AT&T’s Magic Fiber Fairy brings fiber to you, if you approve AT&T’s business agenda.

If it wins approval from regulators to buy satellite TV provider DirecTV, AT&T says it will have enough money to afford to expand its gigabit fiber network Gigapower U-verse to an extra two million homes.

That bit of non-sequitur was the highlight of AT&T’s regulatory filing with the Securities and Exchange Commission. AT&T claims money for the fiber expansion will come from anticipated savings from programming volume discounts AT&T will get combining DirecTV’s 20.3 million customers with AT&T’s 5.7 million U-verse TV subscribers.

AT&T expects cost synergies to exceed $1.6 billion annual run-rate by three years after closing.  These savings will begin in the first year after closing, ramp up over four years and grow with the addition of video subscribers thereafter.  It is anticipated that at least 40% of these total synergies will be realized by year two after closing.  These synergies are conservative and derived from items such as programming cost reductions, operational efficiencies and reductions in redundant broadcast infrastructure.  Programming cost reductions are the most significant part of the expected cost synergies.  At this time, AT&T’s U-verse content costs represent approximately 60% of its subscriber video revenues.  With the scale this transaction provides, we estimate AT&T’s U-verse content costs after the completion of the transaction will be reduced by approximately 20% or more as compared with our forecasted standalone content costs.

AT&T believes that despite perennially increasing programming costs, especially for popular over-the-air and cable networks, the 20 percent of anticipated savings will give AT&T enough money to vastly expand its fiber network.

“The economics of this transaction will allow the combined company to upgrade two million additional locations to high-speed broadband with Gigapower FTTP (fiber to the premise) and expand our high-speed broadband footprint to an additional 13 million locations where AT&T will be able to offer a pay TV and high-speed broadband bundle,” AT&T wrote.

On AT&T’s budget, the company can send you this really nice star ceiling kit, but it won’t pay for gigabit broadband.

Before announcing its intent to buy DirecTV, AT&T already promised to expand Gigapower U-verse to up to 100 cities, while telling investors it anticipated flat spending on network improvements. On Tuesday, AT&T went further and dramatically cut investments in its wireline network to a level that raised concerns for the financial security of several of its vendors, including those supplying fiber optic cable and equipment.

AT&T predicted savings from the merger will amount to $1.6 billion a year, but not until three years after the merger closes. There are questions whether this amount is enough to fund the kind of fiber expansion AT&T promises.

In 2012, AT&T committed to expanding U-verse to 8.5 million more customer locations at a cost of $6 billion. That investment paid for AT&T’s less-costly fiber to the neighborhood service. Based on AT&T’s figures, the cost to deploy fiber into each neighborhood, while still utilizing existing copper wiring to bring service into each home, was $705 per home or business.

AT&T Gigapower U-verse requires AT&T to spend considerably more to extend fiber service directly to each premises it intends to serve. Google is spending approximately $4,000 to reach each home with fiber optics in Kansas City. But AT&T’s math suggests it only has to spend about $800 per home (based on the $1.6 billion savings figure it expects to begin receiving in 2017) for decommissioning the remaining copper and extending U-verse fiber for each of two million customer homes passed. What does AT&T know that Google does not?

But wait. AT&T is also committing to use that $1.6 billion to expand traditional fiber to the neighborhood U-verse to 13 million additional homes as well. That means AT&T has a budget that limits it to $106 per home for a combined 15 million new locations passed. That amount is enough for a fiber optic star ceiling kit or a really nice fiber strand light fixture, but it isn’t nearly enough to bring gigabit broadband to AT&T customers.

One thing is certain: AT&T will not be passing on any cost savings to customers in the form of lower bills. AT&T’s proposed investment is a blatant appeal to regulators with promises of broadband expansion the company has already made and shows few signs of actually delivering.

AT&T’s claim it wants to expand gigabit fiber to the home service to as many as 100 cities nationwide requires closer inspection on news this week it has slashed spending on its wireline business.

Investors knocked AT&T’s share price today as they learned earnings from AT&T’s wired networks will be lower than expected.

TheStreet reported this morning the spending cuts are so significant, they are creating a financial risk for a number of AT&T’s major vendors.

Research firm Jefferies issued a research note warning that AT&T’s spending cuts began last month and seem to be ongoing. As a result the companies that have the most exposure to AT&T’s wireline business are at increased financial risk. Those suppliers include optical fiber equipment manufacturer Alcatel-Lucent, as well as Ciena, Juniper, ADTRAN, Finisar, and JDS Uniphase. As a result, all but Finisar saw their share prices drop significantly in morning trading.

Earlier today, AT&T reported it was ahead of schedule to complete its Project VIP expansion of its 4G LTE wireless and U-verse networks. As U-verse expansion nears an end, vendor orders may be in decline. Wall Street analysts see no evidence AT&T is preparing to spend much on any other expansion efforts, including fiber to the home service.

As Broadband Reports’ notes, without significant capital to invest in fiber upgrades, they are not going to happen.

These cuts make it hard to take the company’s claims of meaningful 1 Gbps fiber expansion seriously as there’s simply no budget cordoned off for such a project (“Project VIP” funds are already in use on other efforts). While AT&T has the press believing they’re deploying 1 Gbps to “up to 100 cities,” AT&T’s shrinking CAPEX tells a different story entirely.

Fiber to the home service is more costly than AT&T U-verse’s fiber to the neighborhood service because it requires a fiber cable be brought directly to each home or business — a more costly endeavor that requires careful cable burial or overhead drop line replacement, as well as the possibility of in-home wiring adjustments. Considering the billions spent on U-verse expansion to date, at least as much will be required to upgrade to fiber to the home service and there are no signs AT&T is ready to invest in anything beyond press releases.

Phillip “How far will $20 get me in your office?” Dampier

Congress is famous for obfuscation when it comes to introducing legislation that promises one thing and delivers something quite different. Take the 2003 “Clear Skies Initiative,” which would have allowed the energy industry to increase polluting emissions, or “The Disclosure of Hydraulic Fracturing Fluid Composition Act,” which allows frackers to keep secret the ingredients of millions of gallons of chemicals pumped into the ground to displace natural gas, and potentially your potable drinking water.

So it shouldn’t be much of a surprise that Rep. Bob Latta (R-Ohio) wants to “protect” the open and free Internet by introducing a new bill that opens and frees the telecom companies that steadfastly support his campaign coffers to install paid Internet toll booths. Like many pieces of legislation coming from some House Republicans these days, “freedom” only extends to corporate interests, not to you or I (unless we want to start a corporation of our own.)

Reclassifying broadband as a telecommunications service under Title II of the Communications Act is the Holy Grail for Net Neutrality supporters. It offers clear oversight authority that would make future lawsuits from Comcast, Verizon and other telecom companies untenable. Earlier court decisions have laid a foundation for broadband oversight under Title II, but the FCC itself must take advantage of that opportunity, and so far it has not.

Congressman Latta has introduced legislation to make sure the FCC can never take that step. His bill would specifically prohibit the FCC from reclassifying broadband Internet access as anything beyond an unregulated “information service.”

According to Latta, only with his legislation can America be assured the Internet will stay “open and free.” — “Open and free” for the picking by companies who dream of new revenue monetizing Internet traffic. Not satisfied charging some of the world’s highest prices for Internet access, many of the largest cable and phone companies in the country now want the right to “double-dip” — charging consumers to reach Internet content and content producers for delivering it. It would be like paying postage to mail a letter and having it arrive postage due or letting the phone company charge both the caller and the person called for a long distance telephone call.

“The legislation comes after the FCC released a proposal to reclassify broadband Internet access under Title II as a telecommunications service rather than an information service,” says a press release from Latta’s office.

Would I lie to you? Rep. Bob Latta (R-Ohio)

That is patently false. In fact, FCC chairman Thomas Wheeler has twisted himself into a human pretzel with clever language and a clear determination not to reclassify broadband under Title II. Wheeler prefers sticking to the rickety Section 706 faux-authority for Net Neutrality — the same section that keeps handing FCC lawyers loss after loss in federal court. After Wheeler announced his intention to propose allowing Internet companies to build paid fast lanes for Internet traffic, the resulting backlash from content companies and the public made him grudgingly offer a “discussion” about utilizing Title II.

That kind of “discussion” will be familiar to every 16-year old teenage girl who is told “we’ll talk about it” after asking mom and dad if she can take her new 22-year old boyfriend on vacation and stay in their own hotel room.

Ironically, detractors like Latta are the ones that usually accuse Net Neutrality of solving a problem that doesn’t exist. But that didn’t stop Congressman Latta from introducing legislation to stop the current ex-telecom lobbyist chairman of the FCC from going all Elizabeth Warren on us, suddenly imposing draconian pro-consumer regulations against those job creators at the cable companies Wheeler used to represent. But on the bright side, when Wheeler doesn’t do what Latta’s bill wouldn’t let him do, Latta can still declare victory against “big government.” If you live in Latta’s district, you can read all about it in the forthcoming government-subsidized, no-postage-needed “newsletter” he and other members of Congress will pelt your mailbox with right before election time.

“In light of the FCC initiating yet another attempt to regulate the Internet, upending long-standing precedent and imposing monopoly-era telephone rules and obligations on the 21^st Century broadband marketplace, Congress must take action to put an end to this misguided regulatory proposal,” said Latta. “The Internet has remained open and continues to be a powerful engine fueling private enterprise, economic growth and innovation absent government interference and obstruction. My legislation will provide all participants in the Internet ecosystem the certainty they need to continue investing in broadband networks and services that have been fundamental for job creation, productivity and consumer choice.”

Consumers not included. Maybe he just forgot.

“At a time when the Internet economy is thriving and driving robust productivity and economic growth, it is reckless to suggest, let alone adopt, policies that threaten its success. Reclassification would heap 80 years of regulatory baggage on broadband providers, restricting their flexibility to innovate and placing them at the mercy of a government agency. These businesses thrive on dynamism and the ability to evolve quickly to shifting market and consumer forces. Subjecting them to bureaucratic red tape won’t promote innovation, consumer welfare or the economy, and I encourage my House colleagues to support this legislation, so we can foster continued innovation and investment within the broadband marketplace.”

Guess not. The Internet should only be about business in Latta’s mind. Consumers that support Net Neutrality are nothing more than parasites sucking away valuable potential profits from the dynamic, flexible and innovative world of traffic shaping, usage caps, and double-dipping.

Latta isn’t interested that your provider is turning your weekend Netflix binge into an exercise of maddening rebuffering futility as your cable/phone company waits for protection racket proceeds a paid peering agreement with Netflix. That is because he doesn’t represent you. He represents AT&T, Time Warner Cable, Comcast, and CenturyLink.

Latta can afford to travel through the Internet toll booth when one considers who his top contributors keeping his campaign flush with cash are:

• More than $32,000 in contributions from AT&T and its executives;
• $29,500 from Tom Wheeler’s old haunt — the National Cable & Telecommunications Association (Big Cable lobby);
• $15,000 from the American Cable Association (Small Cable lobby);
• $21,000 from Time Warner Cable and its executives;
• $16,000 from Verizon and its executives;
• $11,400 from CenturyLink;
• $11,000 from Comcast (they are ditching Ohio customers to Charter after merging with Time Warner Cable so why throw good money after bad).

Latta’s close friendship with Big Telecom is so obvious, it has made co-sponsoring his fact-free bill about as popular as Justin Bieber at an NAACP convention. Even his like-minded Congressional colleagues are staying away. But his industry friends sure appreciate his efforts on their behalf.

One wonders why his constituents return him to office when he would be obviously much more comfortable in his next job — lobbying for AT&T or Comcast. Before our Internet connections slow, let’s hope his constituents hasten a much-needed turbo-speed departure for the congressman, already a shadow employee of AT&T.

227194356 05 28 14 LATTA Broadband Bill (Text)
 

Toy Alarm: No peace of mind here.

A Houston couple paid Comcast $30 a month over seven years for Comcast’s home security system they believed would help keep them safe. But the alarm system hadn’t worked right from the day Comcast’s technicians installed it, and the cable company’s final offer of compensation was a $20 service credit.

Understandably, the couple wasn’t happy paying for Comcast’s pretend peace of mind.

“I’m a loyal customer and my thing is I don’t mind paying for a service if you’re providing the service,” Lisa Leeson told KPRC-TV, “but they weren’t.”

Comcast’s Insecurity System finally revealed its true self one windy February day. The Leeson family had left to do some errands and just as they had done more than 2,500 times before over the past 80 months, they armed Comcast’s home security system from its control panel before heading out.

“We would set it,” explained Leeson. “It would make the little noise that it makes like it was activating.”

When they arrived home, the family was surprised to find their back door wide open. Fearing a break-in, they wondered why Comcast’s alarm wasn’t blaring, with notified authorities standing by to investigate.

Despite more than 26,000 burglaries in Houston every year, the Leeson family was lucky. A wind gust had blown the door open and their possessions were safe. The revelation the family was robbed anyway only came after calling Comcast to ask why their alarm never went off.

A representative promptly told the family it had monitored the status of the Leeson’s alarm 24/7 for the last seven years and it was offline for almost the entire time. Comcast knew about its non-security system since 2007, but never bothered to tell the family. A follow-up visit from a Comcast technician this month quickly revealed the alarm was installed improperly by the cable company.

“It was unable, even if wanted to, to actually call the police and or Comcast once it was activated,” explained Leeson.

So ultimately whose fault is it that Comcast’s home security system never worked? The company that improperly installed it and knew it wasn’t working for the duration of 80 monthly payments it faithfully collected for service never rendered, or the customer?

In the corporate world of Comcast, it’s absolutely the customer’s fault — exactly what both a customer service representative and a corporate spokesman told the Leeson family.

A Comcast customer service representative was only willing to offer a one-time $20 “inconvenience credit” and the corporate spokesman apologized but pointed to a line in Leeson’s alarm agreement where she agreed to “test her system on a regular basis.”

It simply wasn’t good enough to trust Comcast’s alarm control panel notifying the family the alarm was armed and security monitoring was enabled. She’d have to trigger the system, potentially annoying the neighbors and first responders to prove the system worked properly.

Houston police and fire officials beg to differ.

In an ongoing effort to reduce costly and unnecessary false alarms, the city has implemented alarm permit and penalty fees for wasting the time of emergency personnel.

A residential burglar alarm in the city of Houston requires an annual permit ranging in cost from $37-50. A fire alarm permit costs $80.29 the first year, $53.52 each year thereafter. Three false burglar alarm calls are allowed without a charge with a burglar alarm permit per year. The 4th and 5th false alarm call is chargeable at $50.00 each and the 6th and 7th call is chargeable at $75.00 each. Thereafter each false alarm call is chargeable at $100.00 each. Permits are subject to revocation after the 7th false call. Burglar alarm systems without a permit are chargeable at $107.05 per response and/or no response.

Hold-up/panic alarm systems are allowed one false call without charge with a hold-up/panic permit. Thereafter the 2nd call is chargeable at $128.45, the 3rd false call at $256.92 and the 4th false call is chargeable at $385.37. Thereafter the 5th false alarm and above are chargeable at $513.84 (each). Panic alarm systems without a permit are chargeable at $282.61 per response and/or no response.

False fire alarms carry penalties up to $385.37 per incident with a $115.61 collection fee.

After a local television station got involved in the dispute, Comcast softened their hard-line and refunded every penny Leeson paid for the home security system that had left the family vulnerable since the day Comcast incorrectly installed it.

But after what the Leeson family endured, other alarm system customers should check their contracts and make sure they verify their system is working properly. Don’t depend on the alarm provider to notify you.

Most modern alarm systems alert the monitoring company when activated. That company in turn notifies the police, fire department or ambulance. All three agencies recommend using a monitoring company to reduce the instances of false alarms. Older systems often used a built-in message tape recorded by the homeowner. When the alarm triggered, the system would phone 911 and play back the recorded message. Those systems are responsible for the largest percentage of false alarms.

Comcast says customers with its XFINITY alarm can test their systems using the My Account app on their smartphones. The Leeson family uses an older model Comcast security system that doesn’t work with the app.

[flv]http://www.phillipdampier.com/video/KPRC Houston Comcast Insecurity System 5-28-14.flv[/flv]

KPRC in Houston has words of wisdom for Comcast security system owners. Are you really protected? (2:07)

Unsimplify

When is a rate increase not a rate increase? When it is an “administrative surcharge” of course!

Verizon FiOS phone customers will soon find the company’s latest innovation in the form of a new line on their June bill, along with a $0.99 surcharge.

Notice of Price Increase
Effective May 17, 2014, Verizon will apply an FDV Administrative Charge of $0.99 per FiOS Digital Voice line. This monthly surcharge helps defray account servicing costs associated with providing voice services. This is a Verizon surcharge, not a tax or governmental fee. Visit verizon.com for more information.

Instead of simply raising the advertised price of the service, Verizon added a new opaque charge which they admit is nothing more than an effort to increase revenue. Prospective customers will still see Verizon’s attractive promotional pricing, but only later discover the final bill is higher once taxes, fees, and other surcharges are tacked on.

In fact, Verizon’s new FiOS Digital Voice fee is subject to taxes as well, so for some the true cost of the rate increase is $1.21.

Some angry Verizon customers are switching to Ooma, a service that asks customers to pay upfront for the hardware but offers basic telephone service for free (customers pay well under $10 a month to cover taxes that Ooma does not pocket itself.) A more deluxe option including more phone features runs around $10 a month.

One annoyed customer considers the fee an end run around consumer contract law:

My concern [is] with a regulated utility’s ability to get around a contract price by labeling an increase as an “administrative charge.”

I called their customer service line to discuss/complain.  When I asked what would prevent Verizon from using this as a vehicle to increase prices by $10 or $15, assuming Time Warner/AT&T/DirectTV raised their prices as well, he admitted that he was not aware of any restrictions.  Neither am I.

I can’t find anything in my contract with Verizon that lets them increase my price by instituting back-end increases.  I’m pursuing with government regulators and encourage you all to do so as well.  If this gets through, there will be more.

In fact, one of the reasons why Verizon loves their digital voice product so much is because it is unregulated and not subject to government oversight. They can set rates at will and their current contract allows for the addition of administrative fees without violating any “price lock” agreements. So far, most companies implementing these fees have kept them low enough to avoid provoking government scrutiny, but the number of them and their respective amounts have increased over time.

Customer recourse? Complain and ask for a credit for the administrative fee or cancel service.