AT&T made a fortune spying on average Americans and sold what they learned to law enforcement agencies who only needed a paid account to access the data, not a subpoena signed by a judge.

The newest revelations of AT&T’s Project Atmosphere by the Daily Beast sucked the oxygen out of the room from collective gasps of those learning the enormity of private information AT&T is selling to any government agency willing to pay. The first news story about the program came in a 2013 New York Times report. But new evidence suggests AT&T’s project may represent the most extensive private surveillance program ever uncovered.

“The for-profit spying program that these documents detail is more terrifying than the illegal NSA surveillance programs that Edward Snowden exposed… If companies are allowed to operate in this manner without repercussions, our democracy has no future,” Evan Greer, campaign director at Fight for the Future, told Newsweek.

AT&T stores details for every call, text message, Skype chat, or any other form of communication that passes through its infrastructure, and has kept that data as far back as 1987, according to the Times 2013 Hemisphere report. The scope and length of the collection has accumulated trillions of records and is believed to be larger than any phone record database collected by the NSA under the Patriot Act.

AT&T’s Hemisphere program operates in the shadows and does not require compliance with the kinds of federal privacy laws and constitutional protections required to be honored by the nation’s law enforcement agencies. AT&T’s database allows anyone with a procedural administrative warrant (no judge’s signature required) to search through trillions of call records and obtain precise cellular location data to discover where a person is located, who he speaks to, and often why.

A suspect claiming to be in one location at the time of a crime can be challenged when AT&T’s data reveals a subject’s cell phone was actually located somewhere else. If a prosecutor wants to know who a suspect has called for the last five years, he can order a report from AT&T showing every call, every number dialed, how long the call lasted, and details about the person called (and who they, in turn, called).

Privacy advocates call the revelations “chilling” and claim AT&T goes well beyond the kind of surveillance practiced by federal government agencies revealed by Edward Snowden.

AT&T customers have it worst, because the company has direct access to any type of communication made over AT&T’s network. But customers of other telecommunications companies are also affected because communications regularly travel over networks owned and operated by AT&T. The spying program involves cell phone lines, landlines, and internet connections.

The secretive project also turns out to be extremely profitable for AT&T.

Spying is profitable.

“AT&T customers are outraged but this affects everyone,” Greer told Newsweek. “AT&T went far beyond complying with legal government requests and actually built a powerful data mining product to sell our private information to as many government agencies and police departments as they could.”

Taxpayers cover almost all the costs because AT&T Hemisphere clients are government agencies. Small rural police departments pay at least $100,000 for access to AT&T’s data, but significant-sized suburbs and cities can pay AT&T well into the millions.

The 2013 Times report mischaracterized AT&T’s effort as a “partnership” between AT&T and the U.S. government. The Obama Administration’s Justice Department defended AT&T’s efforts calling Hemisphere “an essential, and prudently deployed, counter-narcotics tool.”

But the Justice Department may have been smoking some of the contraband they seized when they made that claim, because this week’s revelations show the program was used for far more than fighting the War on Drugs. Law enforcement agencies have accessed AT&T’s database as part of investigations of everything from Medicaid fraud to homicide.

AT&T’s pay-per-spy program was developed independent of law enforcement agencies and was designed, packaged, and marketed to make AT&T a fortune from American taxpayers. It has raked in millions of dollars annually, according to the Daily Beast.

No pesky warrants are required, only a solemn promise to keep Hemisphere a secret if an investigation that uses the data ever becomes public. AT&T specifically engineered an “end run” that may ultimately prove illegal because law enforcement agencies may have created phony or misleading evidence to cover up for AT&T:

But those charged with a crime are entitled to know the evidence against them come trial. Adam Schwartz, staff attorney for activist group Electronic Frontier Foundation, said that means AT&T may leave investigators no choice but to construct a false investigative narrative to hide how they use Hemisphere if they plan to prosecute anyone.

Once AT&T provides a lead through Hemisphere, then investigators use routine police work, like getting a court order for a wiretap or following a suspect around, to provide the same evidence for the purpose of prosecution. This is known as “parallel construction.”

“This document here is striking,” Schwartz told The Daily Beast. “I’ve seen documents produced by the government regarding Hemisphere, but this is the first time I’ve seen an AT&T document which requires parallel construction in a service to government. It’s very troubling and not the way law enforcement should work in this country.”

The federal government reimburses municipalities for the expense of Hemisphere through the same grant program that is blamed for police militarization by paying for military gear like Bearcat vehicles.

AT&T isn’t feeling threatened by this week’s revelations or their implications, releasing a lukewarm statement implying Hemisphere is just a way for AT&T to efficiently respond to law enforcement subpoenas:

“Like other communications companies, if a government agency seeks customer call records through a subpoena, court order or other mandatory legal process, we are required by law to provide this non-content information, such as the phone numbers and the date and time of calls.”

AT&T is being misleading, according to ACLU technology policy analyst Christopher Soghoian.

“They say they only cooperate with law enforcement as required, and frankly, that’s offensive when they are mining the data of millions of innocent people, and really built a business and services around the needs of law enforcement,” Soghoian told the Daily Beast.

Down the rabbit hole

Google has quietly announced an indefinite suspension of further fiber expansion as it prepares to downsize fiber division employees and re-evaluate its fiber business model.

In a blog post tonight from Craig Barratt, senior vice president of Alphabet and CEO of Google’s Access division, it becomes clear Google is rethinking its entire fiber strategy and is likely moving towards fixed wireless technology going forward:

Now, just as any competitive business must, we have to continue not only to grow, but also stay ahead of the curve — pushing the boundaries of technology, business, and policy — to remain a leader in delivering superfast Internet. We have refined our plan going forward to achieve these objectives. It entails us making changes to focus our business and product strategy. Importantly, the plan enhances our focus on new technology and deployment methods to make superfast Internet more abundant than it is today.

Barratt outlines the immediate implications of Google’s dramatic shift:

• In the cities where we’ve launched or are under construction, our work will continue;
• For most of our “potential Fiber cities” — those where we’ve been in exploratory discussions — we’re going to pause our operations and offices while we refine our approaches. In this handful of cities that are still in an exploratory stage, and in certain related areas of our supporting operations, we’ll be reducing our employee base.

Barratt

Barratt himself is jumping ship (or was pushed). He announced in his blog entry he is “stepping away” from his CEO role, but will remain as an “adviser.”

Observing Google’s recent fiber efforts and acquisitions, it seems clear Google no longer thinks fiber-to-the-home service is an economically viable solution in light of competitors like AT&T rolling out increasing amounts of fiber and the cable industry is on the cusp of launching DOCSIS 3.1, which will dramatically boost internet speeds without a substantial capital investment.

Google’s investors have been lukewarm about the company’s economic commitments relating to its fiber broadband networks. Often built from the ground up, Google’s fiber construction complexities also include trying to navigate costly roadblocks established by their competitors (notably Comcast and AT&T), dealing with bureaucracies and red tape even in states where near-total-deregulation was supposed to make competition easy. Google Fiber has also not proved to be a runaway economic success, and now faces more challenges in light of upgrades from their competitors. Cable companies have slashed prices for customers threatening to cancel and have added free services or upgrades to persuade customers to stay, and Google’s proposition of selling consumers $70 gigabit access has proved tougher than expected.

It is highly likely the future of Google’s Access business will be deploying wireless broadband solutions powered by Webpass, a company Google acquired earlier this year. Webpass uses a high-speed point to point wireless transmission system the company claims can deliver gigabit broadband access to customers in multi-dwelling buildings and other urban areas. Webpass sells access for $60 a month (discounted to $550/yr if paid in advance) for 100Mbps-1,000Mbps speed depending on network density and capacity in the customer’s building. So far, Webpass has not been able to guarantee speed levels, and some customers report significant variability depending on their location and network demand.

Webpass’ wireless infrastructure costs a fraction of what Google has coped with building fiber to the home networks, and the installation of point-to-point wireless antennas on participating buildings has been less of a regulatory nightmare than digging up streets and yards to lay optical fiber.

But despite Webpass’ claim its performance is comparable to fiber, its inability to guarantee customers a certain speed level and its tremendous performance variability from 100 to 1,000Mbps exposes one of the weaknesses of fixed wireless networks. At a time when capacity is king, only fiber optic networks have shown a consistent ability to deliver synchronous broadband speeds that do not suffer the variability of shared networks, poor antenna placement/signal levels, or harmful interference.

There is room for wireless technology to grow and develop, as evidenced by the wireless industry’s excitement surrounding future 5G networks and their ability to offer a home broadband replacement. The emergence of 5G competition is almost certainly also a factor in Google’s decision. But even AT&T and Verizon acknowledge a robust 5G network will require a robust fiber backhaul network to support both speed and user demand. The more users sharing a network, the slower the speed for all users. No doubt Webpass has made the same assumption that cable operators did in the early days of DOCSIS 1 — current internet applications won’t tax a network enough to create a traffic logjam that would be noticed by most customers. The phone companies also learned a similar lesson trying to serve too many DSL customers from inadequate middle mile networks or traffic concentration points. (Some phone companies are still learning.)

Whether it was yesterday’s peer-to-peer file sharing or today’s online video, capacity matters. That is why fiber broadband remains the gold standard of broadband technology. Fiber is infinitely upgradable, reliable, and robust. Wireless is not, at least not yet. But technology arguments rarely matter at publicly-traded corporations that answer to Wall Street and investors, and it appears Google’s backers have had enough of Google Fiber.

Stop the Cap!’s View

At Stop the Cap!, we believe these developments further the argument broadband is an essential utility best administered for the public good and not solely as a profit-motivated venture. The path to fiber to the home service in rural, suburban, and urban communities has and will continue to come from a mix of private and public utilities, just as local public and private gas and electric companies have served this country for the last century. Where there is a business model for fiber to the home service that investors support, there is a for-profit fiber provider. Where there isn’t, now there is often no service at all. So far, the FCC in conjunction with Congress has seen fit to solve broadband availability problems by bribing private providers into offering service (usually low-speed DSL that does not even meet the FCC’s definition of broadband) with cash subsidies, tax write-offs, or occasional tax abatement schemes. Imagine if we followed that model with the nation’s public roads and highways. We would today be paying tolls or a subscription to travel down roads built and owned by a private company often financed by tax dollars.

Not every product or service needs to earn Wall Street-sized profits. Nobody needs to get rich selling water, gas, and electricity… or broadband. Public broadband networks can and should be established wherever they are needed, and they should be priced to recover their costs as well as expenses that come from support, billing, and ongoing upgrades. Naysayers like to claim municipal broadband is socialism run wild or an instant economic failure, yet the same model has provided Americans with reliable and affordable gas, electricity, and clean water for over 100 years.

Maine was made for municipal broadband.

In New York, publicly owned/municipal utilities often charge a fraction of the price charged by investor-owned utilities. In Rochester, where Stop the Cap! is headquartered, one need only ask a utility customer if they would prefer to pay the prices charged by for-profit Rochester Gas & Electric or live in a suburb where a municipal provider like Fairport Electric or Spencerport Electric offers service. RG&E has charged customers well over 10¢ a kilowatt-hour when demand peaks (along with a minimum connection charge of over $21/mo and a “bill issuance charge” of 72¢/mo). Spencerport Electric charges 2.9¢ a kilowatt-hour and a connection charge of $2.66 a month, and they issue their bills for free. There is a reason real estate listings entice potential buyers by promoting the availability of municipal utility service. The same has proven true with fiber-to-the-home broadband service.

The economic arguments predicting doom and gloom are far more wrong than right. Municipal utilities are often best positioned to offer broadband because they already have experience providing reliable service and billing and answer to the needs of their local communities. Incompetence is not an option when providing reliable clean water or electricity to millions of homes and customers have rated their public utilities far superior to private phone or cable companies.

Google’s wireless future may prove a success, but probably only in densely populated urban areas where a point-to-point wireless network can run efficiently and profitably. It offers no solution to suburban, exurban, or rural Americans still waiting for passable internet access. Clearly, Google is not the “free market” solution to America’s pervasive rural broadband problem. It’s time to redouble our efforts for public broadband solutions that don’t need a seal of approval from J.P. Morgan or Goldman Sachs.

It was a busy weekend for AT&T’s Randall Stephenson and Time Warner (Entertainment)’s Jeff Bewkes, culminating in an announcement from AT&T it was acquiring Time Warner in a deal worth $85.4 billion.

AT&T CEO Stephenson will remain as CEO while Bewkes stays temporarily to help oversee the transition of the merged company.

The deal has sparked confusion among some consumers who associate Time Warner with Time Warner Cable, but in fact the two entities are independent companies. Time Warner, Inc., is the entertainment and content provider that owns HBO, Warner Bros., CNN, TNT, and other networks. Time Warner Cable was spun-off in 2009 as an independent cable operator that was purchased by Charter Communications earlier this year.

AT&T’s interest in Time Warner is entirely about its video content. By owning Time Warner, AT&T can win deals to place its video programming on U-verse, DirecTV, and AT&T wireless smartphones and tablets without running into heated contract renewal negotiations, spiraling prices, and restrictions on how that content is viewed.

AT&T is hoping its acquisition will generate more revenue to make up for stalled wireless revenue growth. AT&T customers already can view DirecTV content on their smartphones without it counting against one’s usage allowance. AT&T could offer a similar usage cap exemption for Time Warner-owned programming, although it would raise the ire of consumer groups fighting for Net Neutrality, which prohibits preferential treatment of internet content.

Stephenson

Stephenson hopes the addition of Time Warner to the AT&T family will strengthen his existing plan to compete nationwide with cable television providers, offering a streamed bundle of cable channels under the DirecTV brand starting as early as this winter.

Stephenson has talked to Bewkes about a merger of the two companies since August, but Time Warner has always proved an elusive seller, having earlier rebuffed a buyout attempt from 21st Century Fox. Stephenson was talking to a man who pushed Time Warner Cable out of its corporate family nest back in 2009, and the reasons for doing so were ironic considering this weekend’s acquisition announcement:

Time Warner’s management believed that the separation was the right step for Time Warner based on the changes in Time Warner Cable’s business over time. […] Time Warner’s management believed that there were a number of potential benefits from the separation transaction:

• Time Warner would become a more streamlined portfolio of businesses focused on creating, packaging and distributing branded content.
• Time Warner and Time Warner Cable would each have greater strategic flexibility and each would have a capital structure that better suits their respective needs.
• The separation would provide investors with greater choice in deciding whether to own shares of Time Warner or Time Warner Cable or both companies based on their separate portfolios of businesses and assets.

What regulators ultimately think about the deal will probably take at least a year to learn, but reaction from Wall Street and both political parties was decidedly negative. AT&T’s decision to pay half the purchase price in cash worries investors more than the remainder of the cost paid in stock. AT&T’s stock price is falling, upsetting investors concerned about AT&T’s dividend, and the market may be signaling concern the merger might be a mistake of epic proportions similar to the disastrous $164 billion AOL-Time Warner merger in 2000.

Bewkes

Tom Eagan, an analyst with Telsey Advisory Group, said owning Time Warner for its content didn’t make much financial sense when it could license it for considerably less, as it does now.

“Why buy the cow when you get the milk for free?” Eagan wrote his clients.

Many analysts are wondering what changed Bewkes’ thinking that led to him spinning off Time Warner Cable in 2009, with his decision to sell in 2016. Time Warner got rid of its video distribution business because consumers were increasingly looking for alternatives to cable television. In 2000, that came primarily from satellite providers. Today it’s cord cutting.

Combining AT&T and Time Warner would create a mega-corporation that would own or control many of the largest cable networks and a major Hollywood studio and allow AT&T to maintain absolute control over how that content was distributed. Shareholders were concerned about the price tag of the deal, driving shares down in both companies. Combining AT&T’s existing debt with Time Warner will leave the combined company saddled with $175 billion in debt — a massive amount of money that may not be financed at near zero percent interest for long, if the Federal Reserve boosts interest rates. Moody’s has put AT&T’s credit ratings up for review for a possible downgrade as a result.

Both Republicans and Democrats reacted with unease about the prospect of creating another Comcast/NBCUniversal-sized entertainment company. Almost all were skeptical about the benefits to consumers. AT&T’s competitors seemed even more chilled, fearing AT&T’s control of both the content and the means to distribute it would give the juggernaut an unfair advantage. For example, AT&T could give itself a discount to carry Time Warner programming on U-verse and DirecTV that would be unavailable to competitors. It might also take a harder line on competing providers at contract renewal time.

Some regulators and politicians believe bigger has not proved better for consumers in the telecom space, particularly after seeing the results of Comcast merging with NBCUniversal. Critics contend Comcast has never taken the deal’s approving consent decree seriously, and have dragged their feet on adhering to the deal’s many conditions. Consumers have gotten almost nothing from the merger except higher cable bills.

Analysts predict AT&T will do everything possible to minimize regulator review of its deal. The first step will be to eliminate the FCC from the deal review process, which is a very real possibility considering Time Warner and AT&T have few deal-related FCC-issued licenses beyond a single independent television station in Georgia owned by Time Warner. That station could be sold or transferred to a separate entity within months. The deal will get a mandatory review by the Justice Department, looking for evidence of antitrust. AT&T plans to claim the merger combines two entirely different companies and won’t have any implications on competition.

Critics of the deal think otherwise, pointing to the potential of favoring AT&T over cable companies with lower programming rates. Net Neutrality proponents are also concerned about AT&T’s practice of zero rating its own content, which gives AT&T a competitive advantage in the wireless space.

Sources close to the Clinton campaign told Politico three names are emerging as potential FCC nominees in a presumed Clinton Administration, and all three are close friends of Bill and Hillary Clinton, all have spent time traveling through the revolving door of D.C. politics and the private sector or lobbying, and one served as a FCC commissioner before under Bill Clinton’s presidency.

All three are classic D.C. Establishment types, so there should be no surprises or rebellion from within the Democratic ranks.

Ness

Susan Ness: A former FCC commissioner, Ness today serves as a top Clinton fundraiser. Prior to her FCC appointment, Ness was a senior lender to communications companies as a group head and vice president of a regional financial institution. She served as Assistant Counsel to the Committee on Banking, Currency and Housing of the U.S. House of Representatives, and she founded and directed the Judicial Appointments Project of the National Women’s Political Caucus. Ness is a member of the National Association of Regulatory Utility Commissioners’ Committee on Communications, the Federal Communications Bar Association, and Leadership Washington (Class of 1988). Before she joined the FCC, she served in many civic leadership roles, including chair of the Montgomery County, Maryland, Charter Review Commission; vice chair of the Montgomery County Task Force on Community Access Television; and president of the Montgomery County Commission for Women.

In her favor, Ness didn’t end her service with the FCC and become a paid lobbyist, preferring to spend her years outside of public service in the private sector. However, she was a director for Adelphia, America’s first criminally convicted cable company (the principal owners, the Rigas family, went to prison for a variety of white-collar crimes). Ness was also an apologist for the disastrous telecom deregulation policies of the Clinton Administration, which backfired and created mass corporate consolidation and higher bills for consumers.

In a speech in January 1999, Ness promised good times were ahead because of Clinton Administration’s support for deregulation:

It takes good business planning, raising capital, provisioning, and investment before the fruits of competition can be harvested. And sometimes companies succeed and sometimes they fail. That’s the marketplace at work.

That’s why I’ve been somewhat surprised at the impatience with which some pundits have viewed the level of local competition under the ’96 Act.

On the first anniversary, folks were asking “where’s the competition?” I observed then that this was like piling the family into the car for a long trip, and, before you’ve reached the end of the driveway, there is a plaintive voice from the back seat, “Are we there yet?”

No, we’re not there yet — even now, two years further into the journey.

Kornbluh

Unfortunately for Americans, we’re still not there more than 15 years later. The marketplace and regulatory agencies have rigged the game into a comfortable duopoly where competition benefits exist primarily for new customers getting a sign-up promotion. Once expired, high prices predominate. Ness promised competition. We got consolidation and more deregulation instead, and Americans are paying some of the highest broadband and wireless prices in the world as a result. We’re uncertain if she has learned her lesson.

Karen Kornbluh: Her middle initials should be “D.C.” because she’s been there for so long. Kornbluh is the Democratic Party establishment through and through, with a record of public service dating back to the 1980s. From 1991-1994, she was a legislative aide for Sen. John Kerry (D-Mass.) She spent two years at the Treasury Department, then spent three years as a Tech Fellow at the New America Foundation think tank. She served as a policy director for Barack Obama when he was a senator from Illinois and was appointed as ambassador to the OECD in 2009, which means she is at least aware of how poorly the U.S. compares in broadband speeds to the rest of the world. Kornbluh will not rock the boat as a FCC commissioner, but should be a reliable vote for all of a presumed President Clinton’s telecom initiatives.

Phil Verveer serves as a senior counselor to current FCC chairman Thomas Wheeler, which may offer some continuity for Chairman Wheeler’s policies under the Obama Administration in a presumed Clinton Administration. Verveer is a longtime friend of the Clintons. He also served as Deputy Assistant Secretary of State and US Coordinator for International Communications and Information Policy with Ambassadorial rank from 2009 to 2013.

Verveer

Verveer has practiced communications and antitrust law in the government and in private law firms for more than 40 years.  From 1969 to 1981, he practiced as a trial attorney in the Antitrust Division of the Department of Justice, as a supervisory attorney in the Bureau of Competition of the Federal Trade Commission, and as the Chief of the Cable Television Bureau, and the Common Carrier Bureau of the Federal Communications Commission.  Between 1973 and 1977, he served at the Antitrust Division’s first lead counsel in the investigation and prosecution of United States v. American Tel. & Tel. Co., the case that eventuated in the divestiture of the Bell System.  As a bureau Chief at the FCC, Verveer participated in a series of decisions that enabled increased competition in video and telephone services, introduced asymmetric telecommunications regulation, and limited regulation of information services. But he was also a telecom lobbyist or counsel for Willkie, Farr and Gallagher (1999-2005) and Jenner & Block (2006-2009).

With those three names now out in the public view, Big Telecom lobbyists are reportedly “coalescing around those perceived to be frontrunners for a commission spot,” reports Politico.

“Nearly everyone on the list is part of the Clinton campaign’s network of tech advisers, which helped draft the Democratic nominee’s tech policy platform,” Politico adds, which means it is likely what Secretary Clinton has promised in her campaign documents about future telecom policy will likely move forward under the stewardship of her potential appointees who helped write it.

Several Arizona residents have reported receiving e-mail allegedly from Cox Communications requiring customers to update or upgrade their account, but in reality, the e-mail comes from a group of fraudsters trying to commit identity theft. The Pima County Sheriff’s Office has sent an open warning alerting cable customers in Arizona and beyond that if you receive an e-mail claiming you need to update or upgrade your account, disregard it, especially if it carries a deadline that warns your service will be disconnected if you don’t respond within a matter of days.

Customers who click on a link in the email will be taken to a phony Cox Communications website, where you will be prompted to provide your username, password and birth date. The sheriff’s office warns providing this information could start a series of criminal events that will not end well:

Why does this company need your birthdate? They want to steal from you. Do not provide any information to the purveyors of this scam.

Two vital pieces of information the fraudsters are always looking for are your date of birth and Social Security number. Anytime you are asked for this information over the phone in a call you did not initiate, or in an email from an unknown source, stop and ask, “Why?” Who wants to use this information?

If you receive requests that you have not initiated or you have not placed the call — a red flag should appear. Do not provide this information unless you know for a fact to whom you are speaking.

Your date of birth and/or Social Security number give the fraudsters have all the information they need to begin identity theft. The scammers can now open accounts in your name, make high-volume charges and ruin your credit. They are capable of doing this without your knowledge.

If they were to attack your established accounts first, your bank or credit card company may notify you of possible unauthorized activity. However, we have knowledge of unauthorized accounts operating for long periods of time while making large-dollar purchases. The scammers make minimal payments until the account is maxed out. Since the statement comes to a phony address established by them, the credit card company has to make a concerted effort to locate you because you no longer are making payments on this “zombie” account. When the company finally calls you, you are in shock! You had no knowledge of this account.

The Pima County Sheriff’s Office recommends consumers obtain a free credit report every four months by staggering requests for a free annual credit report from the three major credit reporting agencies. This will identify any new accounts you might be unaware of and prevent identity thieves from causing catastrophic damage to your credit score and reputation.

• EQUIFAX: P.O. Box 740241, Atlanta, GA. 30371, 1-888-766-0008.
• EXPERIAN: 701 Experian Pkwy. Allen, TX. 75013 1-888 EXPERIAN (397-3742)
• TRANSUNION: Fraud Victim Assistance Div., P.O. Box 679, Fullerton, CA. 92834-6790. 1-800-680-7289.

A yearly report including credit reports from all three agencies is also obtainable at no cost by calling 1-877-322-8228 or visiting www.annualcreditreport.com.