One of the frustrations communities filing for federal grant money often face are the onerous terms and conditions that arrive with the application.  In many cases the rules are so complex, an entire industry of paid consultants to advise would-be grant applicants has grown up with the bureaucracy.  Miss one qualification and your potentially worthwhile application gets an automatic rejection.  Hiring an expensive consultant (often formerly employed in a government agency as an application processor) can often work miracles for a potentially dubious application.

Although some terms and conditions are included to prevent potential waste, fraud, and abuse or are intended to close potential loopholes, many others are influenced by elected officials trying to steer funding into projects they want to “pre-qualify.”  Often the intentions are obvious to would-be applicants, who discover only one company in their midst is capable of meeting all of the requirements of a grant program.  It never hurts to have a powerful member of Congress sign a cover letter of support for an application either, especially if that member of Congress helps oversee your agency’s annual budget.

And so we come to the broadband stimulus program, which has its own bureaucratic red tape and pre-conditi0ns to be met before funding becomes available.  Big phone and cable interests have already been rigging the system through broadband mapping projects that magically show broadband service in areas where none exists.  That’s critically important, because an application can be rejected out of hand if it seems to duplicate or overlap an existing broadband provider’s service area.  Incumbent players have wasted no time filing objections to thousands of broadband grant applications, often citing broadband maps which show a would-be applicant wants federal tax dollars to compete against them.

Mount Washington Resort – Bretton Woods, New Hampshire (left), Town Office – Minneiska, Minnesota (right)

Larger players sat out most of the first round of broadband stimulus applications, which often involved “last mile” projects which would deliver real results to those stuck on dial-up.  These projects actually provide service to individual homes and businesses where none existed before.  Many of the largest telecommunications companies are seeking a better deal for themselves from so-called “middle mile” project grants which allow them to improve their broadband infrastructure without actually hooking up a single new customer.

The collateral damage of this high stakes poker match is visible in rural communities in states like Minnesota, where some found their stimulus applications rejected because they couldn’t afford a requirement for 50 percent in matching funds.  That won’t be a problem for a New Hampshire community that did win $1 million in stimulus funding.  They are lucky enough to host the Mount Washington Resort at Bretton Woods, which will have broadband available in every room, in part thanks to taxpayers.  The resort, now undergoing a $50 million dollar luxury renovation, encouraged the local phone company to apply.  A single night booked for this weekend at the Omni Mount Washington Resort starts at $259 on the economy rate.  The “Winter Wonderland Inclusive Package” will set you back at least $569 a night.  At least now you can Twitter about it with all of your followers.

In contrast, Minneiska, Minnesota (population 116) doesn’t have a hotel, or broadband access, but you can drive down the road to the Winona Days Inn and get a room this weekend with a queen-sized bed for $65 a night. If the bed has a mattress similar to that on the purple mattress review, then it’s comfortable enough.  Winona is big enough to get DSL service, so Days Inn throws in Internet access for free.  You can contemplate that over your free hot waffle breakfast.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CNN Wiring the Wrong America 3-12-10.mp4[/flv]

CNN asks the question, are we wiring the wrong America for much-needed broadband service?  Before you answer, yes we noticed CNN used the sounds of a fax line to simulate the sounds of a dial-up connection, too.  (3 minutes)

This AT&T customer was billed $12.95 in cramming charges. (Click image for more information)

AT&T and Verizon are among the top recipients of ill-gotten gains from so-called “cramming” incidents — customers who find unauthorized charges on their phone bill placed there by third party companies that maintain a cozy billing relationship with the two phone companies.

Boston-area resident Mike Cunningham paid $567 in phone charges billed “conveniently” to his Verizon Wireless phone bill.  Only he didn’t authorize them.

Cunningham recently sat down and reviewed nearly two years’ worth of dozen-page phone bills scrutinizing them for unauthorized charges.  Speaking to the Boston Globe, Cunningham didn’t initially notice the “enhanced voice mail’’ charges of $14.95 and $13.22 buried on pages five and six.  That’s not surprising, since many Verizon Wireless customers are now billed online and most customers don’t wade through multi-page online billing statements.

After Cunningham added several years of these monthly charges up, totaling $567, that got his attention.

Cunningham was billed by ILD Teleservices Inc., which said Cunningham’s grandson — then 10 years old — ordered its services while on a website that offers free video games. Cunningham said his grandson, who doesn’t have a cellphone, did not intentionally order voice mail — and knew nothing about it.

ILD generates an enormous number of complaints about unauthorized charges placed on consumer phone bills.  The company describes itself as a leading payment processor of online transactions between merchants and consumers, processing more than 120 million billing transactions per year totaling $500 million of third party charges placed on telephone bills.  Although the company claims to put its potential clients through a rigorous screening process, the avalanche of customer complaints, including the fact a 10-year old was able to be victimized by one of ILD’s clients, suggests otherwise.

Even worse, companies like AT&T and Verizon profit handsomely from fees paid by payment processors like ILD to gain the lucrative ability to charge customers’ phone bills for services, ordered or otherwise.  With a profit incentive to protect, consumers are getting the short end of the stick when calling Verizon or AT&T to complain.  More often than not they pass the buck (while keeping the change for themselves) back to the third party billing agency to try and secure refunds.

Only a staggering amount of potential earnings from such billing practices would seem enough to make risking the customer’s relationship with their phone company worthwhile.  After customers spend hours dealing with unruly and hostile customer service representatives working for such billing agencies, there is little chance that customer will be endeared to the phone company that put them through the nightmare in the first place.

Susan from Ambler, Pennsylvania is an excellent example:

“ILD Teleservices placed a charge on my Verizon phone bill for a service that was not requested, authorized or that would even work (ringtones for a land line!) on Feb 22, 2010. When I called Verizon to question the bill, they informed me the charge was not a Verizon charge but from a third party company,” she told Consumer Affairs.

David in Galt, California was billed by ILD on his AT&T phone bill for ordering a service over his home computer, an amazing feat considering he doesn’t have one.

“I received a charge of 14.95 on my AT&T phone bill from ILD Teleservices. They claimed that someone in the household went online and ordered the service. We did not have the capability to do that with no computer at the house,” he writes.

More than 3,000 complaints have been logged against ILD by Consumer Affairs, with customers highly annoyed that their phone companies refuse to stand by them when illegitimate charges show up on their phone bills. John from Wisconsin got no help from AT&T when identify theft allowed someone to add unwanted services to his phone bill under his wife’s name.

It turns out someone signed him up for TotalContactSolutions, a Florida-based company that charges $14.95 a month to alert up to 10 people with text or voice messages “during catastrophic events such as terrorist attacks or natural disasters.”  Perhaps the service will come in handy to contact those 10 friends and family members when you discover the charges on your phone bill and pass out on the floor.

John reports his credit rating is being terrorized by a company that refuses to refund the unauthorized charges unless he can prove, with an e-mail from AT&T no less, that nobody could have signed up for the service from John’s home.  Unfortunately for John, AT&T’s surveillance of its customers doesn’t extend that far, and the company refused to forgive the charges, instead threatening him with collections.

Unfortunately, your tax dollars are hard at work paying for state utility commissions, the Federal Communications Commission, and consumer service agencies to assist consumers who are victimized twice by cramming charges — once by Verizon or AT&T for allowing them on their bills in the first place, and a second time trying to deal with a third party company to reverse them.

A Boston Globe review of more than 200 cramming-related complaints from consumers — filed with the Massachusetts Department of Telecommunications and Cable and the attorney general since 2007 — found that state workers reviewing complaints sometimes spent hours trying to resolve a single one.

The case of Soren Jensen, a retired engineer who lives in Duxbury, is typical. Jensen said he spotted four charges of $9.99 apiece for text messages on his wife and son’s cellphone bills starting in 2008. There was a common thread: Jensen’s wife and son said they had both taken IQ tests online, entering their cellphone numbers to receive the results. He suspected they mistakenly signed up for text messaging in the process.

After reviewing the fine print on his bill and doing some online sleuthing, he found Verizon Wireless had an agreement with Solow, a computer gaming website that contacts players using a text message service that charges $9.99 per message.

Jensen said he called Verizon Wireless to complain, and the company agreed to remove one of the $9.99 charges.

“I just don’t get why Verizon doesn’t want to protect us, as the customer,’’ Jensen said. “Verizon should not allow this kind of stuff. It raises a lot of questions.’’

The answers aren’t difficult to find when you follow the money.  Both AT&T and Verizon collect plenty from fees charged to cramming companies and billing agencies for the right to bill their services directly on your phone bill.  Neither company will disclose exactly how much they profit from such arrangements, but they are clear about who is responsible when mystery fees turn up on your phone bill:  you are.

Both companies told the Boston Globe they “encourage customers to scrutinize their bills to make sure they are not improperly charged for services.”

And they make that very easy by labeling mystery fees with such helpful billing descriptions as “enhanced calling service” or “enhanced voicemail.”  One of Stop the Cap!‘s readers was billed for services described as an “enhanced recovery fee” and another for “customer support and assistance.”

Verizon claims complaints about third-party charges are “infrequent” and says customers can contact the company and block all third-party charges from their bills, something we strongly recommend you consider doing before being victimized.

AT&T won’t go that far.  It told the Globe:

AT&T, which also allows third-party billing, advises customers to direct their complaints to the company assessing the fee. Names of third-party vendors are disclosed on AT&T bills, the company said. “AT&T’s third-party billing contracts require service providers to address cramming complaints appropriately, including issuing credits if customers have been crammed,’’ an AT&T spokeswoman said in an e-mail.

But AT&T is still in the business of scaring its customers.  TotalContactSolutions maintains a required AT&T customer disclaimer on their website, which includes several states where AT&T can disconnect your phone line over billing disputes:

You have the right to dispute the Employee Notification Services charges billed on your local telephone bill. You are not legally responsible for Employee Notification Services charges incurred by minors or vulnerable adults without your consent. Your local telephone service will not be disconnected because you fail to pay a charge by Employee Notification Services, except that nonpayment of certain regulated telecommunications charges may result in disconnection of service in AL, FL, GA, KY, LA, SC, and TN.

And we know what phone company lobbied their way into obtaining the right to cut your service off if you don’t pay, don’t we?

In the end, Cunningham got refunds for the unauthorized fees on his Verizon Wireless bill, after the companies discovered a minor child was involved.

ILD claims to have sent Cunningham $1,000 in coupons as part of a settlement, something Cunningham claims is a lie.  Cunningham is better off without them.  The $1,000 in coupons ILD offered is suspiciously similar to an offer from another ILD client that promises that amount in grocery coupons you can print on your computer… if you sign-up for enhanced voicemail service for $12.95 a month.

Was this the $1,000 in "free coupons" offered to Mike Cunningham? If so, it comes with some very expensive strings attached.

Cunningham is so disgusted with Verizon Wireless for putting him through this ordeal, he wanted to cancel his service and move on.  But Verizon knows how to hold customers captive.  Instead of sending him a refund check for $567, they applied it as a credit that can only be redeemed by remaining a Verizon Wireless customer until the credit is exhausted.

“It’s like salt in the wound,’’ he told the Globe. “I can’t leave. I’m a captive audience.’’

Stop the Cap! notes the Federal Communications Commission is overwhelmed with cramming complaints that number well into the thousands every year.  Since telephone companies refuse to stand up for their customers, it is imperative that the FCC order phone companies to stop allowing all third-party billing unless and until a customer “opts-in” to such billing, in writing.  No third party “opt-in” requests should be permitted, and customers should not have to chase their phone companies to opt-out of a service that has a built-in profit incentive for funny business, fraud, and costly scams that cost customers enormous time and money to resolve.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/CBS News Cramming Charges 2-23-08.flv[/flv]

The CBS Evening News ran this item about cramming charges and the problems they cause customers more than two years ago, interviewing a representative from Verizon Wireless.  Very little has changed as the money, and complaints, keep pouring in.  (3 minutes)

Verizon Communications is indefinitely finished expanding FiOS — its fiber to the home triple-play package of broadband, phone, and TV — to new cities across its service area.  In short, if your community isn’t already engaged in franchise negotiations with the telecommunications company, there is no fiber from Verizon in your immediate future.

The company said after spending $23 billion upgrading its aging copper wire phone network, it needs to finish construction and improve its reach in existing FiOS-wired communities.  When the company ceases FiOS construction, it hopes to pass 18 million customer homes across its multi-state service area.

The decision to stop expansion of advanced fiber optics threatens to leave hundreds of communities behind, too late to the party or simply too far down Verizon’s priority list.  Among important cities Verizon will pass up include Alexandria, Virginia, Boston and Baltimore.

That concerns city officials, especially in Baltimore which already considers itself on the disadvantaged list.

“My take on it is that Baltimore is not equipped for the future,” Rev. Johnny Golden, past president of the Interdenominational Ministerial Alliance and an advocate for improved access to technology in the city told the Baltimore Sun. “We have a decent broadband system for today, but it does not have the infrastructure to take us into the future where we need to go.”

Despite the fiber bypass, the company will continue negotiations with about a dozen communities where negotiations were already underway – mostly in New York, Massachusetts, and Pennsylvania.  Despite company spin, the decision to drop the shovels and wheel away the spools of fiber does represent a dramatic change of plans, evidenced by the company’s decision to bypass the aforementioned lucrative urban communities.

For cable companies like Comcast and Time Warner Cable, Verizon’s announcement brings a sigh of relief.  Both cable operators handily beat Verizon’s DSL offerings and are swiping increasing numbers of Verizon’s phone customers who are disconnecting their landline service in favor of cell phones or “digital phone” service from the cable companies.

Both Time Warner Cable and Comcast have also kept a larger percentage of their customers than Verizon hoped.

In markets where FiOS is available, Verizon has only achieved 25% penetration for television service and 28% for Internet, far below the 40 percent penetration Verizon CEO Ivan Seidenberg hoped to achieve.  The reasons consumers didn’t switch to Verizon FiOS vary, but include:

• Pricing was not always lower than what the incumbent cable operator offered, and in many cases prices for some service were higher once the promotional rate expired;
• Cable operators in competitive areas improved service, offered more aggressively priced bundles, and increased broadband speed;
• Many cable operators locked their customers into two year “price protection agreements” which hold customers in place until agreements expire (if they don’t auto-renew);
• Installation can prove disruptive because of the elaborate rewiring required in many homes;
• Consumers didn’t see enough compelling reasons to switch.

Seidenberg

Still, Verizon has future-proofed their fiber optic service areas and are better positioned to deliver extremely high broadband speed and HD offerings than their cable counterparts.  But that has never impressed short-term focused Wall Street.  Many in the financial press have attacked Verizon for the costly fiber upgrades they believe will not work for the short-term investor seeking immediate return from their Verizon stock purchase.  With the rumor mill predicting upcoming retirement for Seidenberg, his likely successors are hardly FiOS fanboys.

John Killian, Verizon’s current chief financial officer, is a short-term results man.  Samuel Greenholtz, an analyst with the Gerson Lehrman Group, doesn’t see Killian sharing much of Seidenberg’s visionary long term thinking.  Lowell McAdam, another prospect for the top job, is currently the president of the Wireless Services division, and would likely bring a wireless “solution” for broadband customers left off the FiOS list.  Neither man seems particularly interested in restarting the push for fiber in the future.

For 2010, capital expenses are flat or down across the company except in the Wireless Services division.  Verizon already declared copper phone wiring dead, and has elected to abandon its rural and suburban customers,  systematically sold off to America’s “rural phone companies” Frontier, CenturyLink, or Windstream.  Those still with Verizon but without FiOS will find the future of their landlines increasingly perilous.  Greenholtz notes Verizon has terminated another 1,200 line technicians and the company intends to spend two percent less on its copper wire network this year over last.

Greenholtz witnessed first hand what happens when a company starts to ignore its legacy network — his residential phone line quit working:

Having worked at Verizon and its predecessors for over 25 years, I expected a fix would be swift and trouble-free.  Wrong. I was offered a two-week appointment date for repair people to come out and look at the problem. I might add here that my wife does not use the cellular device that she carries around anymore than necessary and certainly never uses it when in close proximity to the hardwired set. By resorting to measures that I certainly would never have thought of using 10 years ago, I was able to get attention brought to the problem much quicker — and the issue has been resolved satisfactorily.

It seems that Verizon’s residential repair and maintenance has sunk to a new low.  Neighbors and other people on copper cabling are often experiencing problems. If there is static on the line, subscribers are frequently told nothing can be done to correct the situation because they need to replace the cable or do cable maintenance – but there is no budget available to do the work.   So, repairmen take the brunt of the public’s unhappiness with the service they are receiving. In contrast, when I spoke with some friends regarding FiOS and its maintenance issues, I found a much better response time to any difficulties the customers were experiencing.

Shockingly for a Wall Street-focused “expert network,” Greenholtz was allowed to offer his belief the only real solution to phone companies ignoring their undesirable customers is to regulate the heck out of them.

What can be done to cure the situation with residential landline services?   Unfortunately, it is going to have to come down to regulation.  Verizon, and no doubt, AT&T, has been doing what they want for many years now.  The PUCs have given them a lot of opportunities to offer advanced services that the commissions thought would spread throughout the serving areas, but they are increasingly realizing that is not in the plans.  They are going to have to force these companies to be responsive to the needs of the entire footprint, not just the Fortune 500 territories — and the nearby residential homes.

[Update 4/1/2010: While working on another story, I was amused to discover we had written about Mr. Greenholtz before, back on April 15th, when he was telling his readers “do-gooders” forced Time Warner Cable to attempt usage caps on customers.  I wonder if we would have heard something different from him had his broadband service faced an Internet Overcharging scheme.]

Blind deregulation and legislative-friendly handouts to companies like AT&T and Verizon have never resulted in better service for consumers.  They haven’t proven to save consumers any money either.  Ultimately, the decision to provide FiOS and U-verse came with investor consent, and when the economic downturn threatened the value of the stock and dividends, no deregulation or statewide franchise agreement is going to keep the fiber party from coming to a close.

[flv]http://www.phillipdampier.com/video/WSYR Syracuse Verizon FiOS Winds Down 3-26-10.flv[/flv]

WSYR-TV in Syracuse reports on the demise of Verizon FiOS’ expansion plans, which have a significant impact on central New York where many communities will be left behind.  One saving grace for New Yorkers ticked off at Albany — they’re now off the FiOS list indefinitely.  (2 minutes)

[flv]http://www.phillipdampier.com/video/Anti-Cable Pay TV Ad from the 70’s.flv[/flv]

I ran across this “public service announcement” about the perils of cable television coming from the over-the-air broadcasters terrified of the implications of a new concept in television delivery — coaxial cable.

Back in the 1960s and early 1970s, big lobby dollars from broadcasters kept a foot on the throat of the newly-born cable television industry, prohibiting them from showing sporting events, movies and programs offered in syndication, unless they were from local stations of course.

To allow this new competitor to gain access to lucrative programming would cost local jobs, hurt investment in television stations providing local community service, and ruin it for everyone!

Ironically, broadcasters are still using these arguments when confronting intransigent cable companies that won’t write checks to pay those “free TV stations” for the right to carry them on the cable lineup.

Whenever a new player enters the marketplace, the existing ones panic.  That’s why the National Broadband Plan, Net Neutrality, and the concept of open networks terrifies incumbent players.  It’s a whole new world — one they aren’t comfortable with — market instability and players out of their comfort zones always invoke a fear-based response, especially on Wall Street.

Forty years after the pay television monster envisioned in this advertisement, we are still watching local over-the-air broadcasters.  In fact, the only harm viewers have experienced comes from an industry that treats local TV stations like commodities, bought and sold for millions of dollars, even as many stations cut local programming and community service.  These days, it’s not uncommon to find a major local affiliate not even producing a newscast any longer.

We now face another transformation in telecommunications with the release of a national blueprint for improved broadband.  Existing players have no problem with it, as long as they define it, benefit from it and get to implement it.  But the idea of opening their networks and providing consumers with additional choice, as well as protection from meddling providers who want to monetize all-things-Internet, just cannot be entertained.  To do so would … you know, cost jobs, harm investment, and ruin it for everyone.

Much like a broken record, this rhetoric is obsolete.

Last week, Stop the Cap! considered the challenges America faced developing universal electric service — so much of that debate echos in today’s struggle to provide universal broadband service.

Although hindsight allows us to recognize the benefits universal electrification has brought Americans over the past 100 years, the transformational benefits from universal broadband are bit more mysterious because many applications haven’t even been envisioned yet.

IBM is a proponent of two revolutionary concepts universal broadband makes possible: The Internet of Things and The System of Systems.  The company produced a video to consider the implications of improved connectivity and how that will impact our daily lives:

[flv width=”641″ height=”380″]http://www.phillipdampier.com/video/IBM – The Internet of Things.flv[/flv]

IBM Social Media produced this video explaining The Internet of Things, one of the concepts made possible with universal broadband. (5 minutes)

Now imagine the implications if the platform which makes this all possible remains in the hands of a broadband duopoly intent on securing big profits earned from high pricing, limits on service, and other cost-controlling measures.  Transformational broadband — for the right price as long as you don’t use too much, brought to you by big cable and telephone companies.