Skeptical Science produced this infographic of the Heartland Institute’s funding sources and where the money goes.

The Heartland Institute, a corporate-backed astroturf operation that has steadfastly supported cable and phone companies against the interests of consumers, has threatened legal action against activists, bloggers, and other journalists who published stories about recently-acquired documents connecting the group with major corporate donors.

Among telecommunications companies, both AT&T and Time Warner Cable show up in the alleged donor documents, which Heartland officials claim were obtained under false pretenses and, in some cases, were altered or forged.

Jim Lakely, communications director for the group, was unhappy:

We respectfully ask all activists, bloggers, and other journalists to immediately remove all of these documents and any quotations taken from them, especially the fake “climate strategy” memo and any quotations from the same, from their blogs, Web sites, and publications, and to publish retractions.

The individuals who have commented so far on these documents did not wait for Heartland to confirm or deny the authenticity of the documents. We believe their actions constitute civil and possibly criminal offenses for which we plan to pursue charges and collect payment for damages, including damages to our reputation. We ask them in particular to immediately remove these documents and all statements about them from the blogs, Web sites, and publications, and to publish retractions.

The fact the group implies it will take legal action against those who published stories not to the group’s liking will only draw added attention to the scandal.  Stop the Cap! has tangled with this group several times over the years whenever AT&T and Time Warner Cable’s corporate agendas are being challenged.

The group has steadfastly refused to release their donor lists, at one point telling us, “by not disclosing our donors, we keep the focus on the issue.”

Not really.  That’s because the first rule of politics is to “follow the money.”  Most of these groups do not sing their songs for free, and knowing who paid the songwriter can be very revealing.

The Associated Press found no evidence Heartland’s budget or fundraising documents leaked to the media were faked or altered:

Because Heartland was not specific about what was fake and what was real, The Associated Press attempted to verify independently key parts of separate budget and fundraising documents that were leaked. The federal consultant working on the classroom curriculum, the former TV weatherman, a Chicago elected official who campaigns against hidden local debt and two corporate donors all confirmed to the AP that the sections in the document that pertained to them were accurate. No one the AP contacted said the budget or fundraising documents mentioning them were incorrect.

Heartland can best salvage its reputation and put this behind them by releasing the names of their largest donors, letting consumers decide whether this organization truly represents their interests, or those of the corporations writing the big checks.  In addition to corporate contributions, Heartland’s operations rely on a single person identified only as “Anonymous Donor.” In the past six years, the man has given $14.26 million to the institute, nearly half its $33.9 million in revenue, according to the AP.

Grassroots this is not.

HissyFitWatch: Damn you FCC!

For the first time in a long time, AT&T did not get what it wanted from Washington regulators and legislators. The repercussions of the company’s failure to secure its controversial merger with Deutsche Telekom’s T-Mobile USA has been one HissyFit after another, including the resignation-retirement of Forrest Miller, a 30-year veteran who was the company’s head of corporate strategy and mergers and acquisitions. After heads rolled, there was the small matter of the multi-billion dollar “breakup fee” payable to T-Mobile. Now someone has to pay:  You.

At Stop the Cap!, we scrutinize quarterly conference calls at major telecommunications companies so you don’t have to. We’ve sat through renditions of “we’re sorry” when Charter Communications’ executive management allowed the company to be flushed into bankruptcy, we’ve heard the Excuse-o-Matic from Frontier Communications about why their broadband service is woefully overloaded with promises of better days ahead, and a whole lot of creative spin to emphasize cord-cutting-bad-news at the nation’s largest cable companies isn’t really a problem all — it’s the housing market, it’s the ‘seasonal residences’ or ‘college students going home’ problem… or sunspots.  Who really knows?  It’s definitely not that they’re charging too much.

Whether it has been Time Warner Cable’s Glenn Britt, or Verizon’s Ivan Seidenberg, chief executives always project a cool, calm, steady authority that leaves shareholders and financial analysts with an impression the adults are in charge, even if they tell little white lies to keep the stock price up.

And then there is AT&T’s chief executive — Chairman Emperor Randolph Stephenson, who used the occasion of AT&T’s 4th Quarter earning results conference call to become a spectacle that brought the house down.

As we look ahead, the issue that gives me the most concern, quite frankly, isn’t our ability to execute. The #1 issue for us as we move forward, and for the industry, I believe, it continues to be spectrum. This industry continues to see just explosive mobile broadband growth and is providing one of the few bright spots in the U.S. economy, but I think we all understand this growth cannot continue without more spectrum being cleared and brought to market. And despite all the speeches from the FCC, we’re all still waiting.

He didn’t stop there.  In an impromptu rant, Stephenson lectured Washington from afar, excoriating all-concerned for failing to agree with their multi-million dollar propaganda campaign that merging America’s second and fourth largest wireless carriers in a market with just four national providers was good for consumers and would bring wireless nirvana to the heartland and lower prices for all.  Evidently America was not ready to accept the word of AT&T-compensated telecommunications experts at the NAACP, the Special Dream Farm, the Shreveport-Bossier Rescue Mission and cattle ranchers a combination of T-Mobile’s spectrum and AT&T’s would ease the capacity crunch, bring 4G to Beaver, Oklahoma, and stop driving AT&T customers nuts with dropped calls and reception black holes.

How it usually works in Washington.

AT&T would have gotten away with their merger if it weren’t for those darned kids (consumers), the FCC and Justice Department ruining everything.

“The last significant spectrum auction was nearly 5 years ago now. And this FCC has made it abundantly clear that they’ll not allow significant [mergers and acquisitions] to help bridge their delays in freeing up new spectrum,” Stephenson complained. “So in the absence of auctions, our company and others in the industry have taken the logical step of entering into smaller transactions to acquire the spectrum we need to meet this demand. But even here, we need the FCC’s action and leadership, and unfortunately, even the smallest and most routine spectrum deals are receiving intense scrutiny from this FCC, oftentimes taking up to a year and sometimes longer before these are approved.”

Stephenson ignores the fact the FCC has rubber-stamped a number of wireless mergers over the past several years, which is why consumers no longer buy competitive service from Cingular, Alltel, Dobson Communications, Centennial Wireless, West Virginia Wireless, Unicel, Ramcell, or SureWest Wireless.  All of these former competitors are now a part of the nation’s two largest carriers AT&T and Verizon Wireless.  Even more impressively for the man in full denial, the FCC just quickly and quietly approved AT&T’s spectrum transfer purchase from Qualcomm.

“Now I hope I’m wrong, but it appears the FCC is intent on picking winners and losers rather than letting these markets work,” the chief executive said.

In other words, AT&T’s definition of letting markets “work” means letting them write their own laws governing the pesky concepts of antitrust, monopoly/duopoly market power, anti-competitive activity, etc.  AT&T has no problem picking winners and losers in the community-owned broadband front, lobbying its way through state legislatures trying to block new networks from being built, even while slapping usage limits on their own customers’ DSL and U-verse accounts because of “capacity” concerns.

In the wireless marketplace, Charlie Sheen would declare AT&T “winning,” considering it has achieved 1/3rd of the U.S. wireless market.  It wants more of course, even though Trefis, a market research firm, noted that had the FCC granted Stephenson’s wishes for three national carriers, AT&T, Verizon Wireless and Sprint “will control more than 90% of the U.S. wireless market, resulting in lower competition and higher prices for consumers.”

No problem there.

Stephenson also noted a lot of the company’s close friends were on their side (and handsomely compensated along the way we might add):

A lot of recent comments and speeches about certain members of this FCC suggest that they and not Congress should decide how spectrum auctions are conducted, including who can participate and what the conditions should be for participating. Meanwhile, we pile more and more regulatory uncertainty on top of an industry that is a foundation for a lot of today’s innovation*, making it difficult for all of us to allocate and commit capital. And in this industry, we all know capital investment equals jobs*. So the end result of this is we have a industry that is just really stuck in terms of creating real capacity*.

(*- except when community-based, publicly-owned networks are involved. They must be stopped at all costs.)

No matter that AT&T continues to sit on earlier spectrum acquisitions it continues not to use.  It only grudgingly agreed to roaming agreements with the company it preferred to dismantle altogether: T-Mobile.  In earlier, accidental disclosures, it was clear even before the merger and the newly-reticent FCC, AT&T preferred to raise prices, restrict service, and hang onto its profits instead of sufficiently investing them back into its network.  Verizon Wireless has a 4G network, no dropped-call-syndrome, fewer signal black holes, and no apparent spectrum panic attacks.

Part of Sprint's fact sheet opposing the merger deal.

AT&T bit off more than they could chew through, and now faces the humiliating prospect of paying off its gambling debts.  Only now, AT&T has effectively declared they are not going to pay for their costly mistake. Customers are.

Stephenson: Payback time.

The company introduced new, higher prices for its smartphone data plans this month, and intends to continue to increase prices and crack down on data use with speed throttles in 2012 and blame it on the “spectrum crunch”:

“In a capacity-constrained environment, usage-based data plans, increased pricing, managing the speeds of the highest volume users, these are all logical and necessary steps to manage utilization,” Stephenson said.

But AT&T’s chief executive also told shareholders repeatedly those increased prices were key to boosting company revenue and profits:

“We’ll expand wireless and consolidated margins. We’ll achieve mid-single-digit EPS growth or better. Cash generation continues to look very strong again next year. And given the operational momentum we have in the business, all of this appears very achievable and probably at the conservative end of our expectations.”

AT&T’s chief financial officer John J. Stephens put a spotlight on it:

In 2011, 76% of our revenues came from wireless and wireline data and managed services. That’s up from 68% or more than $10 billion from just 2 years ago. And revenues from these areas grew about $7 billion last year or more than 7% for 2011. We’re confident this mix shift will continue. In fact, in 2012 we expect consolidated revenues to continue to grow, thanks to strength in these growth drivers with little expected lift from the economy.

[…] We also continue to bring more subscribers onto our network with tiered data plans, more than 22 million at the end of the quarter, with most choosing the higher-priced plan. As more of our base moves to tiered plans and as data use increases, we expect our compelling [average revenue per subscriber] growth story to continue.

Sen. Chip Rogers, a new-found friend of Comcast, AT&T, Charter Cable, Verizon, and the Georgia state cable lobby.

A new bill designed to hamstring local community broadband development with onerous government regulation and requirements has been introduced by a Republican state senator in Georgia, backed by the state’s largest phone and cable companies and the astroturf dollar-a-holler groups they financially support.

Sen. Chip Rogers (R-Woodstock), is the chief sponsor of the ironically-named SB 313, the ‘Broadband Investment Equity Act,’ which claims to “provide regulation of competition between public and private providers of communications service.”  The self-professed member of the party of “small government” wrote a bill that creates whole new levels of broadband bureaucracy, and applies it exclusively to community-owned networks, while completely exempting private companies, most of which have recently contributed generously to his campaign.

SB 313 micromanages publicly-owned broadband networks, regulating the prices they can charge, the number of public votes that must be held before such networks can be built, how they can be paid for, where they can serve, and gives private companies the right to stop the construction of such networks if they agree to eventually provide a similar type of service at some point in the future.

Even worse, Rogers’ bill would prohibit community providers from advertising their services, defending themselves against well-financed special interest attacks bought and paid for by existing cable and phone companies, and requires publicly-owned networks to allow their marketing and service strategies to be fully open for inspection by private competitors.

Rogers’ legislation is exceptionally friendly to the state’s incumbent phone and cable companies, and they have returned the favor with a sudden interest in financing Rogers’ 2012 re-election bid.  In the last quarter alone, Georgia’s largest cable and phone companies have sent some big thank-you checks to the senator’s campaign:

• Cable Television Association of Georgia ($500)
• Verizon ($500)
• Charter Communications ($500)
• Comcast ($1,000)
• AT&T ($1,500)

A review of the senator’s earlier campaign contributions showed no interest among large telecommunications companies operating in Georgia.  That all changed, however, when the senator announced he was getting into the community broadband over-regulation business.

It is difficult to see what, besides campaign contributions, prompted Rogers’ sudden interest in community broadband, considering Georgia has not been a hotbed of broadband development.

Rogers claims cities like Tifton, Marietta and Acworth have tried unsuccessfully to be public providers and that the legislation “levels the playing field for public and private broadband providers.”  Hardly, and the senator’s dismissal of earlier efforts fails to share the true story of broadband expansion in those communities.

The new owner of Tifton's CityNet carries on the tradition the city started providing broadband to a woefully underserved part of Georgia.

Tifton: Either the city provides broadband or no one else will

Tifton’s misadventure with the city-owned CityNet, eventually sold to Plant Communications, was hardly all bad news.  When city officials launched CityNet a few years ago, much of the community was bypassed by broadband providers.  Today, the new owner Plant continues competing with bottom-rated Mediacom, which admitted in 2001 it bought an AT&T Broadband cable system that “underserved” the residents of Tifton.  At the same time, the Tifton Gazette, which has loathed CityNet in editorials from its beginnings, freely admits the network brought lower prices and competition to Tifton residents over its history:

At the same time, having CityNet here has meant increased competition and therefore lower service rates for residents. We would probably have had to wait longer for high-speed Internet to make it to Tifton, and the system makes it possible for local governments to receive services here.

That’s a far cry from Rogers’ claim that the “private sector is handling [broadband] exceptionally well.”

“What they don’t need is for a governmental entity to come in and compete with them where these types of services already exist,” Rogers added.

In fact, in Tifton they needed exactly that to force Mediacom to upgrade the outdated cable system they bought from AT&T.

The Curious Case of Marietta FiberNet: When politics kills a golden opportunity

On track to be profitable by 2006, local politics forced an early sale of the community fiber network that was succeeding.

In Marietta, the public broadband “collapse” was one-part political intrigue and two-parts media myth.

Marietta FiberNet was never built as a fiber-to-the-home service for residential customers.  Instead, it was created as an institutional and business-only fiber network, primarily for the benefit of large companies in northern Cobb County and parts of Atlanta.  The Atlanta-Journal Constitution reported on July 29, 2004 that Marietta FiberNet “lost” $24 million and then sold out at a loss to avoid any further losses.  But in fact, the sloppy journalist simply calculated the “loss” by subtracting the construction costs from the sale price, completely ignoring the revenue the network was generating for several years to pay off the costs to build the network.

In reality, Marietta FiberNet had been generating positive earnings every year since 2001 and was fully on track to be in the black by the first quarter of 2006.

So why did Marietta sell the network?  Politics.

Marietta’s then-candidate for mayor, Bill Dunway, did not want the city competing with private telecommunications companies.  If elected, he promised he would sell the fiber network to the highest bidder.

He won and he did, with telecommunications companies underbidding for a network worth considerably more, knowing full well the mayor treated the asset as “must go at any price.”  The ultimate winner, American Fiber Systems, got the whole network for a song.  Contrary to claims from Dunway (and now Rogers) that the network was a “failure,” AFS retained the entire management of the municipal system and continued following the city’s marketing plan.  So much for the meme government doesn’t know how to operate a broadband business.

Acworth: Success forces the city to sell to a private company that later defaults

Acworth CableNet: Too popular for its own good?

But of all the bad examples Rogers uses to sell his telecom special interest legislation, none is more ironic than the case of Acworth, Ga.  The Atlanta suburb suffered for years with the dreadfully-performing MediaOne.  Throughout the 1990s, MediaOne spent as little as possible on its antiquated cable system serving the growing population, many working high-tech day jobs in downtown Atlanta.  MediaOne had no plans to get into the cable broadband business, while other cable systems around metro-Atlanta had already begun receiving the service.  That left Acworth at a serious disadvantage, so local officials issued $6.8 million in tax-exempt bonds to construct Acworth CableNet.  Demand was so great, the city simply couldn’t keep up.

As Multichannel News reported in 2002, “the Atlanta suburb of Acworth, Ga., isn’t selling because business is bad. Rather, officials said they’ve received so many requests for service from outside the city limits that they’ve decided to sell the operation to an independent company that may expand beyond Acworth’s borders.”

That is where the trouble started.  The city contracted with United Telesystems Inc. of Savannah, Ga., a private company, first to lease and then eventually buy the cable system, maintaining and expanding it along the way.  But in 2003, United Telesystems defaulted on its lease-sale agreement, forcing the city to foreclose on the system and ultimately sell it to a second company.

Acworth’s “failure” wasn’t actually the city’s, it was the private company that defaulted on its contract.

So much for Rogers’ record of municipal broadband failure.

The Hidden Problems of Industry-Funded Research Reports

In fact, many of Rogers’ talking points about his new bill come courtesy of the industry-backed astroturf group, the “Coalition for the New Economy.”  With chapters in the Carolinas, Georgia, and Florida, this tea-party and AT&T/Time Warner Cable-funded group takes a major interest in slamming community broadband.

Most of their findings come courtesy of a shallow dollar-a-holler study, The Hidden Problems with Government-Owned Networks, by Dr. Joseph P. Fuhr, Jr., professor of economics at Widener University.  The report, mostly an exercise in Google searching for cherry-picked bullet points highlighting what the author sees as weaknesses and failures in community broadband, even slams success stories like EPB Fiber.  The Chattanooga, Tenn., network just earned credit for helping to attract hundreds of millions in new private investment and jobs from Amazon.com, but Fuhr’s conclusion is that EPB operates without any “real business plan concerning EPB’s investment.”

Fuhr and his friends at Heartland Institute even misrepresent EPB as delivering only 1Gbps service at $350 a month in an attempt to illustrate municipalities are out of touch with the private broadband marketplace.

Christopher Mitchell at Community Broadband Networks dismisses the bill as more of the same from a telecommunications industry that wants to tie down community broadband networks in ways that guarantee they will fail:

In short, this bill will make it all but impossible for communities to build networks — even in areas that are presently unserved. The bill purports to exempt some unserved areas, but does so in a cynically evasive way. The only way a community could meet the unserved exemption is if it vowed to only build in the least economical areas — meaning it would have to be significantly subsidized. Serving unserved areas and breaking even financially almost always requires building a network that will also cover some areas already served (because that is where you can find the margins that will cover the losses in higher expense areas).

The bill is presently in the Senate Regulated Industries and Utilities committee.  Stop the Cap! urges Georgia residents to contact state legislators and ask they oppose this special-interest legislation that is designed primarily to protect the broadband status quo and provider profits in Georgia, instead of allowing communities to manage their broadband needs themselves.  After all, they are accountable to the voters, too.

Rep. Avila with Marc Trathen, Time Warner Cable's top lobbyist (right) in 2011. Photo by: Bob Sepe of Action Audits

Rep. Marilyn Avila (R-Time Warner Cable), the North Carolina representative fronting for the state’s largest cable company, sure can sing for her supper.

The representative who shilled for North Carolina’s notorious anti-community broadband legislation was the very special invited guest speaker for the cable industry lobbying association annual meeting, held last August in Asheville, according to newly-available lobbying disclosure forms obtained by Stop the Cap!

The North Carolina Cable Telecommunications Association reported they not only picked up Marilyn’s food and bar bill ($290 for the Aug. 6-8 event), they also covered her husband Alex, too.  Alex either ate and drank less than Marilyn, or chose cheaper items from the menu, because his food tab came to just $185.50.  The cable lobby also picked up the Avila’s $471 hotel bill, and handed Alex another $99 in walking-around money to go and entertain himself during the weekend event.  The total bill for the weekend, effectively covered by the state’s cable subscribers: $1,045.50.

That’s a small price to pay to reward a close friend who delivered on most of the cable industry’s wish-list for 2011.  Besides, the recent cable rate increases visited on North Carolina cable subscribers will more than cover the expense.

Meanwhile, in a separate disclosure, Stop the Cap! has learned Time Warner Cable covered food and beverage costs for members of the North Carolina General Assembly and their staff who attended the Mardi Gras World celebration in New Orleans, sponsored by corporate front group the American Legislative Exchange Council.  ALEC lobbies state legislatures for new laws they claim are grassroots-backed, but are in reality the legislative wish-lists of giant corporate interests, including North Carolina’s largest cable company — Time Warner.

The food and bar tab totaled just over $130 for the festivities.

Time Warner Cable achieved victory in 2011 passing anti-community broadband legislation through the North Carolina General Assembly, in part thanks to new support from the Republican takeover of the state legislature last year.

Polly wants a $20K "stipend" for parroting the cable industry agenda.

Time Warner Cable is back again for the third year offering $20,000 in “dollar-a-holler” money to write “research reports” that meet the cable operator’s wish-list of current topics of interest.  While the cable company raises rates on customers, some of the proceeds pay for the Time Warner Cable Research Program on Digital Communications, which they say “awards stipends designed to foster research dedicated to increasing understanding of the benefits and challenges facing digital technologies in the home, office, classroom and community.”

After tearing through some of the earlier “award-winning” reports and topics over the past three years, we find it more an exercise in wasted cheerleading money, particularly when some of the authors happen to work for PR astroturf operations and other industry-connected/funded “think-tanks” that take money for dubious research and public statements that amplify the paymaster’s agenda.

It’s not much of a stretch to figure out exactly what kind of submissions the cable company is looking for after reviewing the topic list.  It’s a safe bet nothing we’d have to say to Time Warner would get them to cut us a check for $20K.  In case there is any doubt, we’ve provided a helpful “between-the-lines” analysis of what they are really looking for, should you wish to put pen to paper:

(1) The end-user experience for broadband services
In an increasingly competitive marketplace, more attention is being paid to the consumer experience. For service providers, it is essential to make it simpler and easier for customers to enjoy the benefits of broadband any time, any place, on any device. Key questions include identifying service characteristics consumers consider in evaluating broadband performance, the role of accessibility in design and engineering, how best to encourage innovation in services and business models, the role of pricing and packaging of services, and how best to meet the needs of diverse communities.

(Between the lines: how can we justify Internet Overcharging customers with usage caps and usage billing and make it sound all-consumery and good-newsy?)

(3) Internet governance
Internet governance is still largely framed by the way the Internet existed when it first became a mass-market phenomenon in the late 1990s. But more users rely on advanced digital communications for a diverse set of uses today. Networks and devices are more varied and more powerful than expected, and the Internet now supports a vast range of business models and drives economic growth . In this environment, the role of government and other intermediaries in framing and addressing policy goals continues to change. Key questions include examining the need for new methods of collaboration in multi-stakeholder processes, examining the role of standard-setting, how to measure and assess the performance of the broadband Internet, developing metrics that are meaningful to a wide range of stakeholders (from industry and policymakers to consumers), how to develop new forms of governance that convene stakeholders to solve problems cooperatively, and how to develop guidelines that protect settled expectations as well as enable continuing entry and innovation.

(Between the lines: This whole “open platform” free-for-all network the Internet was originally envisioned to be is so yesterday.  How can we convert it into a corporate-controlled playground by convincing legislators our ‘investments’ in it should justify our ability to “coordinate” it ((a/k/a run, manage, and control)) as we see fit.)

(5) Video Convergence and Internet Video
Online video is growing rapidly, comprising an increasing proportion of Internet traffic even as workable business models continue to evolve. Internet video thus increasingly competes with more traditional video services, while at the same time placing extraordinary burdens on the broadband networks owned and operated by those competitors. This emerging development raises a host of issues for video competition and regulation as well as for broadband policy. Key questions include how to identify and respond to the challenges posed by Internet delivery of video, and identifying the marketplace, legal, and policy barriers that stand in the way of innovation in video service delivery.

(Between the lines: Since we can’t blame peer to peer traffic for the Internet ‘exaflood’ any longer, we’ve designated online video the new Frankenstein that threatens to run our broadband network into the ground.  How can we stop Internet video from cannibalizing our cable-TV service by limiting access (or charging a bountiful harvest of cash to those who dare to watch too much.) Bonus: Include tips on how we can obfuscate our tissue-paper-thin agenda to slap the caps on from being called out as an abuse of our market power.