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AT&T’s New CEO: If You Don’t Subscribe to HBO Max, You Have a Low IQ

Phillip Dampier April 28, 2020 AT&T, Competition, Consumer News, Editorial & Site News No Comments

Stankey

AT&T’s incoming CEO John Stankey has a message for America: If you are unwilling to pay $15 a month for AT&T’s HBO Max, you have a low IQ.

Stankey made that declaration pitching the new service, set to debut in May. The fact the video platform is late to a market already crowded by Netflix, Hulu, and Disney is just part of the challenge. That $15 price point is a bigger one.

If there is any company in the telecom business that can prove consumers are sensitive to price hikes and bill shock, it is AT&T. Its frequent rate hikes for its DirecTV satellite service and various streaming TV platforms have caused a customer exodus. More than a quarter of DirecTV customers have left and, even more stunning, well over half of AT&T’s streaming TV customers have dropped the service. In late 2018, DirecTV Now (today AT&T TV Now) — AT&T’s cord cutting TV alternative, had 1.8 million customers. As of last month, that number is down to 788,000 and still falling.

AT&T has repeatedly claimed it wants to focus on “high value” customers, which may explain why it remains confident its $15/mo HBO Max service will do well, despite being the most costly streaming service in the market.

Stankey’s predecessor, Randall Stephenson, will exit as AT&T’s CEO in July. He leaves a much larger conglomerate than what he started with. AT&T has diversified from its telephone and wireless portfolio with several major acquisitions, including DirecTV — the satellite TV service, and Time Warner (Entertainment), a Hollywood studio and entertainment giant. The result is a company loaded with debt and a revolt by activist investors that question the wisdom of creating the 2010s version of AOL-Time Warner.

Elliott Management Corp., the activist investment firm that has proved itself a nuisance to the expensive dreams of several rich and powerful CEOs, does not see a viable marriage between AT&T’s profitable telecommunications business and a media and entertainment company. It took its concerns public in 2019, calling on AT&T management to get back to the basics.

Stankey’s approach seems to be a willingness to embrace the newest members of the AT&T family, for now, while also reassuring investors the shopping spree of mergers and acquisitions is over. Bloomberg News reports his views seem to have won Elliott Management over. At the same time, Stankey has to convince investors and the public he is competent at running a media company. The jury is still out on that:

Bloomberg:

At a town hall with HBO employees last year, Stankey said the network had to dramatically increase its programming output, comparing the work ahead to childbirth. Once, when a Time Warner veteran criticized an idea during a meeting, Stankey replied, “I know more about television than anybody.”

[…] But over the past two years, Stankey has tried to acclimate himself to the glitzy world of entertainment. He started watching HBO’s “Westworld” and “Succession.” He could be seen mingling with HBO talent at glitzy Manhattan premiere parties. At an industry event, he wore a pin featuring a Looney Tunes character — a WarnerMedia property — on his jacket lapel.

Crackpots Link 5G to COVID-19; Several Cell Towers Set on Fire in UK to Stop “Murder Vibrations”

(Image: Science Blogs)

A preacher in the United Kingdom told parishioners that the cell tower erected within sight of his church was transmitting 5G “murder vibrations” directly responsible for the country’s outbreak of the COVID-19 coronavirus. A Nigerian pastor told viewers the central government locked down two major cities in the country to secretly install 5G cell towers and warned other lock downs were coming soon to allow cell phone companies to install more towers. Woo incubator “Goop” has hatched more than a few 5G conspiracy theories, including contributor Habib Sadeghi’s claim that every pandemic over the last two centuries is directly caused by the “electrification of earth.” Singer M.I.A. suggests recovery from COVID-19 is being hampered by 5G radio waves which “confuse or slow the body down in healing process as body is learning to cope with new signals, wavelengths, frequencies, etc.” As the coronavirus crisis deepened across the United Kingdom, M.I.A. blasted the government for not forcing 5G services to shut down, pointing out she is not feeling well and “my symptoms match the 5G symptoms.”

For more than a year, conspiracy theories about the health effects of 5G wireless networks have grown. RT, the Russian state broadcaster, even called it the “5G Apocalypse.” On the other side of the political spectrum, conspiracy group Q-Anon, which believes entrenched politicians are conspiring within the “deep state” to sabotage the presidency of Donald Trump, claims 5G is a vital tool to lull people into complacency with mind control.

A Q-Anon supporter:

I am in disbelief that these people would risk extinction of the human race for a buck. But remember these people are evil. The power of 5G is scary. It will give them the ability to control all AI they will literally dictate your life, what MEDIA you are exposed to your privacy your health everything. But is 5G worth so much that someone would be willing to murder someone for it. How about hundreds. We know the Evil behind 911 possible to cover up the 200 trillion dollar military fraud meeting at the pentagon #Qanon #TheGreatAwakening @40_head

In reality, 5G is nothing more than an overhyped wireless technology upgrade that can either be slightly faster than existing 4G LTE networks, or considerably faster if adequate wireless spectrum is available for short distance communications. In either case, the energy emitted by traditional cell towers or small cells is infinitesimal compared to much stronger local TV and radio stations. In fact, the fastest 5G networks operate on millimeter wave frequencies that cannot penetrate walls and doors and are capable of reaching only a few blocks away at most.

As people shelter in their homes to avoid spreading the virus, newly available free time apparently triggered a few believers of 5G conspiracy theories. An unknown number took to the streets last weekend to set several cell towers in the United Kingdom on fire.

CNBC reports four Vodafone cell towers were attacked over the weekend, with a video widely circulated on the internet showing another cell tower owned by EE damaged by fire in Birmingham.

“This site served thousands of people in the Birmingham area, providing vital 2G, 3G and 4G connectivity as it has done for many years,” an EE spokesperson told CNBC. “We will try to restore full coverage as quickly as possible, but the damage caused by the fire is significant.”


London radio station LBC talks with a representative from FullFact, a non-profit independent fact-checker, to debunk claims that 5G signals are helping spread the coronavirus. (23:47)

Frontier’s Inner Secrets Revealed: ‘We Underinvested for Years’

Frontier Communications has revealed to investors what many probably realized long ago — the independent phone company chronically underinvested in network upgrades and repairs for years, giving customers an excuse to switch providers.

Remarkably, the phone company did not just underperform for its remaining voice and DSL internet customers. In a sprawling confidential “Presentation to Unsecured Bondholders” report produced by Frontier’s top executives, the company admits it was even unable to achieve significant growth in its fiber territories, where Frontier-acquired high-speed FiOS and U-verse fiber networks held out a promise to deliver urgently needed revenue.

Frontier’s bondholders were told the company’s ongoing losses and poor overall performance were unsustainable, despite years of executive “happy talk” about Frontier’s various rescue and upgrade plans. In sobering language, Frontier admitted its capital structure and efforts to deleverage the company’s massive debts were likely to cut the company off from future borrowing opportunities and deter future investment.

The presentation found multiple points of weakness in Frontier’s current business plan:

Voice landline service remains in perpetual decline. Like other companies, Frontier’s residential landline customers left first, but now business customers are also increasingly disconnecting traditional phone service.

About 51% of Frontier’s revenue comes from its residential customers. That number has been declining about 5% annually, year over year as customers leave. Frontier’s internet products are now crucial to the company’s ability to stay in business. Less than 30% of Frontier’s revenue comes from selling home phone lines. For Frontier to remain viable, the company must attract and keep internet customers. For the last several years, it has failed to do either.

Frontier customers are disconnecting the company’s low-speed DSL service in growing numbers, usually leaving for its biggest residential competitor: Charter Spectrum. Frontier remains saddled with a massive and rapidly deteriorating copper wire network. The company disclosed that 79% of its footprint is still served with copper-based DSL. Only 21% of Frontier’s service area is served by fiber optics, after more than a decade of promised upgrades. Frontier’s own numbers prove that where the company still relies on selling DSL, it is losing ground fast. Only its fiber service areas stand a chance. Just consider these numbers:

  • Out of 11 million homes in Frontier’s DSL service area, only 1.5 million customers subscribe. That’s a market share of just 13 percent, and that number declines every quarter.
  • Where Frontier customers can sign up for fiber to the home service, 1.2 million customers have done so, delivering Frontier a respectable 40 percent market share.

Frontier has been promising DSL speed upgrades for over a decade, but the company’s own numbers show a consistent failure to deliver speeds that can meet the FCC’s definition of “broadband,” currently 25 Mbps.

At least 30% of Frontier DSL customers receive between 0-12 Mbps download speed. Another 35% receive between 13-24 Mbps. Only 6% of Frontier customers get the “fast” DSL capable of exceeding 24 Mbps that is touted repeatedly by Frontier executives on quarterly conference calls.

Despite the obvious case for fiber to the home service, Frontier systematically “under-invested in fiber upgrades” in copper service areas at the same time consumers were upgrading broadband to acquire more download speed. Frontier’s report discloses that nearly 40% of consumers in its service area subscribe to internet plans offering 100 Mbps or faster service. Another 40% subscribe to plans offering 25-100 Mbps. In copper service areas, Frontier is speed-competitive in just 6% of its footprint. That leaves most speed-craving customers with only one path to faster speed: switching to another provider, typically the local cable company.

So why would a company like Frontier not immediately hit the upgrade button and start a massive copper retirement-fiber upgrade plan to keep the company in the black? In short, Frontier has survived chronic underinvestment because of a lack of broadband competition. Nearly two million Frontier customers have only one choice for internet access: Frontier. For another 11.3 million, there is only one other choice – a cable company that many detest. Frontier has enjoyed its broadband monopoly/duopoly for at least two decades. So long as its customers have fewer options, Frontier is under less pressure to invest in upgrades.

For years Frontier’s stock was primarily known for its generous dividend payouts to shareholders — money that could have been spent on network upgrades. But what hurt Frontier even more was an aggressive merger and acquisition strategy that acquired castoff landline customers from Verizon and AT&T in several states. In its most recent multi-billion dollar acquisition of Verizon customers in California, Texas, and Florida, Frontier did not achieve the desired financial results after alienating customers with persistent service and billing problems. The longer term legacy of these acquisitions is a huge amount of unpaid debt.

Frontier’s notorious customer service problems are now legendary. Frontier’s new CEO Bernie Han promises that customer service improvements are among his top four priorities. Improving the morale of employees that have been forced to disappoint customers on an ongoing basis is another.

Frontier executives are proposing to fix the company by deleveraging the company’s debt and restructuring it, freeing up capital that can be spent on long overdue network upgrades. Executives claim the first priority will be to scrap more of Frontier’s copper wire network in favor of fiber upgrades. That would be measurable progress for Frontier, which has traditionally relied on acquiring fiber networks from other companies instead of building their own.

But the company will also continue to benefit from a chronic lack of competition and Wall Street’s inherent dislike of large capital spending projects. The proposal does not come close to advocating the scrapping of all of Frontier’s copper service in favor of fiber. In fact, a rebooted Frontier would only incrementally spend $1.4 billion on fiber upgrades until 2024, $1.9 billion in all over the next decade. That would bring fiber to only three million additional Frontier customers, those the company is confident would bring the highest revenue returns. The remaining eight million copper customers would be stuck relying on Frontier’s existing DSL or potentially be sold off to another company.

Frontier seems more attracted to the prospect of introducing or upgrading service to approximately one million unserved or underserved rural customers where it can leverage broadband subsidy funding from the U.S. government. To quote from the presentation: Frontier plans to “invest in areas that are most appropriate and profitable and limit or cease investments in areas that are not.”

Another chronic problem for Frontier’s current business is its cable TV product, sold to fiber customers.

“High content/acquisition costs have made adding new customers to the Company’s video product no longer a profitable exercise,” the company presentation admits. If the company cannot raise prices on its video packages or successfully renegotiate expensive video contracts to a lower price, customers can expect a slimmed down video package, likely dispensing with regional sports networks and other high cost channels. Frontier may even eventually scrap its video packages altogether.

To successfully achieve its goals, Frontier is likely to put itself into Chapter 11 bankruptcy reorganization no later than April 14, 2020. The company’s earlier plans may have been impacted by the current economic crisis caused by the coronavirus pandemic, so the exact date of a bankruptcy declaration is not yet known.

ISPs: Suspend Data Caps as Telecommuting and Tele-Learning Chew Through Allowances

Stop the Cap! is calling on all internet service providers to suspend data caps to do their part to help manage the COVID-19 coronavirus crisis.

“As a growing number of businesses are asking employees to work from home and students begin video streaming their classes online, no family should have to face the unnecessary and added expense of an even bigger internet bill because they exceeded a provider’s arbitrary data allowance,” said Phillip M. Dampier, Stop the Cap! president. “We are calling on all providers to suspend data caps, speed throttles, and overlimit fees immediately.”

Education Week reports that over 500 schools with more than 360,000 students are temporarily stopping in-person classes because of the virus. Most are adopting video conferencing software that will stream classes to students at home. Stop the Cap! has learned that many of these video streaming applications can consume a lot of data, chewing through customer data allowances, especially in homes with more than one student.

“Some schools are generously supplying students with hotspots, tablets, and even Chromebooks to help facilitate in-home learning,” Damper noted. “But greedy cable and phone companies with completely unjustified data caps are getting ready to cash in on this crisis by charging unwitting customers overlimit fees that usually start at $10, and quickly can add up to over $100 a month in some cases. At a time when many are being asked to work, learn, and stay at home, it is time for Comcast, Cox, AT&T, Cable ONE/Sparklight, and other providers to do their part and get rid of their data caps and overlimit fees.”

New York Governor’s Boast About Near-100% Broadband Coverage Backfires

Gov. Andrew Cuomo announcing rural broadband initiatives in New York.

When New York Gov. Andrew Cuomo boasted in 2015 that anyone who wanted broadband service in the state would have access to it, he could not have realized that claim would come back to haunt him five years later.

New York’s Broadband for All program claimed to be the “largest and most ambitious state broadband investment in the nation,” with $500 million set aside “to achieve statewide broadband access by 2018,” with “99.9% of New Yorkers” getting access to broadband service.

In 2020, that goal remains elusive, with over 80,000 New Yorkers relegated to heavily data-capped satellite internet access and potentially tens of thousands more left behind by erroneous broadband availability maps that could leave many with no access at all. Now it appears the federal government will not be coming to the rescue, potentially stranding some rural residents as a permanent, unconnected underclass.

The Republican-majority at the Federal Communications Commission has decided to take the Democratic governor at his word and exclude additional rural broadband funding for New York State. The FCC’s recently approved Rural Digital Opportunity Fund (RDOF) is the most ambitious rural broadband funding initiative to date, with a budget of $20.4 billion. As it stands, not a penny of those funds will ever be paid to support additional broadband projects in the Empire State.

“Back in 2016, the governor of New York represented to this agency that allocating the full $170 million in Connect America Fund II support to the state broadband program would allow full broadband buildout throughout the Empire State, when combined with the state’s own funding,” said FCC Commissioner Michael O’Rielly.

That $170 million was originally designated for Verizon to spend in upstate and western New York in areas without high-speed broadband. When Verizon declined to accept the funding, the rules for the program required the money to be made available for other qualified projects in other states, or left forfeit, unspent. An appeal from New York’s Senate delegation to FCC Chairman Ajit Pai to award that $170 million to New York’s Broadband for All program was successful, allowing other phone, cable, and wireless providers to construct new rural broadband projects around the state. That decision was met with criticism, especially by the Wireless Industry Service Providers Association (WISPA), which represents the interests of mostly rural, fixed wireless providers around the country.

O’Rielly

“After robust opportunity for public input, last year the FCC adopted a CAF-II framework that was truly technology-neutral and designed to harness the power of competition to deliver the most broadband to the most Americans, at the lowest overall price,” said Steve Coran, counsel for WISPA, in a statement. “Unfortunately, today’s action appears to deviate from this approach by providing disproportionate support to one state at the expense of others, which will now be competing for even less federal support.”

That criticism was partially echoed by Commissioner O’Rielly, who appreciated the dilemma of rural New Yorkers without access to high speed internet, but felt the FCC was showing favoritism to New York, which he worried was getting a disproportionate share of federal funding.

“These are federal [Universal Service Fund] dollars taken from ratepayers nationwide. They are not New York State funds, and we have the burden of deciding how best to allocate these scarce dollars, as well as the right to demand that they be spent wisely,” O’Rielly said. “At the same time, I am concerned that the funding will not be used as efficiently as possible. It should not be lost on everyone that New York is one of the states that diverts 9-1-1 fees collected to other non-related purposes, as is noted in the Commission’s recent report on the subject. We should have received assurances that New York would cease this disgraceful practice.”

O’Rielly added that offering even more generous funding in New York could lead to overpaying providers to service rural New York communities at the expense of other, cheaper rural broadband projects in other states.

Recently O’Rielly claimed that allowing New York to receive funding under the new RDOF program would almost guarantee dollars would be spent on duplicative, overlapping broadband projects, noting that Gov. Cuomo already considers New York almost entirely served by high speed providers. In fact, he claimed any additional funding sent to New York would be “beyond foolish and incredibly wasteful” and would undermine the rural broadband program’s objective to avoid funding projects in areas already served by an existing provider.

In other words, since Gov. Cuomo has claimed that virtually the entire state is now served with high speed internet access, O’Reilly believes there is no reason to award any further money to the state.

Except the claim that ‘nearly the entire state already has broadband access’ is untrue, and O’Rielly’s arguments against sending any additional money to New York seem more political than rational.

The FCC’s broadband availability map shows significant portions of New York in yellow, which designates no provider delivering the FCC’s minimum of 25/3 Mbps broadband service.

First, the FCC’s own flawed broadband availability maps, criticized for over counting the number of Americans with access to broadband, still shows large sections of upstate and western New York unserved by any suitable provider. Parts of western New York between Buffalo and Rochester, significant portions of the Finger Lakes, Southern Tier, and North Country are all still without access. An even larger portion of upstate New York has either no access or very slow access through DSL. The number of residents without service is significant. The FCC uses census blocks to measure broadband availability, but this methodology is flawed because if even one home within that block has broadband while dozens of others do not, the FCC still counts every home as served. This has angered many New Yorkers stuck without service while a local cable or phone company offers high-speed internet access to neighbors just up the road. Many of these rural residents are not even designated to receive satellite service, Broadband for All’s last catchall option for areas where no wired provider bid to provide service.

Second, long-standing rules in broadband funding programs already deny funding to areas where another suitable provider already offers service. So it would be impossible for RDOF to award “wasted” funding to projects where service already exists.

While Gov. Cuomo’s boastful claims about broadband availability opened the door for discriminatory rules against the state, the FCC itself wrote the rules, and it appears the goal was one part payback for securing earlier broadband funding over the objections of Commission O’Reilly, and one part sticking it to a state that has given the Trump Administration plenty of heartburn since the president took office.

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