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Stop the Cap! Analysis: Charter Spectrum and New York State Reach Tentative Deal

Charter Communications and the New York Department of Public Service announced a tentative settlement Friday that would allow Spectrum to continue providing cable TV, phone, and internet service in New York in return for a renewed commitment from the cable company to meet its 145,000 new passings rural broadband buildout agreement, commit to an expansion of that rural buildout, and in lieu of fines, pay $12 million in funds deposited in two escrow accounts to be used to help defray the costs of further broadband service extensions apart from Charter’s original commitments.

“Today the New York Department of Public Service jointly filed a proposed agreement with Charter Communications to resolve disputes over the network expansion conditions imposed by the Public Service Commission,” said Department of Public Service CEO John B. Rhodes in a statement issued Friday. “This proposed agreement will now be issued for a 60-day public comment period and remains subject to review and final action by the Public Service Commission.”

The agreement reinforces the state’s desire that Charter’s broadband expansion commitment be met by expanding service to homes and businesses in areas unlikely to get cable service otherwise, namely areas in Upstate New York. The state originally objected when Charter tried to count new passings in the highly populated New York City area as part of its expansion commitment. The new agreement requires the 145,000 homes and businesses newly passed be entirely Upstate, and completed no later than Sept. 30, 2021.

Only 64,827 new passings have been recognized by both parties as “completed” as of December, 2018

The proposed settlement gives insight into just how badly Charter failed to meet its original broadband expansion commitments, noting “Charter shall be deemed successfully to have completed 64,827 passings qualifying towards the Total Passings requirements of the Settlement Agreement and the 2019 Settlement Order, as of December 16, 2018.”

Charter’s record of failure on its rural expansion commitment is stark.

The original 2016 Merger Order required Charter to expand service to:

  • 36,250 premises by May 18, 2017
  • 72,500 by May 18, 2018
  • 108,750 by May 18, 2019
  • 145,000 by May 18, 2020

Charter did not even come close. Department Interim CEO Gregg C. Sayre said in 2017 that as of May 18 of that year, Charter had only extended its network to pass 15,164 of the 36,250 premises it was required to pass in just the first year after the merger.

In June 2017, New York fined Charter and required a $13 million ($12 million refundable to Charter if it complied) deposit be placed in escrow in an effort to get the company to comply with its buildout commitments. But Charter also failed to meet its commitments under that settlement as well:

  • 36,771 premises by Feb. 16, 2017
  • 58,417 by June 18, 2018
  • 80,063 by Dec. 16, 2018
  • 101,708 by May 18, 2019
  • 123,354 by Nov. 16, 2019
  • 145,000 by May 18, 2020

With just shy of 65,000 premises recognized as completed as of December, 2018 — almost three years after the merger — Charter was 15,236 premises short, based on the December 16, 2018 deadline. Within a few weeks from today, the company should have completed its 101,708th new passing. That seems extremely unlikely to actually happen.

Charter itself claimed in July, 2018, “Spectrum has extended the reach of our advanced broadband network to more than 86,000 New York homes and businesses since our merger agreement with the PSC.” That number is also suspect.

The company did not say if the expansion numbers it reported met the terms of the 2016 Merger Order, but Charter obviously thought those should be counted as legitimate new passings for the purpose of meeting its merger obligations. New York regulators clearly thought many of those expansions did not, and were infuriated when Charter began airing advertisements promoting its rural expansion in New York with what the state believed to be inflated numbers.

The Settlement

A review of the proposed legal settlement shows the Commission accepted many of the recommendations made by Stop the Cap! regarding the terms of any deal that would rescind last summer’s order revoking approval for the merger of Time Warner Cable and Charter Communications in New York State. We recommended the settlement focus on requiring an even greater expansion of rural broadband than originally envisioned, particularly in areas the state designated for HughesNet satellite internet access. We also recommended that any monetary fines be directed to further expansion of rural broadband, instead of being sent on to Albany to be added to the state’s general fund.

We noted that although Charter flagrantly violated the terms of the 2016 Merger Order, successfully removing the company from New York would likely result in years of litigation, and the likely entry of Comcast, which in our view is anti-consumer, and a much worse choice in terms of pricing and the quality of customer service. Comcast also imposes data caps in many of its service areas, a concept which Stop the Cap! obviously fiercely opposes. In our view, given a choice between Charter and Comcast, which would be the highly likely outcome, New York consumers would benefit (slightly) by keeping Spectrum service.

The terms

Reach 145,000 unserved/underserved New Yorkers with at least 100 Mbps internet access

  • Charter is recommitted to expand rural internet service to 145,000 New Yorkers qualified as unserved (download speeds less than 25 Mbps available) or underserved (download speeds of 25-99.9 Mbps) entirely within Upstate New York.

Schoharie, NY

To ensure Charter does not simply choose “low-hanging fruit” to wire, such as new housing starts or urban business parks, the agreement limits Charter expansions to no more than 9,500 addresses in the urban and suburban areas adjacent to Albany, Buffalo, Mt. Vernon, Rochester, Schenectady, and Syracuse.

Additionally, Charter is restricted from expanding service to no more than 9,400 addresses that are scheduled to get (or already have) access to another wired provider because of a grant from the New NY Broadband Program.

But Charter is allowed to expand service to reach not more than 30,000 customers stuck on New York’s list of addresses designated to get HughesNet satellite internet. Stop the Cap! strongly recommended the Commission do all it can to require or encourage Charter to reach as many satellite-designated New Yorkers as economically feasible. The proposed agreement takes our recommendation into account, but we will urge the Commission to strike the 30,000 cap and allow Charter to reach as many of these disadvantaged customers as possible, and have it count towards their broadband expansion commitment. Those addresses designated to receive satellite service are the least likely to be reached by any commercial provider because of the costs to reach them, and they are too scattered across the state to make a public broadband alternative feasible.

Charter gets to include some ‘already-in-progress new passings’ towards its 145,000 new passings commitment: 5,993 passings located within Upstate Cities Charter would likely have serviced anyway; 4,388 wired overlap passings (where an existing telco or cable provider already offers service), and 9,397 addresses where wireless or satellite service was the only option.

A new “milestones” schedule is included for new buildouts, which partly explains why so many rural New Yorkers expecting to receive service by now are complaining about delays:

  • 76,521 new premises by Sept. 30, 2019
  • 87,934 by Jan. 31, 2020
  • 99,347 by May 31, 2020
  • 110,760 by Sept. 30, 2020
  • 122,173 by Jan. 31, 2021
  • 133,586 by May 31, 2021
  • 145,000 by Sept. 30, 2021

If Charter again fails to stay on schedule, it must pay $2,800 for each designated-as-missed passing address into an escrow fund. If it chooses not to appeal that decision, or loses an appeal, those funds will be added to an Incremental Build Commitment fund described below.

Rural Broadband Expansion Fund #1 ($6 million) — Incremental Build Commitment

The first rural broadband expansion fund will contain $6 million dollars that Charter will pay into escrow and will be dedicated to defray Charter’s costs of constructing additional broadband passings above and beyond the 145,000 noted above. Charter itself or the state can designate the unserved addresses either want serviced, and Charter will be permitted to withdraw funds to pay for materials, construction, labor, licensing, and any permits required for these incremental expansion efforts. This money will be reserved for Charter to use for its own projects.

Rural Broadband Expansion Fund #2 ($6 million) — Incremental Broadband Fund

Although New York Gov. Andrew Cuomo promised broadband service for any New Yorker that wants it, his New NY Broadband Program left more than 80,000 New York homes and businesses behind because the program relied on private companies to bid to serve each unserved/underserved New York address. In especially rural areas, no company ultimately bid to reach those addresses because the subsidy funding offered by the state was too little to make the expansion investment worthwhile. In the end, those addresses were designated to be served by HughesNet, a satellite internet service provider. But HughesNet cannot guarantee its internet speeds, has draconian usage caps, and is very expensive. Customer satisfaction scores are also generally poor. For most, a wired internet solution is far preferable. To get one, New York would need to launch a new round of broadband funding, with a more generous subsidy to make construction costs to reach those unserved customers financially worthwhile.

The second $6 million rural expansion fund is more or less exactly that — an additional source of funds to try to reach those missed by earlier funding rounds. Most of the money in this fund would be awarded after a bidding process starting on or after Sept. 30, 2021. Any provider capable of offering customers at least 100 Mbps service will be qualified to participate in the first round of bidding to receive a portion of this money. The areas under consideration would be in existing Charter franchise areas or outside of a Charter-franchised area if both Charter and New York’s Broadband Program Office (BPO) agree. In most cases, for reasons of simplicity, we expect most this money will end up financing expansion projects just outside of Charter’s existing service area. So if you happened to live within a mile or two of an existing Charter customer, this money could be used by Charter to extend its network in your direction. Charter also enjoys the right of first refusal, an important advantage for the cable company. Charter could agree to service a designated address before it becomes open to a competitive bidding process.

The terms are generous to providers, who only have to agree to pay 20% of their own money to submit a cost-sharing bid. The fund would cover the remaining 80%, which would be particularly useful where the cost to extend a fiber connection to a rural neighborhood or development would run into the tens of thousands of dollars. The downside is that $6 million will not go very far in these high cost areas, where a single project could easily exhaust $50,000-100,000 just to reach a handful of homes and businesses. Assuming there are any funds left, the BPO will entertain bids in later rounds from wireless providers delivering at least 25 Mbps service, assuming no wired provider submits a bid. But it is just as likely the funds will be long gone before that happens. The state needs to choose the wording of its terms carefully. Charter could easily apply for funds to buildout new housing tracts or large development projects and business parks the company would have reached anyway. We recommend restricting these funds exclusively to projects that would otherwise fail a bidder’s own Return On Investment formula.

Stop the Cap! intends to be a participant in the comment round and we will share with readers our formal comments as they are submitted.

Potential Optical Fiber Breakthrough: New Spin Lasers Might Deliver 240 Gigabits Per Second

Phillip Dampier April 18, 2019 Broadband Speed 1 Comment

Circular polarization (Image courtesy of: Dave3457)

German researchers are testing a new way of transferring data over optical fiber using a new laser polarization method that could boost the capacity of a single strand of fiber from 25 gigabits per second to as fast as 240 gigabits per second, while greatly reducing power consumption and heat.

The technique relies on oscillating polarization in the light beam instead of more traditional methods that rely on light intensity to transmit data. Current methods differentiate between digital “1s” and “0s” by using different light intensity.

“Normally, you make the throughput faster by pumping the laser harder, which automatically means you consume a lot of power and produce a lot of heat,” said Nils Gerhardt, chair of photonics and terahertz technology at Ruhr-University Bochum in Germany. “Which is actually a big problem for today’s server farms. But the bandwidth in our concept does not depend on the power consumption. We have the same bandwidth even [at] low currents.”

Using lower current means a less expensive power bill, particularly to remove excess heat generated from the high intensity beams of light sent across fiber cables in places like data centers. The new technique encodes a “1” as a burst of circularly polarized light that corkscrews to the left, while a “0” is represented by a burst of the same polarized light, only it corkscrews to the right. Right now, the technology is at the “proof of concept” stage in the lab, but the idea of light spinning has been around since at least 1997. The goal is to efficiently boost transmission capacity across optical fiber strands, which currently tops out at between 40-50 gigabits per second.

One of the benefits of optical fiber in fiber to the home applications is that it is considered almost infinitely upgradable, depending on laser transmission technology improvements. Currently, multiple strands of fiber are used in dedicated, very high-speed applications. If a provider uses all of its fiber strand capacity, it may have to divert excess traffic or lay down more fiber. Gerhardt’s technology could eventually expand existing fiber strand capacity by five times or more if it proves workable. But Gerhardt warns there is much research to complete, and he envisions the technology would be most useful initially in server farms and data centers, where cable lengths are shorter and heat concerns are greater. The technology would have to prove itself before being considered for internet backbone applications.

Competing technologies that could come to market before Gerhardt’s method include “mode-locked semiconductor laser diodes” and “quantum cascade lasers,” but neither have been successful much above 100 gigabits per second.

Google Paying $3.84 Million to Louisville to Clean Up Its Aborted Fiber Build

Google’s fiber cables were buried at little as two inches deep in Louisville. Many have resurfaced, as this reporter from WDRB-TV showed in a recent report.

Google Fiber will pay $3.84 million to the city of Louisville to restore roads and damaged public rights-of-way as Google Fiber exits the Louisville market.

Installment payments made over the next 20 months will be spent on:

  • Removing fiber cables and sealant from roads
  • Milling and paving activities where needed
  • Removal of above-ground infrastructure

“Infrastructure in neighborhoods and public properties affected by Google Fiber will look as good or better than they did before the company began construction, just as our franchise agreement stipulated,” said Grace Simrall, the city’s chief of civic innovation & technology.

In addition, Google Fiber is making a $150,000 cash donation to the Community Foundation of Louisville’s Digital Inclusion Fund to support the community’s digital inclusion efforts, which include refurbishing used computers for low-income individuals and the enrollment of public housing residents in low-cost internet access through other companies providing service in Louisville. The company is also planning to make a donation of 275 refurbished computers to the Louisville Metro Housing Authority.

Last summer, Google Fiber discovered its newest underground installation method of “shallow trenching” — laying optical fiber cable just two inches below ground along the sides of roadways and covered with sealant — was ineffective. In short order, the sealant rose above the surface, often exposing fiber cables to damage from the freeze-thaw cycle, road maintenance crews, plows, or just ordinary traffic. An effort to remove and replace the sealant with ordinary asphalt and re-bury the cables appeared to fail as well. That left Google Fiber with a choice between replacing all of its fiber infrastructure, or deciding to give up and leave. It announced the latter in February, and Google Fiber was officially switched off at 11:59pm on April 15.

Simrall suggests it isn’t all bad news.

“It’s clear that Google Fiber’s presence in Louisville led other providers to step up and increase investment in Louisville, and that was good news for consumers everywhere,” Simrall said. “Moreover, we appreciate Google Fiber’s donation to our digital inclusion work, because improving equity in access to technology and digital skills is essential for Louisville’s economy today and tomorrow.”

WDRB-TV in Louisville reports former Google Fiber customers are angry about losing their internet service from the fiber provider. (2:15)

WHAS-TV in Louisville talked to residents concerned about whether the costs to repair the roads damaged by Google Fiber will be adequately covered. (1:57)

Justice Dept. Staffers Warn T-Mobile/Sprint Merger Unlikely to Win Approval as Structured

Justice Department staffers have told T-Mobile and Sprint that their $26 billion merger is unlikely to win approval as presently structured, according to a report in the Wall Street Journal.

Unnamed sources familiar with the deal told the newspaper the Justice Department’s Antitrust Division is among the most skeptical of those reviewing the deal, questioning claims from the companies that the merger will create synergy and increased efficiency that could free up resources to dramatically expand the combined company’s wireless business.

At the core of the concern is the impact of combining the nation’s third and fourth largest wireless carriers, reducing competition to just three national postpaid companies — AT&T, Verizon Wireless, and T-Mobile. That could present an unacceptable threat to competition.

The Justice Department is not alone expressing concern over the merger deal. Multiple state attorneys general are still reviewing the deal and several have announced they are prepared to sue the companies involved to stop the merger if it manages to win approval on the federal level. The Federal Communications Commission is also said to be questioning some of the claims of the company about the merits of its promised 5G home broadband service and exactly how much consumers could save should they subscribe.

The Financial Times also published a story this afternoon essentially confirming the Journal story.

John Legere, CEO of T-Mobile USA, denied the premise of the Journal’s story in a tweet late this afternoon, calling it “simply untrue,” but refused further comment.

Any decision about the merger is not expected for several weeks, and any recommendations from the staff report on the deal can be overruled by the political appointees that run the Justice Department. The Times reports that the final decision will likely rest with Makan Delrahim, President Trump’s pick as chief of the antitrust division. With staff objections now leaked to the press, Delrahim could be in a politically difficult situation overruling his staff’s recommendations. In the meantime, company officials can offer concessions, such as selling off certain assets to overcome regulator objections.

Many Wall Street analysts feel the chances of the merger winning approval are reduced the longer the merger review remains underway in Washington. Many have placed the odds at less than 50% that the deal will ultimately be approved. If it is rejected, T-Mobile is expected to continue its business without any significant financial hurdles. Sprint may be a different matter, as its Japanese backer SoftBank has soured on the merits of pouring additional money into Sprint’s wireless business.

White House Refuses to Turn Over Documents on AT&T-Time Warner Merger

Phillip Dampier April 16, 2019 AT&T, Public Policy & Gov't, Reuters No Comments

(Reuters) – The White House has told two U.S. House Democrats it will not turn over documents that could show whether Republican President Donald Trump sought to intervene in the regulatory review of AT&T Inc’s $85 billion acquisition of Time Warner Inc.

In March, House Judiciary Committee Chairman Jerrold Nadler and Representative David Cicilline, who chairs a panel overseeing antitrust issues, asked the White House and Justice Department to turn over records after The New Yorker magazine reported Trump directed then-National Economic Council Director Gary Cohn to use the Justice Department to block the deal.

The pair wrote that if accurate, Trump’s involvement would “constitute a grave abuse of power.” In February, a federal appeals court upheld a lower-court ruling rejecting a Justice Department challenge to the deal filed in November 2017.

Trump criticized the deal as a candidate in late 2016, saying it would concentrate too much media power in the hands of one owner, and later saying it would raise prices. He has also frequently attacked CNN, a Time Warner property now owned by AT&T, for what he sees as negative coverage of his campaign and administration.

In a letter dated Monday and released on Tuesday by Cicilline, White House counsel Pat Cipollone declined to release any documents, saying he would not provide “protected communications between the president and his senior advisers that are the very core of the executive branch’s confidentiality interests.”

Cipollone added that the Justice Department would be responding “in due course.”

The two Democrats responded in a joint statement that “the White House Counsel has made a blanket claim that all White House communications — regardless of whether they contain evidence of improper or even unlawful activities — are protected by a cone of secrecy,” adding they would “pursue this matter.”

Makan Delrahim, the head of the Justice Department’s antitrust division, said in a 2018 declaration he had never received “orders, instructions, or directions relating” to the AT&T-Time Warner deal from Trump, Justice Department officials or White House officials.

The Justice Department said in February it would not seek further appeals to block the merger.

In February 2018, U.S. District Judge Richard Leon rejected AT&T’s request to see White House communications that might shed light on whether Trump pressured the Justice Department to try to block the deal.

AT&T lawyers said last year the deal may have been singled out for enforcement, citing as evidence statements by Trump as a candidate and as president that the deal was bad for consumers and the country. AT&T declined comment on Tuesday.

Reporting by David Shepardson; Editing by Peter Cooney

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