A sweeping deregulation measure sponsored by Verizon Communications would end the telephone company’s obligation to provide landline service and remove state-mandated customer quality of service standards in Massachusetts.

House Bill 2930, “An Act modernizing telephone regulation and encouraging economic growth,” introduced by Rep. Stephen L. DiNatale (D-Fitchburg) is succinct:

SECTION 1. Chapter 25C of the General Laws, as appearing in the 2010 Official Edition, is hereby amended by inserting after section 7 thereof the following sections.

Section 8. Notwithstanding any other general or special law to the contrary, the department shall have no jurisdiction, general supervision, regulation or control over wireless service, including mobile radio telephone service, or radio utilities.

Section 9. Notwithstanding any general or special law to the contrary, subject to the provisions of section 10 of this chapter, no provision of this chapter, Chapter 25 or Chapter 159, 8 and no regulation, order or settlement or portion thereof adopted pursuant to any such provision, shall apply to any telephone company (or a common carrier offering telephone service) in any municipality for which the company or carrier certifies to the Office of Consumer Affairs and Business Regulation that there are at least two providers offering voice telephone service to retail residential customers in that municipality using any technology, including but not limited to wireless voice service and VoIP service.

Section 10. Nothing in sections 8 or 9 of this chapter shall be construed to affect or modify:
a. the authority of the attorney general to apply and enforce chapter 93A or other consumer protection laws of general applicability;
b. the department’s authority under sections 18B and 18H of Chapter 159, concerning enhanced 911 service, and under section 15E of Chapter 166, concerning telephone relay service;
c. the rights or obligations of any carrier under 47 U.S.C. § 251 or 47 U.S.C. § 252; or
d. the department’s authority to administer the federal Lifeline and Link-up programs or the Connect America Fund.

SECTION 2. Sections 11, 12, 12A, 13, 14 and 15 of Chapter 166 are hereby repealed.

The measure was discussed at a hearing this week before the Legislature’s Energy & Telecommunications Committee. Verizon argued its company is still regulated as if it was a monopoly, with reporting requirements and customer service mandates that do not apply to its competitors in the cable or wireless industry.

DiNatale

“We have to answer a customer’s call within x number of seconds,” said Verizon spokesman Phil Santoro. “If we don’t, we get penalized. No other company that provides phone service has to do that. They’re all regulations that were formed when we were a monopoly, and they haven’t been changed.”

Verizon lobbyist Joe Zukowski told the Boston Business Journal Verizon is required to respond to repair calls within a 24-hour window, something not required of its biggest competitor Comcast. Verizon has to report its annual finances and various customer metrics governing response times and outages to state regulators. Verizon also has to offer landline service anywhere in its service area across most of the state, while cable companies can pick the places they wish to serve.

DiNatale regularly supports Verizon’s legislative initiatives. In 2012, he proposed a bill to amend state law to remove the authority of the Department of Telecommunications and Cable to regulate the wireless industry, deferring instead to federal regulations that industry representatives said would level the playing field.

DiNatale suggested Massachusetts could be left behind if the legislature didn’t adopt the measure. Rep. Randy Hunt, a Sandwich Republican, asked if Massachusetts had missed out on any innovations in technology because of overregulation. Zukowski suggested a Massachusetts legislature hostile to business interests would make the company think twice about expanding its 4G LTE network in the state. By November, the bill was effectively buried in a legislative maneuver and by June 2013, Verizon announced it largely completed its 4G LTE upgrade, regardless of the bill.

DiNatale’s latest bill includes last year’s wireless oversight ban as well as forbidding the Department of Telecommunications and Cable from regulating Verizon in any part of the state where at least one provider of any kind offers competitive service.

Despite DiNatale’s attempt to ban state regulation of wireless service,  Sen. Karen Spilka (D-Ashland), argued at Tuesday’s hearing for (S 1617), “The Cellphone User’s Bill of Rights,” that would require clearly published prices and service policies, monitors the quality of cell service in the state, and limits all cell contracts to 12 months.

“Many people don’t have landline phones anymore. However, as wireless subscribership increases, so do complaints about the contracts and services,” Spilka told the committee.

Zukowski suggested that rural areas will still be covered by regulation where Verizon maintains a monopoly. But the legislation eliminates regulation from any part of the state where even one competitor promises to provide service. AT&T Mobility alone would give Verizon an effective way out of regulatory oversight, because AT&T claims it already provides solid service to the majority of the state.

AT&T Mobility claims its competing cell service is available across almost the entire state of Massachusetts. The areas boxed in red are the only significant parts of the state without claimed coverage by AT&T.

There are only about three dozen or so towns in the state with no cable voice service, and even fewer with significant sections that have no cell phone service, all in the sparsely populated rural central and western parts of the state.

Other key components of this and another bill Verizon is supporting this term:

• Verizon would end its commitment to provide universal service in the state. Under the terms of the bill, Verizon could also justify ceasing rural landline service and offer an alternative such as Voice Link, a wireless landline replacement not subject to state oversight;
• Verizon would not have to report finances and customer service metrics and would no longer have to meet mandated customer service standards;
• State authority to compel reliable E911 service without any charge to the calling party and mandates regarding service for the disabled are weakened or eliminated;
• Elimination of a requirement providing Verizon customers with 10 free directory assistance calls per month, unless the customer is certified as elderly or disabled;
• Impose clear terms that wireless service is off-limits to state regulators.

The bill is co-sponsored by: Rep. Stephen Kulik (D-Worthington), Sen. Anthony Petruccelli (D-East Boston), Rep. Kathi-Anne Reinstein (D-Revere), and Sen. Sal DiDomenico (D-Everett).

LightSquared, the ill-fated venture to bring nationwide 4G wireless broadband to the masses may be all but gone and forgotten in bankruptcy reorganization proceedings, but the wireless spectrum it controls and the drama surrounding it is not.

A battle between billionaires and the hedge funds they support has broken out over who will ultimately control the failed venture — a hedge fund manager deep in LightSquared debt or the richest man in Colorado that often finds a way to get his way.

Harbinger Capital Partners’ Phil Falcone

Falcone

Phil Falcone earned his first fortune trading junk bonds in the 1980s. In 2001, he launched Harbinger Capital Partners and by 2007, Falcone and his investors were well-positioned for a blizzard of cash betting against sub-prime mortgages just before the housing collapse and credit crisis that followed. Falcone took home $1.7 billion in compensation that year while an epidemic of foreclosures and upside down mortgages was just getting started.

In late 2008, when the economy was in free-fall, Falcone suspended or limited withdrawals from his largest funds, upsetting investors who couldn’t get their money out. But Falcone reportedly gave special treatment to certain large investors (sources say Goldman Sachs is among them) who were able to clear out their exposed accounts before the losses piled up.

By 2009, Falcone was again making money — so much he vastly underestimated his federal and state tax bills. What’s a cash-strapped billionaire to do? Quietly loan himself $113.2 million from one of his investment funds at a favorable interest rate and keep it a secret from investors for five months. When they eventually found out, they were understandably disturbed. Falcone had barred those same investors from cashing out of the fund he borrowed from.

The Securities and Exchange Commission was not happy either and filed charges against Falcone.

“Today’s charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully,” Robert Khuzami, director of the S.E.C.’s division of enforcement, said in a statement. “Clients and market participants alike were victimized as Falcone unscrupulously used fund assets to pay his personal taxes, manipulated the market for certain bonds, favored some clients at the expense of others, and violated trading rules intended to prohibit manipulative short sales.”

Despite the publicity generated by the SEC, investors who appreciated Falcone’s ability to earn them money allowed them turn a blind eye to the ethics questions and pour money into Falcone’s latest venture — a wireless network known as LightSquared.

LightSquared was preparing to launch a unique nationwide 4G LTE mobile broadband network powered by satellites and ground-based cell towers, selling wholesale access to third-party wireless companies able to market the service under their own brand. Falcone’s funds poured nearly $3 billion dollars into the venture while getting a waiver from the government to operate high-powered transmitters on the “L” band — 1525-1559 MHz. LightSquared’s plans alarmed the next door neighbors — GPS satellites facing interference issues that would hurt the accuracy of precise location information provided to millions of tracking devices on the “L1” band — 1559 to 1610 MHz.

Initial testing showed that significant interference from the prototype ground-based transmitters would occur and potentially could cripple aviation and public safety GPS users. The FCC eventually withdrew permission for LightSquared to run its network as planned, a potential death-blow to the venture.

Creditors grew anxious wondering how LightSquared would be in a position to repay its loans when it was unable to launch its wireless network.

In May 2012, creditors forced the issue and LightSquared filed for bankruptcy protection, listing assets of $4.48 billion and debts of $2.29 billion. Falcone claimed the bankruptcy filing would give the company more time to overcome the FCC’s objections to its network operations plan. Falcone estimated it would take two years to secure a resolution. Analysts familiar with the FCC suggested Falcone might die of old age before the agency gave way.

Falcone’s subsequent efforts to win back control of the venture have been made more difficult because one man has been quietly buying up large amounts of LightSquared’s debt with designs on the venture’s spectrum.

Dish Networks’ Charles Ergen

With LightSquared’s debt trading at around 50 cents on the dollar, Charlie Ergen went shopping.

Ergen has been involved in the satellite business for decades. Today, he controls and runs Dish Network, a satellite television provider that has seen the back of high customer growth. Dish and DirecTV are both locked out of the “triple play” business most cable and phone companies offer customers. Neither company can offer broadband or telephone service without partnering with another provider. As cord-cutting continues to take hold, customers willing to pay for increasingly expensive television packages are in decline. That likely explains Ergen’s interest in acquiring wireless spectrum — to build Dish into a broadband, television, and telephone service provider.

In May, Dish publicly bid $2.2 billion for certain spectrum assets from LightSquared. But for more than a year earlier, Ergen was quietly buying up LightSquared’s debt through holding companies and hedge funds.

Ergen created an opaque investment entity named “SP Special Opportunites, LLC” a/k/a “Sound Point” to buy LightSquared debt. Separately, Ergen asked Stephen Ketchum, a former investment banker with close ties to Ergen, to buy over $1 billion in LightSquared debt securities through Ketchum’s hedge fund. From April 2012 until May 2013, Sound Point allegedly spent $1,013,082,326.30 to purchase secured debt for Ergen’s personal benefit and without the knowledge of Dish or its board of directors. Secured debt held by creditors is paid first in a bankruptcy proceeding, and Ergen quietly because LightSquared’s largest single secured creditor.

That puts Charlie Ergen in a major ethical dilemma.

The more Dish offers to pay for LightSquared, the more money Ergen will be paid to cover the shares of LightSquared’s secure debt. Ergen has a controlling interest in Dish, which means he can order Dish to overpay for LightSquared, personally pocketing the proceeds.

Bloomberg’s Matt Levine explains the shady deal:

“An executive going around and buying up an asset for cheap, then convincing his company to buy all of that asset for a higher price – doesn’t come up a lot because it’s so obviously shady,” Levine wrote. “If you’re supposed to be devoting your time and energy to finding opportunities for your company, it looks pretty bad to steal those opportunities for yourself.”

Falcone was outraged when he learned of Ergen’s stealthy acquisitions.

Ergen

In July, Harbinger accused Ergen of “fraudulently” becoming a creditor to block efforts by LightSquared to reorganize and emerge intact from bankruptcy. Instead, Harbinger accused Ergen of seeking to acquire the company’s assets “on the cheap.” Harbinger also points to provisions in a LightSquared debt agreement that forbids certain competitors from buying the company’s debt.

Also upset are several major Dish Network shareholders who are not pleased Ergen’s private deal could make him a lot of money while costing shareholders plenty should Dish overpay for LightSquard’s assets or worse, end up with everything but the spectrum Dish covets.

At least five lawsuits have been filed since August, accusing Ergen and other board members of casting their fiduciary duties to the wind and wasting money along the way. They are also upset Ergen and his connections purchased $1 billion in LightSquared debt at a substantial discount and will likely be repaid the full face value of those debts with Dish Network’s money. That means nearly $300 million in personal profits for Ergen.

The latest shareholder lawsuit was filed by the Louisiana Municipal Police Employees’ Retirement System. It along with the suit filed by the City of Daytona Beach Police Officers’ and Firefighters’ Retirement System claim Ergen’s near-total control of Dish’s board of directors makes it impossible for the board to meet its obligation of representing shareholder interests first.

“Ergen’s control over the company and the board is highlighted by the numerous transactions he has caused Dish to enter into with members of his family,” the lawsuit states.

Ergen and Dish’s efforts to insulate themselves from charges of conflict of interest didn’t fly with many investors.

One lawsuit noted Tom Ortolf, one of the directors on the supposedly independent committee reviewing Dish’s bid, has a daughter that works at Dish; the other, George Brokaw, chose Mr. Ergen’s wife, Cantey Ergen—a Dish director named in the shareholder suit—to be the godmother of his son.

The discomfort level at Dish reached high enough to prompt one board member, Gary Howard, to suddenly resign in early September. Howard was also on the committee formed to vet the LightSquared deal because of the potential conflict of interest on Ergen’s part.

Before Falcone could claim the high road at Ergen’s expense, this week New York’s top financial regulator banned Falcone from managing Fidelity & Guaranty Life Insurance Company of New York for seven years. Harbinger Group bought Fidelity & Guaranty, the U.S. life and annuity unit of London-based Old Mutual Plc, for $350 million in 2011.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg LightSquared 9-5-13.flv[/flv]

Bloomberg News discusses the high drama between LightSquared and Dish Network. (4 minutes)

Comcast has expanded its 300GB usage cap to Internet customers in Huntsville and Mobile, Ala. and Charleston, S.C.

In these cities the XFINITY Internet allowance includes a $10 penalty for each 50GB segment customers exceed the arbitrary allowance. Alabama and South Carolina join customers in parts of Georgia, Kentucky, Mississippi and Tennessee now subject to a usage allowance.

Comcast is also offering a new Flexible Data Option for Economy Plus customers that use less than 5 GB per month.

Customers who do not want the new usage caps can register their displeasure by calling Comcast Customer Security Assurance at 1-877-807-6581, contacting the local news media, or writing to your federal elected officials.

The shutdown of non-essential government services that began early this morning apparently also applies to non-human digital data at the Federal Communications Commission, because employees heading home on furlough from the federal agency brought down the agency’s website on the way out the door and replaced it with a basic page that looks straight out of 1986:

The melodramatic response to the impasse in Washington was not repeated by most other federal agencies.

The web site for the EPA is still up and running with a subtle banner indicating it would not be updated until the shutdown was resolved. The same is true at the Department of Education, the Department of the Treasury, the EEOC, HHS, and the Department of Labor, to name a few.

Even the government-funded Voice of America, Radio Free Europe-Radio Liberty, Radio Free Asia, Radio/TV Marti, and Radio Sawa are all soldiering on, despite the loss of about 60 percent of the staff at the Broadcasting Board of Governors.

But VOA News did outsource its editorial column on student issues to China. A Chinese student studying in the United States compared the U.S. government’s financial-related actions in Washington with those in Beijing.

Instead of worrying about contacting the FCC or other government agencies in an emergency, we suggest you instead use the contact form on this website. As America saw last week, he has plenty of time to spare.

*-Terms, conditions, and a whole lot more applies.

Austin residents are getting spoiled with promises of gigabit broadband — the first major city in the country offered a competitive choice of 1,000Mbps Internet providers — Google and AT&T.

But one of those claiming to offer a “100-percent fiber Internet broadband network that will deliver up to 1Gbps per second,” is already fudging on that commitment before activating its first fiber customer.

AT&T’s sudden interest in selling 1,000Mbps service came as a surprise to Austin residents that have been told for years their broadband service was fast enough as is. Grande Communications had been the choice for customers seeking the fastest speeds — they sell up to 110/5Mbps for $110 a month. Time Warner Cable still tops out at 50Mbps and AT&T’s U-verse, still not fully deployed in Texas, sold up to 24Mbps ‘screaming fast’ Max Turbo service as its top offering until recently, when AT&T began limited roll-out of up to 45Mbps service.

Mere hours after Google announced Austin as its next choice for Google Fiber, “me-too” AT&T was announcing it would build its own gigabit fiber to the home network in the same city. That was a complete 180 for AT&T, which has consistently argued that running fiber to the home was an unnecessary expense. While Verizon faced the wrath of Wall Street for its decision to launch FiOS — an all-fiber-network — analysts were complaining Verizon was spending too much while AT&T was spending considerably less on its fiber to the neighborhood U-verse system that keeps existing copper wire into the home.

Right from the beginning, AT&T has always accompanied certain terms and conditions for any fiber deployment — winning equal concessions that Google received from local officials with respect to pole attachment fees, zoning, permits, and other expenses. If those were not forthcoming, AT&T could walk away from its fiber commitment at any time.

On Monday, AT&T announced it had started deploying fiber for AT&T U-verse with GigaPower, with a plan to launch in December in neighborhoods with the highest number of votes to get the service. AT&T is taking names and numbers of interested customers seeking to show their interest in fiber service. No deposit or commitment is required to vote, but you will be placed on AT&T’s marketing mailing lists.

“Austin embodies innovation and social consciousness, and is the heart of a vibrant, ever-evolving tech culture and entrepreneurial spirit,” said Dave Nichols, president of AT&T Texas. “With our all-fiber U-verse services, we are building the foundation for a new wave of innovation for Austin’s consumers, businesses, and civic and educational institutions. It’s about engaging the full community and empowering the city and its people with all that technology can offer us. This investment will help attract new business and new jobs to Austin.”

Phillip Dampier

As long as those consumers, businesses, and jobs are within the first deployment zone for AT&T’s fiber network.

For the rest of this year and well into the next, that will be a very exclusive neighborhood.

AT&T’s press release claims it will “initially reach tens of thousands of customer locations throughout Austin and surrounding areas this year, with additional local expansion planned in 2014.”

The five-county Austin–Round Rock metropolitan area has a population of 1,834,303 residents. Assuming AT&T managed to offer fiber service to 100,000 residents — and that is a generous figure, that represents only 5.5% of Greater Austin. The old U-verse is still a work in progress in several Texas cities, so it could take years for AT&T to deploy fiber in Austin. Expect AT&T to start with the low-hanging fruit — multi-dwelling units such as apartments, condos, and other similar buildings, some that already have existing fiber connections in place.

AT&T may never get around to offering fiber to more rural locations in Austin’s suburbs: “There are many factors involved in stringing an advanced fiber network, so having your neighbors vote to be notified about U-verse with GigaPower is no guarantee we’ll get to your neighborhood first, but it does give us some idea of where we want to focus our efforts; and besides, things are always more fun when we work together.”

AT&T is already backing away from its commitment to offer gigabit service, at least initially.

“The December launch will initially feature symmetrical speeds of up to 300Mbps, […] with an upgrade to speeds up to 1 Gigabit per second when available in mid-2014, and at no extra cost,” AT&T writes in its press release.

Speaking of cost, nobody at AT&T is willing to give us one for the 1,000 300Mbps launch tier.

If AT&T is smart, it better set it lower than what Google is likely to charge, considering AT&T will initially only deliver less than 1/3rd of the promised gigabit speed.

While thinking about that, AT&T might also want to dump usage caps. The fastest U-verse tiers come with a 250GB usage allowance, which can really crimp a screaming fast fiber experience once your allowance runs out.