power. At the same time, the FCC, out of the blue, is forcing Charter to get even bigger.”

The real goal here is to minimize direct competition at all costs. The FCC’s deal conditions already included the need for more rural broadband expansion. Wheeler’s second goal was to introduce a new model — cable company competing against cable company — fighting for new customers by offering consumers better service and pricing. The existence of such competition would belie the industry’s claim that cable overbuilds and head-to-head competition is uneconomical. Wildly profitable, perhaps not, but certainly possible. Historically, the traditional way cable operators dealt with the few instances of direct cable competition was to buy them out to put them out of business. Rutledge was certainly thinking along those lines when he complained that the FCC’s order to compete did not include permission to eventually devour its competitor, effectively making competition go away.

Had Charter chosen to compete with cable companies not afraid to spend money to upgrade service above and beyond the anemic broadband speeds Charter offers, it would likely find few takers for its maximum 300Mbps broadband service that comes with a $200 install fee.

“Why would we go where we could get killed?” Rutledge admitted.

Industry claims that the cable business is already fiercely competitive are also countered by Rutledge’s own statements making clear direct competition with brethren cable companies on the cusp of speed-boosting DOCSIS 3.1 upgrades was bad for business. Instead, he would focus on competing with inferior phone companies, which he characterized as mired in debt, still skeptical about the financial wisdom of fiber optic upgrades, and the only competitor where dismal 3-10Mbps DSL service presented a ripe opportunity to steal customers away.

Clyburn – A likely “no” vote.

Charter’s merger approval and its conditions are a sealed deal that was acceptable to Charter and its shareholders and at least offered small token treats to ordinary consumers. Mr. Pai’s willingness to reopen and undo those commitments is just one reason we’ve referred to his regulatory philosophy as irresponsible, nakedly anti-consumer, and anti-competitive. Mr. Pai’s willingness to embrace things as they are comes at the same time most consumers are paying the highest broadband bills ever while also facing an epidemic of usage caps, usage billing, and increasing service and equipment fees. Mr. Pai’s other actions, including ending an effort to introduce competition into the set-top box market, curtailing customer privacy, ending inquiries on usage caps/zero rating, threatening to eliminate Net Neutrality, and reducing the FCC’s already anemic focus on consumer protection makes it clear Mr. Pai is a company man, on a mission to defend the interests of Big Telecom companies and their lobbyists (that also have a history of hiring friendly regulators for high-paying positions once their government job ends.)

That conclusion seems apt considering what Mr. Pai said about Chairman Wheeler’s vision of improving broadband: “one more step down the path of micromanaging where, when, and how ISPs deploy infrastructure.” Missing from his statement are consumers who have spent the last 20 years watching ISPs govern themselves while waiting… waiting… waiting for broadband service that never comes.

Mr. Pai’s proposal needs just one additional vote to win passage. That extra vote is unlikely until President Trump appoints another Republican commissioner. Pai’s proposal isn’t likely to win support from the sole remaining Democrat commissioner still at the FCC — Mignon Clyburn.

The average Charter/Spectrum customer shares their internet connection with up to 499 of their neighbors, according to an admission made today by Charter Communications CEO Thomas Rutledge.

“Our average node size is around 500 homes,” Rutledge told investors on a morning conference call.

According to a lawsuit filed by the New York State Attorney General Eric Schneiderman, from about 2012, Spectrum-TWC’s network across New York typically provided about 304Mbps (8 x 38Mbps channels) of bandwidth to be shared among all the subscribers in a service group. In some areas, this would mean that 300 customers in a node would have around 1Mbps of bandwidth to use if all 300 subscribers used the internet at the same time. Time Warner Cable had begun expanding bandwidth on DOCSIS nodes to 16 channels at the time Charter Communications acquired the company, giving customers shared bandwidth of about 608Mbps.

Remarkably, Rutledge’s admission suggests some Charter customers may be serviced by DOCSIS nodes even more populated than the ones in New York State that regularly failed to deliver advertised internet speeds and prompted the Attorney General to file a lawsuit against Charter.

New York’s lawsuit claimed as of February 2016, the average Time Warner Cable customer in the state shared their connection with about 340 other customers. Information obtained from Time Warner Cable found some nodes with as few as 32 subscribers while the most overcongested had as many as 621 subscribers.

Rutledge’s comments this morning suggest Charter/Spectrum customers may be sharing their connection with up to 499 of their neighbors, making them more likely to experience congestion potentially worse than experienced with Time Warner Cable. Standard internet service from Charter is also much faster than Time Warner Cable’s corresponding Standard plan — 60Mbps vs. 15Mbps, which has the potential to lead to even worse slowdowns if customers use their internet connections at the same time.

Rutledge defended the average node size by claiming Charter has a lot of fiber in its network.

“And we have the ability to take that fiber deeper,” Rutledge said. “We have the ability incrementally to take the network to a passive network and to do that at reasonably efficient capital cost through time and to do that in very targeted ways where we need the capacity. So we’re very comfortable with the extensibility of our network and the ability to put high capacity anywhere in our network.”

Rutledge said node expansions take place through a “market demand driven sort of process.”

“There are bunch of ways you can manage capacity on our network,” Rutledge explained. “We can do what are called virtual node splits. If you clear analog spectrum and go all-digital, [that can create] excess capacity in your network, and [if] you have demand to put more capacity in a node, there [are] two ways of doing it. One way is to physically split a node into a smaller node, which requires the placing of an electronic device in the field, and maybe the extension of some fiber. It depends on how the architecture of that is structured, but it’s relatively inexpensive on a grand scale capital perspective, but a lot more expensive than a digital or virtual node split. And you can do those if you have channel capacity by just recreating additional DOCSIS paths to create a virtual node essentially. And so we manage our network for the future based on the actual load on the network as opposed to some theoretical issue.”

As your AT&T wireless bill soars to new heights, the phone company is spent your money on an exclusive inside-the-beltway private soirée to help win approval of its merger deal with Time Warner, Inc.

The little people (ordinary Americans and AT&T customers) were barred at the door for AT&T’s “Stars and Stripes Reception,” celebrating the grand opening of the AT&T Forum for Technology, Entertainment, and Policy. The party was heavy on lobbyists, lawyers, executives, and lawmakers that Bloomberg News reported were bathed in cool blue light and amply supplied with drinks and avocado tartare with melon carpaccio. Added bonus: free photos with a blonde in a slinky white gown promoting “Ice,” an AT&T original show seen on DirecTV.

AT&T doesn’t throw parties just to have fun. Its army of 100 lobbyists and a budget of at least $16.4 million to match leaves very little to chance. Only one company – Boeing – spends more time and money influencing lawmakers. But even a household name aerospace company cannot match the success AT&T has had getting its corporate agenda through in Washington, especially when the Republicans hold the majority. The company has spent more than $213 million schmoozing elected officials since 1998 alone.

The smell of power brought some important names to AT&T’s party, among them, Meredith Attwell Baker, former Republican FCC commissioner who accepted a high-paying lobbying job at Comcast just a few months after voting to approve its own merger deal with NBCUniversal. She was photographed by Washington Life magazine with Peter Jacoby, a former longtime AT&T lobbyist now lobbying for UnitedHealth Group, Bryan Cunningham, co-founder and principal at Polaris Consulting, which has advised AT&T on all of its merger deals since 2009 (along with just about every other large cable merger in the last seven years), and Shane Tews, a visiting fellow at the American Enterprise Institute also associated with the Koch Brothers-backed Heartland Institute, and two other DC consultant groups catering to big businesses that need a guide to help navigate and influence Washington.

Having fun: On the right is Republican strategist Ivan Garcia-Hidalgo, Hispanic Communications | Run PAC

In short, AT&T’s Forum is the embodiment of the D.C. “swamp” President Donald Trump has vowed to drain. Yet it confidently opened for business just a few days before his inaugural. Bloomberg News called the event part of AT&T’s search for “friends in high places.”

The phone company remains concerned about Mr. Trump’s rhetoric on the campaign trail that a merger between AT&T and Time Warner, Inc. would concentrate too much power in too few hands and was “an example of the power structure I’m fighting.”

But not concerned enough to believe their $85.4 billion deal is dead. In fact, D.C. insiders predict the transaction is likely to sail to approval with the Trump Administration’s Justice Department. Few believe the likely next head of the agency that reviews corporate mergers on antitrust grounds — Sen. Jeff Sessions (R-Ala.) is going to be too tough on AT&T. The president has yet to appoint an assistant attorney general for antitrust, who will be responsible for most of the transaction’s review. But Trump’s team was still considering Joshua Wright, a law professor that generally believes mergers are pro-consumer and has promoted a strict laissez-faire philosophy on antitrust enforcement, which foreshadows almost no enforcement at all.

So why throw lavish receptions for the important people in Washington?

“All of this outreach, all of this cultivation, is ensuring you have allies,” Meredith McGehee, strategic adviser to the Campaign Legal Center told Bloomberg News. “You get to know people. You invite them. You do the receptions. You start to cultivate champions on the Hill, so if an antitrust action comes about you can turn to those champions and say, ‘Hey I need you to push back. I need you to write letters.’”

Most of that attention will continue to be tilted towards Republicans, which have traditionally been more favorable to AT&T’s interests. AT&T donated 62% of the $2.7 million in campaign contributions to the GOP in the last election. Most of AT&T’s lobbyists are Republicans that took a trip through D.C.’s revolving door between Capitol Hill and K Street — home of the city’s top lobbying firms. Almost 60 of the 100 AT&T lobbyists used to work for Republican lawmakers or affiliated groups. Another 30 come from Democratic backgrounds — most formerly working for the Clinton Administration or Democratic lawmakers.

Since President Trump began emphasizing the need for American jobs and investment, AT&T’s lobbying team has tailored its message accordingly. On inauguration day, AT&T took out a full-page ad in the Washington Post stating: “We employ more than 250,000 people.” AT&T CEO Randall Stephenson also reportedly emphasized AT&T’s investments in its network when he met privately with Mr. Trump in New York.

Pai

Like President Donald Trump, Ajit Pai is a busy man. He’s spent his first month as FCC chairman gutting his predecessor’s legacy, reversing pro-consumer policies, ending forays into set-top box competition, fair pricing for inmate phone calls, cheap internet access for the poor, ending reviews of data caps and zero rating practices, and threatening to terminate Net Neutrality with extreme prejudice.

No wonder Bob Quinn, AT&T senior executive vice president of external & legislative affairs applauded President Trump’s appointment of Pai, proclaiming he will “quickly and decisively put back in place the commonsense regulatory framework necessary to support the President’s agenda for job creation, innovation and investment. We look forward to working with him and his team and the FCC to support President Trump’s growth agenda.”

AT&T’s only growth agenda is sending customers ever-increasing bills, and with Mr. Pai at the helm of the FCC, they are sure to get their wish.

Over their terms at the FCC under the Obama Administration, Republican Commissioners Ajit Pai and Michael O’Rielly frequently complained their minority voices on the Commission were ignored and newly proposed regulations or policies would come before the FCC so quickly, there was inadequate time for public review. But since Pai teamed up with O’Rielly to abolish many of the most important achievements of his predecessor, Chairman Thomas Wheeler, they have reportedly all but ignored the sole remaining Democrat currently serving on the Commission — Mignon Clyburn.

Last Friday, Clyburn accused Pai of hypocrisy for complaining about policies being rushed for a vote without explanation before doing the same thing himself late last week.

Clyburn

“Today is apparently ‘take out the trash day.’ In an eponymous episode of the West Wing, White House Chief of Staff Josh Lyman stated: ‘Any stories we have to give the press that we’re not wild about, we give all in a lump on Friday . . . Because no one reads the paper on Saturday,'” Clyburn said in a statement. “Today multiple Bureaus retract—without a shred of explanation—several items released under the previous administration that focus on competition, consumer protection, cybersecurity and other issues core to the FCC’s mission. In the past, then-Commissioner Pai was critical of the agency majority for not providing sufficient reasoning behind its decisions.”

Clyburn’s office asked for more than the allotted two days to review a dozen items that suddenly appeared on the FCC’s agenda.

“We were rebuffed,” Clyburn wrote.

Clyburn then accused Pai of violating the Administrative Procedure Act, which requires adequate public notice and a comment period for public input. When she asked the chairman to comply with the “reasoned decision-making requirements of the APA,” she was told ‘No deal.’

Mr. Pai’s regulatory rollback agenda has moved with breathtaking speed, according to some FCC observers. Consumer group Free Press today called Pai’s progress “Orwellian.” Over less than a month, Pai — with the help of Commissioner O’Rielly — has:

• Announced the formation of a Broadband Deployment Advisory Committee that is expected to be stacked with industry stakeholders that will recommend reform the FCC’s pole attachment rules, identify “unreasonable” regulatory barriers to broadband deployment, encourage local governments to adopt “deployment-friendly” policies, and develop a “model code” for local franchising, zoning, permitting, and rights-of-way regulations for telecom infrastructure like cell towers. Few expect the eventual “model code” to stray far from Big Telecom companies’ wish lists;
• Near-unilaterally loosened rules allowing AM radio stations to continue making their presence felt on the overcrowded FM band through the use of low-power FM “translator” stations that rebroadcast the AM station’s programming;
• Changed FCC policies to give broader notice of upcoming agenda items and policy proposals, ostensibly to improve public access to FCC rulemaking procedures. But observers suggest the change will primarily benefit industry lobbyists who will have advance detailed notice about the FCC’s upcoming agenda items, allowing them time to lobby for or against the proposals, or suggest changes;
• Rescinded “Improving the Nation’s Digital Infrastructure,” a policy paper promoting rural broadband deployment and other broadband improvements released just prior to the inauguration of President Trump. On Feb. 3, the FCC set “aside and rescinds the Digital Infrastructure Paper, and any and all guidance, determinations, recommendations, and conclusions contained therein. The Digital Infrastructure Paper will have no legal or other effect or meaning going forward.”
• Rescinded “in its entirety and effective immediately, earlier guidance provided in a March 12, 2014, public notice, DA 14-330, “Processing of Broadcast Television Applications Proposing Sharing Arrangements and Contingent Interests,” which attempted to limit ongoing media consolidation controversies including allowing one TV station to effectively operate and provide content for so-called ‘competing’ stations in a local area.
• Closed the FCC’s investigation into wireless carriers’ zero-rating policies, which allow subscribers free access to “preferred provider content” without it counting against their data plan. Critics call zero rating an end run around Net Neutrality, because providers treat their own content as “preferred.” AT&T charges other content providers to participate in its zero rating program.
• Instructed the FCC’s legal team to stop defending court challenges to its authority to ensure fair and reasonable telephone rates for incarcerated prisoners held captive to using a single carrier to make phone calls at prices much higher than what the public pays. Those rates were as high as $5.70 for a 15-minute in-state collect call placed from an incarceration facility in Kentucky. In that state alone, consumers effectively paid $2.79 million in kickbacks to state prison systems or a county jail. In contrast, a similar 15-minute call placed from a West Virginia jail or prison would cost $0.48. As a result of Pai’s actions, companies like Global Tel*Link, Securus, and Telmate “can continue the practice of price gouging prisoners and their families,” according to Prison Phone Justice;
• Ended former FCC Chairman Wheeler’s attempt to force competition in the cable set-top box marketplace, allowing consumers to take a bite out of the $20 billion cable companies make in rental fees annually. At least 99% of subscribers now pay an average of $231 a year to lease the boxes, even after the company has fully recouped their original cost. Customers in Canada can buy their own set-top boxes and DVRs.
• Killed an expansion of the FCC’s Lifeline program to offer discounted internet access to the poor. Pai reversed approvals made to nine providers — none accused of waste, fraud, or abuse — including Kajeet, Spot On, Boomerang Wireless, KonaTel, FreedomPop, Applied Research Designs, Liberty Cablevision of Puerto Rico, Northland Cable Television and Wabash Independent Networks. Pai later defended the move claiming his predecessor rushed through approval of the providers and he was rescinding those “midnight rules” as current chairman. Many Republicans are seeking a complete elimination of the Lifeline program.
• Rescinded the latest progress report on modernizing the Universal Service Fund’s E-Rate program, which is designed to subsidize telecom services for schools and libraries. It could be the first step in eliminating or dramatically reforming the Fund;
• Gave two violators of the FCC’s rules on properly collecting and reporting information about the source of political advertising aired on stations air a free pass.
• Threw out a white paper from the FCC’s own Homeland Security Bureau advising the agency on cybersecurity issues. Pai doesn’t think the FCC should be involved in cybersecurity, so anything contrary to his agenda of reducing the role of the FCC is likely destined for the nearest wastepaper basket.

FCC letter to AT&T’s Bob Quinn letting him know the company is off the hook with the FCC on zero rating.

“Ajit Pai has been on the wrong side of just about every major issue that has come before the FCC during his tenure,” said Craig Aaron, president of Free Press. “He’s never met a mega-merger he didn’t like or a public safeguard he didn’t try to undermine. He’s been an inveterate opponent of Net Neutrality, expanded broadband access for low-income families, broadband privacy, prison-phone justice, media diversity and more. If Trump really wanted an FCC chairman who’d stand up against the runaway media consolidation that he himself decried in the AT&T/Time Warner deal, Pai would have been his last choice — though corporate lobbyists across the capital are probably thrilled.”