(Image courtesy: FCC.com)

Many of President-elect Donald Trump’s choices for America’s newest regulators have track records of being so “hands-off,” it is hard to find their fingerprints.

Wall Street expects the Trump Administration and the Republican majority in Congress to eliminate vast swaths of regulatory oversight, perhaps enough to put the federal government’s involvement in commerce at a level not seen since before the Great Depression. UBS analyst John Hodulik believes the Trump Administration will look the other way as an unprecedented frenzy of corporate mergers and acquisitions begins — mergers that would never have passed an antitrust review during prior administrations.

Hodulik might as well suggest the next four years could represent The Great Convergence, as cable and wireless operators merge, potentially leaving the majority of Americans with just one choice for telecommunications services.

“We have long believed that secular changes in technology and usage would lead to the convergence of the cable and wireless industries,” Hodulik said. “The transformation of the internet into a mobile-first platform combined with the rapid migration of video from proprietary networks to digital and the rise in competitive pressure this entails increases the value of an integrated fixed and wireless service to cable providers. Densification of wireless networks required to meet the needs of video-centric subscribers increases synergies of cable-wireless combinations and provides the springboard for 5G-based services. A roll-back of Title II re-classification could further increase incentives for cable.”

Hodulik envisions that a wave of mergers during the first term of the Trump Administration could look like this:

• Comcast <-> Verizon: Conquering the northeast and mid-Atlantic states, a supersized Comcast would likely be the only telecommunications company offering broadband service in states like New Jersey, Delaware, and Maryland with Verizon FiOS just another flavor of Comcast’s coaxial and fiber network. The only remaining competitors of significance would be Frontier Communications in Connecticut and upstate New York and FairPoint Communications in northern New England. Charter Communications would also still provide cable service in New York, Massachusetts, and parts of the Carolinas. Hodulik called the effective monopoly a win-win for shareholders of Comcast and Verizon. Customers are likely to hold a different view.
• Charter <-> T-Mobile/Sprint or Dish Networks: As the number two player, Charter already envisions offering wireless phone service through an arrangement it has with Verizon. But in a “converged” world, why rent someone else’s network when you can buy your own. Deutsche Telekom has been a motivated seller since AT&T tried and failed to buy T-Mobile USA and Sprint’s largely uninspiring performance may make it an easy sell for Japan’s Softbank. The wildcard: Dish Networks. Charter might want Dish’s huge number of video subscribers to win itself better volume discounts for cable programming.
• Never forget about Altice, laying the foundation for another wave of buyouts starting in 2017. So far, Altice seems interested in the handful of remaining independent cable companies — Cox, Cable One, Mediacom, and the few others increasingly becoming anomalies in the consolidated cable marketplace. Cox and Mediacom may have to be coaxed to sell much the same way Cablevision was — by overpaying.

Hodulik also believes some side mergers may also turn up, especially a Dish/T-Mobile deal that would bring Dish’s large wireless spectrum holdings into T-Mobile’s network. T-Mobile could also sell Dish programming by streaming it over the internet and/or mobile devices.

Making America Great for Robber Barons Again

The president-elect’s choice for chairing the Federal Communications Commission may conclude there is little reason to even have a regulatory agency for telecommunications.

Donald Trump has gone farther to the right than any president-elect in modern history, at least in how he has chosen to staff his transition team. Having a place on that team is traditionally seen as a fast track to getting a plum cabinet position or leadership role in Washington’s bureaucracy, and Mr. Trump’s choices for overseeing tech and telecom policy have more in common with Ayn Rand than Ralph Nader.

Two of the top picks for his FCC transition team are true believers in the “laissez-faire/the free market always knows best” camp, but both have also been on the payroll of Big Telecom companies that believe special favors are perfectly acceptable.

The notorious D.C. revolving doorman Jeffrey Eisenach, now a leading contender for the next chairman of the FCC, is a man with so many hats that the New York Times published an exposé on him, noting it has become hard to tell whether Eisenach’s views are his own, those of his friends at the corporate-friendly American Enterprise Institute (AEI), or those of various telecom companies like Verizon that have had him on the payroll.

Eisenach has been heavily criticized for his especially close ties to telecom companies, fronting their positions at various Washington events often under the cover of his role as a “think tank scholar” at AEI. Eisenach despises Net Neutrality with a passion, and has used every opportunity to attack the open internet protection policies as overregulation. At the same time, Eisenach’s consulting firm was also doing work on behalf of the cellular telephone industry, including Verizon and other cell companies.

Eisenach is exceptionally casual about disclosing any paid financial ties, and has received criticism for it. His prominence as a member of the Trump transition team is therefore curious, considering incoming vice president Mike Pence has tried to clean the transition team of lobbyists.

Eisenach

Trump’s other leading contender is Mark Jamison, a former lobbyist for Sprint who now works for AEI. Jamison has received less attention and scrutiny from the telecommunications press, but in some cases his views, well-represented on his blog, are even more extreme than those of Mr. Eisenach.

In a 2013 report to the Florida Public Service Commission, Jamison looked down on consumer involvement in creating and enforcing telecom regulations:

Does customer involvement in regulation improve outcomes? Not always, according to PURC Director Mark Jamison. Speaking at the Australian Competition and Consumer Commission annual conference in Brisbane, Australia, Dr. Jamison explained that the key question is, “Who do we expect to change when regulators and customers engage?” Most discussion on customer engagement is about customers informing regulators about customer preferences and utility practices. Learning by regulators is important, but so are the building legitimacy, ensuring regulator integrity, and engaging in adaptive learning that are largely about changing customers. An over emphasis on changing regulators can result in pandering to current norms, which hinders institutional strengthening and adaptive work.

In that same report, Jamison echoed some of the same sentiments he has made on his blog, questioning the wisdom of regulating telecommunications policies, providing subsidies to ensure affordable telephone service (Lifeline), subsidizing rural broadband expansion, and maintaining the core concept of universal service, which means assuring every American that wants utility service can affordably get it.

Jamison even questioned the need for the FCC in its current form, particularly overseeing rate regulation, fair competition, and enforcing rules that overturn the telecom industry’s cartel-like agreement on mandated set-top boxes (and rental fees), Net Neutrality and interconnection agreements and fees, and consumer protection:

Most of the original motivations for having an FCC have gone away. Telecommunications network providers and ISPs are rarely, if ever, monopolies. If there are instances where there are monopolies, it would seem overkill to have an entire federal agency dedicated to ex ante regulation of their services. A well-functioning Federal Trade Commission (FTC), in conjunction with state authorities, can handle consumer protection and anticompetitive conduct issues.

Content on the web competes well with content provided by broadcasters, seeming to eliminate any need for FCC oversight of broadcasters. Perhaps there is need for rules for use of the airwaves during times of emergency, but that can be handled without regulating the content providers themselves.

The only FCC activity that would seem to warrant having an independent agency is the licensing of radio spectrum. Political interference in spectrum licenses would at least dampen investment and could lead to rampant corruption in the form of valuable spectrum space being effectively handed out to political cronies.

Jamison

Jamison’s theories are interesting, but in the real world they are impractical and frankly untrue. Readers of Stop the Cap! have long witnessed the impact of the insufficiently competitive telecom marketplace — higher broadband fees, data caps, and relentlessly terrible customer service. The costs to provide service have declined, but prices continue to rise. For many consumers, there is barely a duopoly for telecom services with cable companies taking runaway victory laps for providing 21st century broadband speeds while an area’s phone company continues to try to compete with underinvested DSL. The FTC has been a no-show on every important telecom issues of our time, in part because the industry got itself deregulated, leaving oversight options very limited.

It wasn’t the FTC that halted AT&T’s attempted buyout of T-Mobile and Comcast didn’t lose its struggle to acquire Time Warner Cable because of the FTC either. Pushback from the FCC and Department of Justice proved to be the only brakes on an otherwise consolidation-crazed telecom sector.

Oversight of broadcasting remains important because unlike private networks, the airwaves are a publicly owned resource used for the good of the American people. Jamison would abandon what little is left of regulations that required broadcasters to serve the public interest, not just private profit motives. Programming content is not the only matter of importance. Who gets a license to run a television or radio station matters, and so does the careful coordination of spectrum. It is ironic Jamison theorizes that a lack of regulation (of spectrum) would lead to political interference, rampant corruption, and cronyism. Anyone who has followed our experiences dealing with many state regulatory bodies and elected officials over telecom mergers and data caps can already use those words to describe what has happened since near-total deregulation policies have been enacted.

Public and private broadband competitors like local communities and Google have been harassed, stymied, and delayed by organized interference coordinated by incumbent telecom companies. Allowing them off the leash, as Jamison advocates, would only further entrench these companies. We have a long history in the United States dealing with unfettered monopoly powers and trusts. Vital infrastructure and manufacturing sectors were once held captive by a handful of industrialists and robber barons, and consumers paid dearly while those at the top got fabulously rich. Their wealth and power grew so vast and enduring, we are still familiar with their names even today — Rockefeller, Vanderbilt, Morgan, Schwab, Mellon, Duke, and Carnegie, just to name a few.

Jamison wrote a blog entry mapping out how to ultimately destroy the effectiveness of the FCC:

• Take direction from politicians,
• Promote partisan divides,
• Change the language in orders after the FCC votes,
• Ignore the facts, or at least manipulate them.

Jamison intended to argue that represented the current state of the Obama Administration’s FCC, but it is just as easy to ponder what comes after the Trump-lit bonfire of burned regulations and oversight, leaving only Big Telecom companies and their paid mouthpieces to manipulate the facts.

Jamison also undercuts his own argument in two other ways: first by declaring Michael Powell one of the great FCC chairmen of the modern era (after leaving the FCC he became president of the country’s biggest cable industry lobbying group) and second by relying extensively on quoting people with direct and undisclosed financial ties to the telecom companies that will directly benefit from implementing Jamison’s world views.

New York Times: In a 2014 email, Mr. Eisenach encouraged Michael O’Rielly, a Republican FCC commissioner, to use an American Enterprise Institute event to “lay out the case against” internet regulations.

Who doesn’t ultimately matter much in this debate, according to Jamison, are customers and consumers, whose input in these discussions is dismissed as either trendy or misinformed. No similar conclusions are forthcoming from Mr. Jamison about the influence and misinformation emanating from huge telecommunications companies that keep more than a few of his self-interested sources in comfortable suburban Virginia homes, driving their nice cars to and from the offices of shadowy think tanks that receive direct corporate funding or go out of their way to hide their benefactors.

Appointing either Mr. Eisenach or Mr. Jamison to the Federal Communications Commission would be the ultimate rubber stamping of business as usual in Washington, exactly what Donald Trump ran against. That may make Verizon or Comcast “great again,” but it certainly won’t help the rest of the country.

French competition regulators have fined Altice for a second time this year for abusing European regulatory policies designed to protect competition in the marketplace.

The French Competition Authority imposed an $88.5 million fine for pursuing mergers and acquisitions without first getting permission from the regulator.

In 2014, Altice rushed into an effort to buy SFR, one of France’s major cellular and broadband providers. Although ultimately successful, the French regulator produced a lengthy dossier with evidence Altice executives allegedly engaged in illegal back door negotiations to complete a takeover of both SFR and Virgin Mobile with or without clearance from the agency that ensures French consumers benefit from competitive markets.

“The Group chose not to refute these practices and to accept the French Competition Authority’s settlement offer,” Altice said in a statement. “The Group chose to settle the matter in order to limit its financial exposure, given the level of penalties imposed for the type of procedural violation under the French Commercial Code.”

SFR customers apparently wished Altice never acquired the telecom provider, because the mass exodus from customer cancellations continued for yet another quarter, despite extremely low-priced customer retention promotions.

SFR’s cable and fiber broadband division lost 75,000 customers in the last three months, 193,000 over the year. Among DSL customers, 120,000 said goodbye to SFR during the last quarter, 432,000 for the year. SFR’s mobile service did even worse, down 88,000 customers in the last three months, 593,000 for the year.

To offset losses on that scale, Altice is relying on American cable customers to make up the difference. At least 41% of Altice’s global operating free cash flow now emanates from Cablevision and Suddenlink customers in the United States. Thanks to rate increases and other revenue enhancers, Cablevision customers kicked in 2.2% more revenue while Suddenlink customers provided 6.2% more to Altice’s revenue numbers. Suddenlink customers are already paying unprecedented cable bills, with a reported 46.4% profit margin, which ranks among the highest in the U.S. cable industry.

Seeing the enormous sums of money to be made running cable companies in the much-less competitive United States, Altice has been drawing up plans for a potential initial public offering to build a war chest to expand the Altice USA empire starting in 2017.

Among the most likely targets to be consolidated under the Altice umbrella: Cox Communications, Cable One, Mediacom and Midco. Some of those companies are privately held, so Altice founder Patrick Drahi would likely have to pay a substantial premium to snap up some of these mid-sized companies.

If the incoming Trump Administration opens the floodgates for a merger and acquisition free-for-all, Drahi might aim higher, looking at Charter Communications. An acquisition attempt of Comcast would be his most audacious move yet.

Those customers consolidated into the Altice family can look forward to higher bills and significant cutbacks in some customer support functions.

Altice plans to continue centralizing call center operations and demanding better performance from workers employed there. By minimizing customer contacts with call centers, costs are reduced. Making sure customer problems are addressed quickly is supposed to reduce customer losses from churn.

Rate increases and additional fine print also guarantee more revenue for Altice operations. In France, SFR has not shied away from imposing multiple rate increases throughout the year, even when customers are “locked in” with a promotional rate. SFR has been playing with how it charges France’s value-added tax (VAT), reducing it for some while adding new passed-thru charges for others. Many customers saw their bills increase by around 10% over the summer and are waiting to pay even more this fall.

Cablevision and Suddenlink customers are getting similar treatment as they discover new and unusual service charges and fees, including general rate hikes of about 3.4% that take effect in December.

The most significant change is that Cablevision no longer provides credits for disconnecting customers. Regardless of when you drop Cablevision service, Altice will not give you any service credits for disconnecting before the end of your billing cycle.

Manasquan, N.J. resident Bonnie McGee discovered Cablevision’s quietly imposed change that took effect in October.

“No matter what now, I am paying for 25 days when I am not getting any service from them,” McGee told New Jersey’s Press on Your Side. Her final bill was $183.

Under the previous owners, billing stopped the day a customer disconnected service and turned in their equipment. Under Altice, customers will continue to be billed for service, even if they cannot access it because they turned in their set-top boxes and cable modem, under the end of the billing cycle.

Cablevision officials call this change a benefit to their customers.

“Optimum services remain available to you for the full billing period and there are no partial credits or refunds of monthly charges already billed,” according to the fine print on Optimum bills.

“Like many entertainment and telecommunications providers, our services are available on a monthly basis, and customers have access to all of our high-quality products and services until the end of their monthly service period,” a spokesperson told the newspaper.

While that may sound good to the bean counters at Altice, it has infuriated customers, and the change may be permanently harming Cablevision’s name, leaving many departing customers even more unhappy with the service they canceled.

“Why would I even think about going back to Optimum for anything?” one asked. “I will never go back,” said another.

Although existing Time Warner Cable Maxx customers will be able to keep their broadband speed upgrades up to 300Mbps, new customers and those switching to a Charter Spectrum plan will find Spectrum’s advertised broadband options reduced to just one: 100Mbps in TWC Maxx cities like New York and 60Mbps in territories never upgraded to Maxx service.

Charter Spectrum has soft launched their new plans in the New York City market and will begin heavily promoting them later this month. But customers will find their choices dramatically limited, except for television service.

Spectrum is marketing just three triple play plans on its revamped website in the NYC area, varying only with respect to the number of channels included in the TV package:

When we selected internet-only service, we were presented with only one option in New York City: 100Mbps

TWC plans are no longer promoted in areas offered Charter Spectrum service.

At least the modem rental is included in the promotional price, which incidentally rises in the second and third year until it reaches $60 for 60Mbps service, and $100 for 100Mbps service, assuming your promotion has expired.

The promotional prices are not too bad if you are a devotee of cable television, and the broadband price is affordable as well, at least for the first year. After the first 12 months, prices rise and company officials have already warned they will be far more stingy about offering customers repeat retention pricing than Time Warner Cable was.

Charter has announced it will continue to roll out Spectrum packages across the Time Warner Cable and Bright House service areas until the conversion is complete early next year. New York City and Florida are the next targeted markets, but it is clear Charter has already begun offering Spectrum plans instead of continuing to market Time Warner Cable plans that customers can still buy upstate.

Customers will be able to keep their existing Time Warner Cable plans, but any promotional pricing deals will not likely be renewed when they expire, causing your Time Warner Cable bill to spike dramatically in some cases.

We are unsure if existing TWC Maxx customers will be forced to give up their 300Mbps TWC Maxx plan if they switch to a Spectrum plan. There may be several non-publicized plans for these customers. Time will tell.

Editor’s Note: These prices/packages were obtained from timewarnercable.com using a residential street address on W 72nd St, New York, NY, 10023

Quintillion, a new underseas fiber provider, is expected to vastly expand Alaska’s internet backbone, but there are not enough terrestrial middle mile networks to allow all Alaskans to benefit.

A federal taxpayer-funded effort to improve broadband access in rural Alaska will instead improve the bottom lines of Alaska’s telecommunications companies who helped collectively “consult” on a plan that will pay $365 million in taxpayer subsidies to companies building profitable and often redundant 4G wireless networks.

The Alaska Plan, which took effect Nov. 7, is a decade-long effort to subsidize telecom companies up to $55 million annually to encourage them to expand broadband service to 134,000 Alaskan households that get either no or very little internet service today. The Alaska Telephone Association (ATA) — an industry trade association and lobbying group, claims if the plan is successful, only 758 Alaskans will still be waiting for broadband by the year 2026.

But critics of the plan claim taxpayers will give millions to help subsidize private telecom companies that have plans to spend much of the money on redundant, highly profitable 4G wireless data networks that will cost most Alaskans large sums of money to access.

One company — AT&T, which refused to participate in the plan, is still taken care of by the plan, receiving $15.8 million dollars from taxpayers for doing absolutely nothing to improve broadband service in Alaska. The plan directs the money to AT&T to provide phase-down, high-cost support, which drew a sharp rebuke from Republican FCC commissioner Ajit Pai, who questioned why taxpayers had to subsidize AT&T for anything.

“The order claims this a ‘reasonable’ accommodation but cannot explain why the nation’s second largest wireless carrier needs ‘additional transition time to reduce any disruptions,’” Pai wrote.

The biggest weakness of the plan, according to its critics, is its lack of support for middle-mile networks — wired infrastructure that connects providers to a statewide broadband backbone that can manage traffic needs without having to turn to slow-speed satellite connectivity. One of Alaska’s biggest challenges is finding low-cost connectivity with Canada and the lower-48 states. Much of the state relies heavily on GCI’s still-expanding TERRA network, which provides fiber as well as microwave connectivity to 72 towns and villages in rural Alaska. Quintillion, a new player, is working on stretching fiber connectivity through the Northwest Passage. Its forthcoming 30 terabit capacity fiber network offers the possibility of dramatically lower broadband rates and no more data caps, assuming providers have the network capacity to connect their service areas and the nearest fiber access point.

Instead of subsidizing the development of middle mile networks for this purpose, the authors of The Alaska Plan have instead favored wireless connectivity, including the very lucrative 4G wireless networks cellular providers want to expand. By definition, the broadband plan accommodates the limitations of wireless by easing broadband speed requirements for providers. To earn a subsidy, providers need not offer the FCC’s minimum speed to qualify as broadband — 25Mbps.

Instead, the ATA managed to convince regulators that 10/1Mbps service was good enough — speed that can be achieved by the DSL service phone companies favor. This is well below Alaska’s Broadband Task Force goal of 100Mbps for every state resident by 2020. Another free pass built into the plan is allowing providers to collect subsidies even when they do not offer 10Mbps because of network limitations, including lack of suitable middle mile networks. In those cases, the only speed requirement is 1Mbps download speeds and 256kbps uploads, the same as satellite broadband providers.

Commissioner Pai complained those are broadband speeds reminiscent of the internet a decade ago and hardly represents a vision for a faster future.

In a rare moment of bipartisanship at a divided FCC, Commissioner Mignon Clyburn joined Commissioner Pai dissenting from Alaska’s plan.

“It is clear that Alaska’s ‘majestic geography’ makes deployment difficult, but without affordable middle-mile connectivity, high-cost program support spent on the last mile does little to improve communications service to Alaskans,” Clyburn wrote. “Commissioner Pai and I supported an approach that would have taken the $35 million a year in duplicative universal service money and use[d] it to support a middle-mile mechanism that would enable many Alaskans in the Bush to receive broadband for the very first time. The status quo is simply not good enough, and the cost of doing nothing is far too high.”

Pai

Both Clyburn and Pai also complained federal tax dollars will be used to build duplicative 4G wireless networks that will primarily benefit providers. From Commissioner Clyburn’s statement:

We do not subsidize competition. We do not provide duplicative high-cost support to carriers in the same area and we do not subsidize carriers where other unsubsidized carriers are providing service. That underlying principle should be applied here as well. With Alaska’s “sublime scale,” we should instead be directing support to areas that are unserved, not subsidizing competition in areas that already receive mobile service. And just what is the cost to the American consumer of continuing to support overlap in these areas? About $35 million a year!

The companies benefiting from federal tax subsidies include: ASTAC, Copper Valley Wireless, Cordova Wireless, GCI, OTZ Wireless, which covers Northwest Alaska, TelAlaska Cellular, covering Interior and Northwest Alaska, and Windy City Cellular, covering Adak.

Clyburn

Pai called many of the spending priorities a waste of money that will still leave 21,000 Alaskans without 4G LTE broadband and another 46,000 without 25Mbps fixed broadband:

All together these wasted payments total $365 million, or about one quarter of the total Alaska Plan pot. That’s $365 million that could be used to link off-road communities to urban Alaska as requested by the Alaska Federation of Natives, the Bering Straits Native Corporation, the Chugachmiut rural healthcare organization, and many others. That $365 million is more than eight times the $44 million grant from the Broadband Initiatives Program that launched the TERRA Southwest middle-mile network that connected 65 off-road communities in 2011.

With the federal government now pouring federal tax dollars into Alaskan broadband, the state government has been using that as an opportunity to slash state investments in internet access.

A bill from Rep. Neal Foster (D-Nome) to upgrade all rural school districts to 10Mbps broadband for $6.2 million died in committee without any hearings, according to the Alaska Commons. State Rep. Lynn Gattis (R-Wasilla) proposed killing a $5 million broadband grant to schools, and the House Education subcommittee also recommended eliminating the Online with Libraries (OWL) program. Both programs ultimately survived, but not before the state legislature significantly cut the budgets of both programs.

Guttenberg

State Rep. David Guttenberg (D-Fairbanks) hopes the results from last week’s election in Alaska will allow him to position stronger broadband-related legislation in the state legislature.

Guttenberg wants to reinstate a long-cut Broadband Task Force and Working Group while also creating a public Broadband Development Corporation that would build and own middle mile broadband infrastructure and sell it to telecommunications companies that have refused to build those types of networks on their own.

A lot of members of the ATA are lining up in opposition, the newspaper notes, because they won’t directly own the infrastructure. Guttenberg’s view is that the needs of the many outweigh the needs of deep-pocketed telecom companies.

“If you want to build a strong state, if you want to build a strong community, we need to start putting those pieces together,” Guttenberg said of broadband infrastructure last year. “If you give a kid a laptop or a pad in a school district, it’s pointless if he can’t get online.”