The price of providing lousy telephone and broadband Internet service in three New England states?  $2.8 million dollars in fines, and counting.

FairPoint Communications has been piling up fines and penalties for almost a year now, providing third world phone service with the competitive spirit of Hugo Chavez.  Maine, New Hampshire, and Vermont officials started fining the company after it blasted FairPoint’s “failure to meet certain standards for quality and timeliness of interconnections.”  FairPoint is required by law to open its networks to local competitors, and the results of those trying to purchase access at wholesale rates have been about as acceptable as those residential customers have dealt with since Verizon threw them under the bus and left town more than a year ago.

The company’s response?  It wants Maine’s Public Utilities Commission, for one, to waive the $845,000 it owes to local phone carriers.  In a filing with the PUC, it asks that waiving or modifying the payments will let it return its focus to fixing faulty networks to normal operating levels.

In other words, it was penalized for not doing its job and promises, if the penalties go away, it will do its job.  What happens if the penalties don’t go away?

FairPoint’s plans for broadband expansion in its service area were called into question when the company announced it has the potential to go bankrupt if bondholders don’t agree to waive certain payment requirements.

"The biggest problem is to figure out what to do with all of the money."

Charter Communications President and CEO Neil Smit steered his company straight into bankruptcy, and still got paid double his salary he earned the year before.

Charter, which filed for Chapter 11 bankruptcy protection March 27th in order to rid itself of a pesky $8 BILLION dollars in debt apparently is no reason Smit should not get a doubling of his salary, becoming the highest paid executive in St. Louis and walking home with briefcases stuffed with $7.4 million in salary, bonus, non-equity/”cash” incentives and other goodies and perks.

But this Money Party is just getting started for Smit and his pals at Charter.  In a convenient move just two weeks before the company ran crying for protection from big bad creditors, Charter established some new executive incentives designed to reward the same guy in charge of the company when it went bankrupt with up to a $6 million dollar bonus if he helps the company find its way off the courthouse steps and back into regular business.  But he also apparently deserves a bonus on top of his bonus — the company will also pay him an additional $2.5 million in annual performance bonuses if he manages to actually… do his job.

Those that will help him in that endeavor are also set to be richly rewarded.  The company hired Gregory Doody in May as “chief restructuring officer” for a bargain: just $60,000 A MONTH, or $720,000 a year.

Smit got paid a pretty penny for joining Charter in 2008 in the first place, before the crash and burn, as the St. Louis Business Journal reports:

On top of his $1.34 million salary, Smit’s updated employment contract in 2008 provided him with a $2 million signing bonus and about $1.2 million in retention bonus pay. He earned about $2.8 million through Charter’s performance-based bonus plan. Although equity awards were not included in calculating the Business Journal’s highest-paid list, they brought the book value of Smit’s total compensation package to nearly $15.4 million.

We at Stop the Cap! believe in public service and doing the right thing, so we’re offering our free advice to help Charter restructure itself out of bankruptcy: fire the guy who shepherded the company there in the first place.

Summer in western New York has been usage capped.

As alleged summer continues here in endlessly rainy and dreary western New York, and our basement suffers from the trickling of water ingress from the never-ending rains, I’ve had plenty of indoor time as of late, pondering various issues and strategies.

I wanted to bring everyone some updates on where we have been, where we are, and where we are going (in part to take care of some questions which I receive regularly from readers):

ISP Subscriber Agreement Change Notification Tracker

In private beta at the moment, this system is nearly ready for its first testing phase.  We’ll be running a special website that will track any changes to ISP Subscriber Agreements, terms of service, or Acceptable Use Policies, and automatically notify those who wish to subscribe to the updates.  We’ll also be calling out major changes right here on Stop the Cap! This has proven necessary because ISPs are not always consistent about informing their customers about changes to these agreements, and many others do not timestamp the date of changes.  We will, along with a representation of what exactly has changed.  When the test goes public, we’ll have a form up to allow readers to inform us about any ISP’s you would like us to track.

Rep. Massa’s Bill: The Special Interests Want Revenge!

As we suspected, Rep. Eric Massa has been targeted for takedown come the next election in 2010.  In fact, his opponents are going to make his district a hot target, with a ton of special interest money and outsider cash flooding in to force him out of office.  We cannot allow this to happen.  If he has our back, we have to have his, and we’ll be calling on everyone to help do what it takes to keep Congressman Massa right where he is — doing the business of the people, not the special interest telecommunications lobbies.  I will be putting up a contribution link this week for his re-election campaign and putting some of my money where my mouth is, and I hope anyone concerned with the Internet Overcharging issue will do the same.  We need to get started early and stick with him all of the way.

Naughty Phone Companies Need Their Own Special Site

I’ve heard from just about everyone on the issue of FairPoint, and our 13-part series on the nightmare that never seems to end for people in New England who are stuck with this god awful phone company.  Even regulators are dropping e-mail my way, some in other states facing the prospect of Verizon pulling out of their communities as well.  Everyone wants to know what happened, what’s being done to really fix it, and how they can prevent this from ever happening again.

Because this issue starts to diverge away from the mission of Stop the Cap!, a new pro-consumer website is forthcoming that will be the home for news and information about telephone companies behaving badly on pricing, service, and viability.  We’ll still bring all of the news that relates to Internet/broadband issues here, but some of the other deeper issues will work better on a different site.  Stay tuned for more details.

Not every phone company is evil, and some do a fine job for their customers.  But the days of rubber-stamped business deals that leave consumers out in the cold need to come to an end.

My Personal Ramblings

You will also find an eclectic mix of stories, opinion, and rantings about the telecommunications industry, the media, politics, and life in the Flower City on my personal blog.  It’s become more active as a place where I can cover stories and issues that won’t fit anywhere else, and allows people to figure out where I’m coming from on an entire range of issues.  It will look familiar to readers here, as it has the same basic look.

Tweets, Twitter & The Social Networking Thing

Stop the Cap! Official Twitter Channel

Phillip Dampier’s Personal Twitter Channel

Facebook

[Updated 1:00pm ET: Stop the Cap! reader Michael Chaney found a video interview done last fall with some Australian providers falling all over themselves to praise themselves for Internet Overcharging schemes, and suggest American providers learn from them how to get away with trying the same thing.]

The group managing director of Telstra (Australia), Justin Milne, wants you to know that the era of free love is over.  They are sick and tired of letting content producers like Ninemsn (a partnership between Australia’s Nine Network ((think ABC or CBS)) and Microsoft’s MSN) use their pipes for free to send those video clips to their customers.  It’s time to break out the checkbooks and start paying them for freeloading on their network.

In a commentary for ZDNet Australia, Milne equates Net Neutrality with greed and “economic self-interest dressed up as moral virtue.”  Pot to kettle, especially when he quotes Franklin Roosevelt:

Franklin Roosevelt said during the Great Depression that heedless self-interest reflected not only bad morals but bad economics too.  Seventy years on, his advice still rings true.

Yes it does, and Telstra is a perfect example of that in practice, offering dreadful broadband service with paltry limits on usage and heavy throttles on speed when one exceeds them, all for a substantial price.  Telstra’s own self-interest leaves a lot of Australians despising the provider and begging for alternatives.  The morality of a company that now wants content providers, with whom it has no business relationship, to pay them money to reach their customers, can be left to the reader’s determination.

This is a tune we’ve heard before.  AT&T’s former CEO Edward Whitacre was the guy who first lit the flame to the gas line of abusive provider tactics using generally the same language:

How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?  (11/07/05)

Justin Milne

After Whitacre was educated that providers already pay hosting fees, infrastructure and licensing costs, and provide the very stuff that drives consumers to sign up for AT&T’s broadband services (and pay them for it) in the first place, Whitacre did a full reversal three months later:

“Any provider that blocks access to content is inviting customers to find another provider. And that’s just bad business.” (3/21/06)

Milne follows in Whitacre’s earlier footsteps, except he wants to be paid by everyone.  His customers are already subjected to limits on usage, which have limited Australia’s multimedia online experience years behind most others, and now he wants to have the money he earns from Internet Overcharging -and- the right to limit content that reaches his customers to only those who pay Telstra for the right to deliver it:

“Some content providers such as ninemsn argue that Telstra should subsidise the cost of the ninemsn customers visiting their internet sites. We might also assume [they] would prefer petrol to be free for their cars, and Hayman Island would like air travel to the resort free,” Milne wrote.

“But Shell, Qantas and Woolworths do not give their services away for free. Just like BigPond and the rest of Australia’s ISPs, they need to charge their customers a fee so that over time their investment is recouped,” he said.

Of course, Shell, Qantas and Woolworths only charge once for their products and services.  They don’t install a toll booth on a road and claim that because a full petrol tank weighs more than a near-empty tank, there needs to be a surcharge toll.  Qantas doesn’t send people down the aisle on a flight with a collection plate demanding more money for your ticket because the plane was packed.  All of Australia’s ISPs charge their customers for providing broadband connectivity.  Telstra does as well.  The difference is that Telstra wants to charge its customers a fee and also charge the websites you choose to visit a “transport fee” on top of that.  Your bill as a customer doesn’t go down because of “cost sharing.”  Telstra’s profits simply go up.

Milne’s problem with Net Neutrality is its core principle that all legal data traveling across the net must be treated equally.  That means Telstra has no way to enforce their HissyFit.  In the absence of Net Neutrality, they can block, limit, or throttle those that refuse to pay them.

The cost of the infrastructure to support this traffic has been borne almost entirely by internet service providers, and not by the publishers. In Telstra’s case alone, the company has invested billions of dollars in the Next G mobile broadband network covering 99 per cent of Australian consumers, the HFC cable network in major cities and the extensive ADSL network.

Unfortunately there is no magic pudding, so this investment must be repaid by the beneficiaries of the internet — the users on the one hand, and the publishers who seek to make money from those users through advertising and subscriptions.

Milne almost suggests they did this out of the goodness of their heart, and their investment was not going to be paid back.  The fundamental reality is that subscribers to those services are Telstra’s customers and they pay for that service, such as it is.  That is where that investment will be recouped.  Demanding a company that has no business relationship with your company to pay up or else face the potential of being cut off is akin to extortion.

I offered Milne two alternative suggestions:

• Expand your network to create infrastructure suitable to meet the needs of your subscribers, who will sign on in greater numbers to your service.
• Create hosting platforms and services at attractive prices to content providers who will use your service to host their content (and pay you for actually doing something for them).

Barring that, this is nothing but a HissyFit from another provider looking for a payday.

Michael Chaney, one of our readers, discovered this video interview compilation done last fall by ZDNet.  Enjoy the Internet Overcharging excuse making, where the customer becomes the enemy, and the creativity to find new ways to charge more in without bounds.

“The attempt is being made certainly in the UK but also in the US to push that cost onto the content owner by saying, you pay, and we’ll prioritise your traffic,” he said. “[And] if you don’t pay, your traffic will be really crap.”

[flv width=”480″ height=”360″]http://www.phillipdampier.com/video/ZDNet Australia Providers 2008.flv[/flv]