Brain Trust: Time Warner's Gerald Levin (left) and AOL's Steve Case (right)

Gerald Levin, the former CEO of Time Warner, who presided over the company’s disastrous merger with the AOL online service confessed “I presided over the worst deal of the century, apparently.”

Appearing Monday on CNBC with Steve Case, former head of AOL, the two lamented the blockbuster wealth destruction vehicle on its 10th anniversary.

“I’m really very sorry about the pain and suffering and loss that was caused. I take responsibility,” Levin said. “It wasn’t the board. It wasn’t my colleagues at Time Warner. It wasn’t the bankers and lawyers.”

“It’s a little hard to exercise compassion, connection, and love when the market is very unforgiving,” Levin added.

The striking admission that a corporate master of the universe exercised flawed judgment was rare enough, but to apologize for it is near unprecedented.

The Times-Online called it “a tad late,” coming a decade after the deal, noting the deal was only made possible because of the Dot.com Boom launching AOL stock value into the stratosphere.

“In the US, there have been no apologies from the chief executives who steered Wall Street banks on to the rocks, notably Dick Fuld of Lehman Brothers. Given he is likely to spend the rest of his life defending legal actions, that is hardly surprising,” the newspaper adds.

The Financial Times notes corporate apologies come with some rules of etiquette:

There are – rightly – limits on what responsibility a business can accept until it has talked to its lawyers. Executives whose contrite words turn out to contain too great an admission of liability may soon end up apologising all over again.

But there are a few straightforward rules for an effective corporate apology, and the first one is to keep it simple. Expressions of penitence that come with explanations of how the event was not a total catastrophe or was partly someone else’s fault lose their impact. Equally, a statement that equivocates on the extent of remorse will fail to convince. The apology must also be clearly directed at those adversely affected by what has happened, rather than aimed at making those responsible feel better about it.

Mr Levin mixed his belated apology with a call for today’s corporate leaders to accept responsibility for the financial crisis. Though some bank executives have apologised, expressing regret for this crisis is a harder task than it sounds. People can take responsibility only for their own misdeeds, but explaining this may sound weaselly. At the same time, if an angry public favours ritual sacrifice, then other acts to make amends might seem inadequate. So those executives who pull off an effective apology for the crisis deserve our respect – as long as they do not leave it until 2018.

Amusingly, post colossal failure, the two executives have found remarkably similar career paths divorced from the high tech telecommunications market.

Levin runs the California-based new-agey Moonview ‘addiction-rehab-for-the-rich’  Sanctuary, which markets itself as “a place to revel in the wonder of you.”  New York Magazine said Levin was pitching “brain painting, equine therapy and soul communion with the dead.”

Moonview’s “comprehensive multi-modal mind, body and spirit assessment creates a customized plan of psychological, spiritual, physical healing and optimal performance.”

It had better.  They don’t take health insurance and charge $2,500 for a one-half day and from $5,000 for a full day. Minimum is $15,000.  That makes me depressed.

Steve Case founded Revolution, which claims to: “drive transformative change by shifting power to consumers and building significant, category-defining companies in the process.  Focusing on multiple market sectors, including Health, Financial Services, Resorts, Living and Digital, Revolution’s mission is to give people better choices, more control and more convenience in the important aspects of their lives.”

Looking through their collection of companies, the middle class need not apply.  I especially enjoyed Case’s vision of a getaway with his “Exclusive Resorts” company:

We believe that your Exclusive Resorts membership plan should be designed around your lifestyle, not the other way around.

With Membership Fees starting at $160,000 (75% refundable) and Annual Dues of just under $1,000 per day on all plans, our memberships are designed to be tailored to your individual needs.  A wide range of plans from 10 to 60 days of vacation per year and optional features such as priority holiday access ensure that you will find the unique combination that is right for you.

My last vacation getaway was in Calgary and Kananaskis Country in Alberta in 2007.  The private chef “at your beck and call” at Exclusive Resorts for them was a trip to Tim Horton’s for me.

But then I didn’t preside over the worst deal of the century, requiring a mind, body and spirit assessment and a getaway to the French Alps.

[flv]http://www.phillipdampier.com/video/CNBC 10 Years After AOL-Time Warner, Gerald Levin Says He’s Sorry 1-4-10.flv[/flv]

Gerald Levin and Steve Case revel in the wonder of their failure 10 years ago merging Time Warner with AOL. (22 minutes)

Phillip Dampier

In a remarkable statement to the Federal Communications Commission in Washington, AT&T has joined Verizon in predicting the imminent demise of Ma Bell’s classic telephone network.

AT&T writes in its 30 page comment, “That transition is underway already: with each passing day, more and more communications services migrate to broadband and Internet Protocol (IP)-based services, leaving the public switched telephone network (“PSTN”) and plain-old telephone service (“POTS”) as relics of a by-gone era.”

AT&T claims abandoning the old legacy phone network would help the company devote its full resources into staying relevant by constructing a broadband, IP-based network that would deliver voice, data, and video to consumers, presumably over its U-verse platform.  That, according to AT&T, could help the company achieve universal broadband coverage in its service areas, but only if investment-friendly regulations are supported by Washington policymakers.

The Commission has been charged by Congress with formulating a National Broadband Plan that will result in broadband availability for 100% of the United States. That auspicious goal is within reach, but […] will not be met in a timely or efficient manner if providers are forced to continue to invest in and to maintain two networks. Broadband is dramatically changing the way Americans live, work, obtain health care, and interact with the government. Congress and the Commission have rightly made universal broadband access a core national priority. But achieving this goal will take an enormous investment of capital. Private investment from network operators has brought broadband access to over 90% of Americans, and these operators will continue to play a pivotal role in bringing broadband to the remaining 8-10% of citizens who do not currently have broadband access. It is accordingly crucial that the Commission pursue forward-looking regulatory policies that remove disincentives to private investment and encourage operators to extend broadband to unserved areas.

While broadband usage – and the importance of broadband to Americans’ lives – is growing every day, the business model for legacy phone services is in a death spiral. Revenues from POTS are plummeting as customers cut their landlines in favor of the convenience and advanced features of wireless and VoIP services. At the same time, due to the high fixed costs of providing POTS, every customer who abandons this service raises the average cost-per-line to serve the remaining customers. With an outdated product, falling revenues, and rising costs, the POTS business is unsustainable for the long run.

AT&T cites a growing number of Americans cutting their wired phone line service — 22% according to the National Center for Health Statistics.  Craig Moffett from Bernstein Research pegs it closer to 25%, with an additional 700,000 phone lines being disconnected every month.  With a shrinking customer base, the viability of companies providing only wired phone service has come into question.  Verizon and AT&T, the nation’s largest phone companies, have made the judgment it’s a dying business.  Conversely, Frontier Communications and a few other independent phone companies remain believers in rural copper wire phone networks, and are willing to buy the discarded, mostly rural regions their bigger counterparts can’t wait to exit.

But AT&T’s advocacy for an end to “plain old telephone service” is just a tad self-serving when one explores their “To-Do” list for Washington regulatory agencies and lawmakers.  AT&T suggests their future plan benefits all Americans.  Critics would contend it mostly benefits AT&T and its shareholders, especially in light of AT&T’s future revenues being directly impacted by customers disconnecting their AT&T phone lines.  AT&T themselves note collective industry revenue for basic phone service fell from $178.6 billion in 2000 to $130.8 billion in 2007, a 27% decrease.

AT&T’s Action Plan to Avoid Obsolescence Explored

At the heart of AT&T’s proposal for 21st century telephone service is an end to analog telephone service, designed more than 100 years ago to carry voice calls, and the launch of broadband-based service to every home in their service area.  From this new platform, AT&T can deliver telephone, television, and Internet service over a single network.  In fact, they already do in several cities where AT&T’s U-verse has launched. Instead of getting one revenue stream from basic phone service, AT&T can now earn from any number of services a broadband platform can support.

AT&T compares their plan with the transition from analog to digital television, except you won’t have to trade in your existing phones or attach converter boxes to every telephone in the house.  Just like the switch to digital television, AT&T wants a date certain to pull the plug on Ma Bell’s old phone network, the sooner the better.

But AT&T’s plan has plenty of strings attached.

First, the company believes the only path to private investment and a successful transition is a near-complete deregulation of the telephone industry.  It wants the federal government, specifically the FCC, to take control of oversight of phone companies across America, if only to end a patchwork of state regulations and service requirements.  Remember, the Ma Bell most Americans grew up with was a regulated monopoly.  In return for guaranteed profits, phone companies agreed to meet service obligations, provide service to any home or business that wanted it, serve the disabled, and provide discounted phone service to the economically disadvantaged.  Rural customers were assured they would have access to phone service and at reasonable prices, and if something stopped working, government oversight ensured problems would be repaired to the customer’s satisfaction.

In AT&T’s view, such requirements are quaint and outdated, and it wants to bear few of those burdens going forward.  Indeed, in a too-cute-by-half aside, the company argues that since it will design the network to operate under the same protocol the unregulated Internet uses, it should be unregulated as well.

Such deregulation could impact a myriad of policies governing phone service that most Americans take for granted — minimum service standards, requirements that telephone companies complete calls between one another – even if competitors, and reasonably priced basic phone service even in the most remote locations.  But AT&T is asking for even more – a comprehensive review and possible elimination of any regulation that could be interpreted as interfering with the transition to an all-broadband telephone network.  AT&T includes everything but the kitchen sink in this category, ranging from service quality requirements, reporting, recordkeeping, data collection, accounting, and depreciation and amortization rules governing how quickly the company can write off obsolete equipment.

Ma Bell's network is due for a retirement, advocates AT&T

Ironically, AT&T wants deregulation -and- access to public taxpayer dollars to construct their new network.  The company advocates government-funded award programs to promote universal broadband access.  One would provide money for wired broadband service, perfect for companies like AT&T that want to build those networks, and another for wireless mobile projects to expand service into unserved or underserved areas, also perfect for AT&T Mobility — the same wireless carrier slammed by Verizon Wireless for largely ignoring rural America with 3G wireless data upgrades.

While there is some justification for a review of federal and state rules that may no longer realistically apply to today’s telecommunications marketplace, AT&T goes out of its way to be self-serving in its recommendations.  It dangles the bright and shiny object of a 21st century broadband-based telephone network, but only if they get to run it essentially “no questions asked,” with little oversight and an infusion of public taxpayer dollars to compliment private investment.

AT&T may be correct that the days for Ma Bell’s “plain old telephone service” are indeed numbered.  But for a company that earns billions in profits and answers to shareholders demanding maximum return, shouldn’t their long term well-being first be a question between AT&T management and shareholders?  Are they incapable of a private course correction that makes their future relevance more secure?  AT&T’s U-verse did not require public tax dollars to be successful, and the company spent generously on lobbyists and astroturf campaigns to smooth the way forward with “statewide franchising,” bypassing local government oversight.

The real question on the table is how far does the Obama Administration and the FCC want to go to achieve universal broadband?  AT&T suggests that only massive deregulation will entice private investors to step up and make the investments required to help achieve whatever definition of “universal broadband” the Commission comes up with.  But that price is way too high to pay.  AT&T answers first and always to its shareholders.  If they want public tax dollars funding, even in part, their transition to an all-broadband future, they must also answer to the other “stockholders,” namely the American people helping to foot the bill.

It's your fault our service doesn't work.

Central Floridians are angry and annoyed with a broadband provider that is more adept at randomly assigning blame than actually resolving serious service problems.  Bright House Networks customers in the Orlando area first noticed their Road Runner service began slowing down around December 23rd.  Web pages took minutes to render, if they finished at all.  Important e-mail was inaccessible at times for many accustomed to a much faster online experience than the bad old days of dial-up.

Problems worsened by Christmas Day, and despite complaints from across the entire region, Bright House technicians spent their time assigning blame elsewhere.  In a classic case of buck passing (Deluxe Goldman-Sachs Home Edition), the cable operator initially began blaming customers for the problems, claiming everything from virus infections to bad routers.

“The technician said he was certain it was either my router or my Windows XP had become hopelessly corrupted with viruses, and I might have to reformat my hard drive and start all over,” writes Stop the Cap! reader Kris.  “Two days before Christmas was the worst possible time for something like this to happen, and it was clear Bright House’s biggest priority was to get me off the phone as fast as they could.”

As customers abandoned all hope of using their broadband accounts on Christmas Day, calls continued to pour into Bright House customer support.  Even the media got involved, noting the cable company adopted a “mum’s the word” strategy on their website, saying nothing about the increasingly maddening service problems.

By then, company officials must have figured out blaming the customers wasn’t working too well, and they blamed Christmas instead.

“I was told heavy Christmas web traffic was responsible,” said Jed, a Stop the Cap! reader.  “They told me with everyone getting new computers and laptops and other electronics, it might be awhile before things got back to normal, perhaps even as late as next week when people returned to work.  Considering I was getting less than 56kbps service at this point, I wasn’t buying it.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WFTV Orlando Internet Outages Frustrate Bright House Customers 12-27-09.flv[/flv]

WFTV-TV in Orlando is credited for being among the first in the media to shine a spotlight on Bright House Networks’ failure to address their ongoing Internet service problems (2 minutes)

As the weekend wore on, enterprising customers learned it was probable a DNS server or other connection point further up the Internet was probably causing all of the trouble.  Yet that theory was repeatedly denied by Bright House, who was forced to begin issuing statements to the local press, still blaming others for broadband woes.

“Some Bright House Networks Road Runner Internet customers are experiencing intermittent problems accessing various websites,” Bright House spokesman Brian Craven wrote. “The issue is a result of off-network congestion. BHN engineers are working to resolve the issue.”

Customers were also on the receiving end of that old chestnut ‘the exaflood,’ the theory that the Internet is being crushes by a global traffic flood worthy of Noah’s Ark.  As comments piled up on Orlando media’s online message boards, customers traded the excuses coming from Bright House, wondering why the company couldn’t spend as much effort actually fixing the problems with Road Runner on Xanax.

Finally, several days later, company officials admitted the problems were coming from a lot closer to home — theirs, not yours. Brian “It’s Congestion” Craven was back with a revised statement:

“A hardware problem experienced by a Bright House Networks vendor caused some Bright House Networks customers to experience intermittent problems accessing some Internet websites. The issue was resolved at 11 p.m. Sunday. Bright House Networks Internet service was never down.  The situation only affected some customers’ ability to access certain Internet sites.”

Some websites like Google, for instance.

So it wasn’t your fault after all.  It was one of their “vendors.”  Customers pondered when they would be able to receive service credit for several days of useless broadband.

The answer?  Never… tough luck:

“Customer credits will not be given because at no time was Internet service down. It was a latency issue in which some customers experienced intermittent problems accessing certain websites. The issue was caused by a hardware problem experienced by a Bright House Networks vendor,” Craven added.

Customers began lighting the torches.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/WOFL Orlando Bright House Outage 12-29-09.flv[/flv]

WOFL-TV in Orlando reports on growing customer rage over the lousy customer service being provided by Bright House Networks. (1 minute)

News accounts noted some customers disappointed by the company’s callous response were returning the favor by unceremoniously dumping their cable modems on the counter at the nearest Bright House cable store, canceling service.  For those brave enough to stay, lessons were learned. As one Web Worker Daily contributor lamented, the most effective way to get Bright House off their collective butts was to embarrass them in the media:

The biggest help [came] when the media started reporting the problem. A local TV station and the Orlando Sentinel both picked up the story. Within only a couple hours, the problem that supposedly didn’t even exist was magically solved, after having dragged on for at least a week.

The lesson I came away with was that fighting as a group is more powerful than going it alone — and even better is having a reporter or two in that group.

The Internet… interrupted: Bright House Networks’ holiday gift to you.  A week of buck passing, liberal use of the “excuse-o-matic” that blames others for their own problems, and a complete unwillingness to do the right thing by customers.  When a service doesn’t work properly, customers don’t want to hear a finger-pointing blame game.  They want the service fixed… fast, and receive credit for the inconvenience they experienced while trying to use your service.  Anyone aware of good customer relations already recognizes these are not unreasonable requests.

Too bad Bright House spent most of its time creatively not fixing its problems until the media got interested.  They should stay on the company’s case until it provides the credit customers deserve.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WFTV Orlando Bright House Not Taking Blame For Outage 12-28-09.flv[/flv]

WFTV-TV in Orlando reports on the inevitable customer blowback that happens when a service provider treats their customers with disregard.  [Apologies for the audio sync problem.] (2 minutes)

OnLive puts the processing power to render and play games on their end, and streams the result to you over your broadband connection (click to enlarge)

OnLive, the cloud-based videogame streaming service, was on display during a live dem0 of the service at Columbia University.  The service, which literally streams game play across fast broadband networks, could seriously challenge the videogame console marketplace.  Instead of using an expensive piece of hardware at home to play videogames such as w88, OnLive puts the hardware at their end and streams the results to any computer or television.  If it works, it means consumers won’t need the highest performance videocards or latest new CPU.  They’ll just need a fast broadband connection to let OnLive’s own servers do all of the processing.

The founder and CEO of OnLive, Steve Perlman, shows considerable enthusiasm for the concept, and several major investors including AT&T and Time Warner have backed the venture, which could help guarantee smooth passage on their broadband networks.

Still, a product that requires a minimum of a 5Mbps broadband connection for HD-quality streamed game play could consume an enormous amount of data — up to 2.25 GB per hour of gaming.  Although cable and fiber-based broadband connections will suffice, many DSL customers don’t have service fast enough to support OnLive.  Among those that do, any usage caps or allowances will significantly reduce the value of the service to potential subscribers.  Frontier Communications’ infamous 5GB “acceptable use” per month, for instance, would allow just over two hours of use per month, assuming you did nothing else with your DSL service.

Even Comcast’s 250GB usage allowance cuts game play to a little over 100 hours per month.  That’s a ludicrous amount of gaming for most of us, but not for some gaming addicts who may have tried games like 핑카지노.  Besides, it also assumes you don’t use your Comcast broadband service to watch video or other bandwidth-intensive online services.

Time Warner Cable’s proposed 40GB usage limit, shelved indefinitely in April after consumer protests, would permit less than an hour of play per day, assuming your Road Runner service was for nothing but OnLive.

In short, assuming OnLive works as promoted, its biggest threat to success will come from external factors mostly outside of its control — namely cap-happy ISPs that could quickly make streamed cloud computing untenable for all but the wealthiest among us.

What could OnLive do to reduce its risk from caps?  Partner with ISPs in a non-Net Neutral broadband world, of course.  That investment from AT&T, for example, could theoretically pave the way for AT&T to exempt OnLive from any usage limits that come from its own Internet Overcharging experiments in Beaumont, Texas and Reno, Nevada.  That would be a clear violation of Net Neutrality, if enacted into law.

Scenarios like this should drive consumers to support Net Neutrality policies.  ISPs forming “preferred partnerships” with innovative services like OnLive might seem consumer-friendly at first, but not in the long-term because it spells the death of would-be “non-preferred” start-ups, and helps pave the way even faster to Internet Overcharging schemes letting broadband providers pick the winners and losers of the future.

[flv width=”484″ height=”292″]http://www.phillipdampier.com/video/OnLive Columbia University Demo.flv[/flv]

OnLive founder and CEO Steve Perlman demonstrates OnLive and talks about cloud-based, streaming game play at this gathering at Columbia University in New York. (49 minutes)
(If stream stops for buffering, pause it for a few minutes to let a significant amount of the file pre-load, which should reduce re-buffering problems.)

Customers in New York City attempting to order an iPhone direct from AT&T's website saw this message over the weekend

While much speculation about this week’s two-day unavailability of the iPhone for those in the Big Apple has often centered on the company running out of capacity, the more likely explanations are far simpler — the regional fulfillment center temporarily ran short after a holiday rush and AT&T wanted to stem the tide of increasing numbers of bottom-feeding eBay resellers doing business in the Tri-State area.

Customers in the New York metropolitan area discovered Saturday they couldn’t order an iPhone from AT&T’s website after entering a New York-area zip code.  Customers were told “we’re sorry, there are no Packages & Deals available at this time — please check back later.”  By Monday afternoon, orders were being processed normally.

The mystery deepened when some blogs began speculating the reason for the order blockade had to do with AT&T’s data capacity in New York City, suggesting the wireless company had reached its limit and halted sales accordingly.  They had the right to speculate if online chats with AT&T sales representatives were to be believed.  The Consumerist found two different explanations during their chats:

Daphne: Welcome to AT&T online Sales support. How may I assist you with placing your order today?

Laura: Hi, I was looking at the iPhone 3Gs and the system tells me that I cannot order one in my ZIP code. My zip code is 11231. (Brooklyn, NY) Is this true? Are iPhones no longer available in New York City?

Daphne: I am happy to be helping you today . Yes, this is correct the phone is not offered to you because New York is not ready for the iPhone.

Daphne: You don’t have enough towers to handle the phone.

Laura: Thank you for your help. So the phone is not available to people anywhere in the city?

Daphne: Yes this is correct Laura.

AT&T didn’t help matters with a non-denial denial issued by AT&T spokesman Fletcher Cook, who said only that the phone company periodically “modifies” its distribution channels. He had no comment about why the company resumed sales.

By not denying the capacity narrative that gained popularity earlier this week, it confirmed it in the popular press, including two local television news reports detailing the ‘sales outage.’

[flv width=”596″ height=”356″]http://www.phillipdampier.com/video/WNBC New York iPhone Sales Stopped 12-28-09.flv[/flv]

WNBC-TV reports on the unavailability of the iPhone in New York and AT&T’s ongoing problems with reception, service, and now PR in the Big Apple. (2 minutes)

With that story feeding the greater narrative that people “love the iPhone, hate the network,” AT&T better get on the phone with Luke Wilson and start taping some new ads.

In reality, Cook’s vague statement is something you’d expect from a spokesman who hasn’t been briefed on what really happened and needed to go with something to placate media speculation.  The data capacity theory would only make sense if the company suspended sales across all channels.  Except they didn’t.  Beyond the post-holiday low inventories found by some shoppers, New Yorkers could still find and purchase the iPhone in AT&T retail stores and through third-party retailers.  One could even order the phone from Apple.  Could unofficial ‘over-eager’ customer service representatives be responsible for the volunteered excuses noted above, either of which would ignite a firestorm of bad press for AT&T?

An increasingly annoying problem confronting cell phone companies is the eBay bottom-feeder and other gray market sales of the popular phone.  Both AT&T and Verizon have had growing problems with resellers who purchase a subsidized smartphone, agree to a two year contract, and immediately cancel it and resell the phone.  And they’ve been cashing in.

AT&T sells a new iPhone 3GS with 16 gigabytes of memory for $199.  When a reseller cancels the contract and keeps the phone, they pay a $175 early termination fee.  That means the phone costs them $374.  They then easily modify the phone to work with other cell phone companies and resell it for upwards of $600 or more on eBay, pocketing a nice $226 in profit.  Demand for the iPhone abroad is high, and considering the value of the dollar remains relatively low, Europeans can snap one up at a fire sale price.  Outside of North America, wireless phone companies don’t discount handsets like the iPhone.

Verizon Wireless has tried to deal with this problem by doubling the early termination fee on smartphones to $350.  That nearly eliminates the profit motive to resell affected phones.

[flv width=”600″ height=”356″]http://www.phillipdampier.com/video/WABC New York iPhone Sales 12-28-09.flv[/flv]

WABC-TV New York calls the latest iPhone mess “salt in the wound” for many New York-area AT&T customers.  (1 minute)