Image: Bloomberg News

Elections don’t have consequences if you happen to be a favored board member overseeing Cablevision.

For the third time in four years, the cable company has decided to keep several board members that shareholders voted against.

Vincent Tese will keep his board seat despite the fact 54.8 percent of shareholders wanted to show him the door. Leonard Tow was given a thumbs-down by almost 52 percent of voters and Thomas Reifenheiser squeezed by with a margin of just 0.5 percent.

Tese and Reifenheiser failed to win a majority of shareholder support in 2010, 2012, and again last month, but they will keep their board seats because Cablevision’s other board members said so. The zombie board members may be dead to those who hold shares in Cablevision, but as long as the board can collectively override shareholder wishes, they can stay.

That prompted New York City comptroller John Liu to recommend shareholders vote against all five Class A directors this year, because they are responsible for allowing the losing board members to stay.

“Shareowners delivered a stinging rebuke to the five Cablevision directors we opposed for being ineffective and unaccountable, including majority votes against two of them,” Liu said. “Both Mr. Tese and Dr. Tow, should immediately step down. In Mr. Tese’s case, this is the third majority vote against his directorship in the past four years. Enough is enough.”

“As fiduciaries, we can’t sit by and let the board make a mockery of our fundamental right to elect directors,” Liu added. New York City owns more than 530,000 shares of Cablevision stock, part of the pension fund portfolio Liu oversees. “Share owners need accountable directors who will ensure the company isn’t being run for the benefit of insiders at our expense.”

The New York Times reports shareholders have plenty to grumble about:

Over the last two years, while the Standard & Poor’s 500-stock index has rallied to a new high, Cablevision shares have dropped from more than $36 a share to under $15, where they were trading this week. Yet Cablevision’s chief executive, James Dolan, earned $16.9 million last year, and his father, Charles, earned $16.6 million as chairman — an unusually high amount for a chairman who is not serving as chief executive. Both payments were about 50 percent higher than the year before. In addition to their compensation, the two Dolans get a full-time car and driver as well as access to a helicopter and jet for personal use. Institutional Shareholder Services noted there was a “disconnect” at the company between performance and executive pay.

Mr. Tese, Mr. Ryan and Mr. Reifenheiser make up the compensation committee of the board, which approves the Dolans’ compensation.

Mr. Tese, a former chief executive of the New York State Urban Development Corporation and former director of economic development for New York State, was also Bear Stearns’s lead director before its collapse in 2008 and served on its finance and risk committee. “Given the significant lack of oversight provided by Mr. Tese during his tenure at Bear, particularly in the area of risk management, we believe he should not continue to serve on any public company board,” the proxy advisory service Glass, Lewis & Company said last year. Mr. Tese is a member of four boards, including that of Madison Square Garden, which was spun off by Cablevision and is also controlled by the Dolan family.

Mr. Ryan and Mr. Reifenheiser were both members of a special committee that approved an ill-fated proposed buyout of the company by the Dolans in 2007. Independent shareholders blocked the deal on grounds that the Dolans’ offer was self-serving and too low. “Its improvident support by the special committee is among the reasons we have lost confidence in Messrs. Reifenheiser and Ryan,” Mr. Liu wrote in his recent letter to the company.

Last year, Cablevision paid Mr. Tese $233,967, Mr. Ryan $247,508 and Mr. Reifenheiser $220,786 in cash and stock, according to the company’s proxy statement.

Not so fast, says Cablevision spokesman Charles Schueler.

“These directors have served Cablevision shareholders well and we look forward to their continuing contributions. Our shareholders know that Cablevision is a controlled company and they understand the rules by which our directors are elected.”

Back in the fall of 2010, British billionaire Alki David fired a salvo against major broadcast networks in the United States and United Kingdom with the introduction of FilmOn, an online cable system offering unlimited viewing of broadcast networks from both countries for around $10 a month. By early 2011, lawsuits from various networks forced the removal of the most-watched channels, and most of the incentive for subscribers to keep paying for the service.

But David has never given up on FilmOn, and borrowing a page from Aereo’s business plan, he has brought back most of the major American networks on his relaunched platform, dubbed AereoKiller.

The company claims it is now using individual over-the-air antennas to receive broadcast stations from the New York or Washington, D.C. area, selling 24/7 streaming access for $9.99 per month or $99 a year. DVR service is sold at prices ranging from $2.95 a month to $190 a year, depending on the number of hours recorded.

Among the stations included:

New York

• WCBS (CBS)
• WNBC (NBC)
• WNYW (FOX)
• WABC (ABC)
• Bounce TV (via WWOR subchannel)
• WPIX (CW)
• WNET (PBS)/WNET-Kids
• WNJU (Telemundo)

Washington, D.C.

• WRC (NBC)
• WTTG (FOX)
• WJLA (ABC)
• WUSA (CBS)

There seem to be no geographic restrictions to prevent out of area viewers from subscribing, and FilmOn offers viewing on the desktop, as well as through iOS and Android apps.

David

FilmOn may have avoided streaming west coast stations because a California court found in favor of broadcasters who sued to shut down the operation three years earlier. But it ultimately will not keep David’s upstart service out of the courts in the east.

Last week, three major television networks and Washington, D.C. station owner Allbritton Communications filed suit against FilmOn for streaming signals from the nation’s capital without permission.

Based on the track record of earlier ventures, customers may want to avoid subscribing at the annual package price. Historically, broadcasters have fought and won temporary restraining orders that block the streaming services until the case makes its way through legal proceedings. Aereo, which streams New York area television stations exclusively to New York City customers has proven the exception and continues to run, at least for now.

Broadcasters consider stopping “dime-sized” antenna farm streaming services like Aereo and AereoKiller a top priority, because networks and local stations earn lucrative retransmission consent rights fees from cable, satellite, and telco-TV providers used by at least 90 percent of the viewing audience. Should these alternative technologies be found legal and not in violation of copyright, pay television providers could potentially license and incorporate similar technology into their respective set-top boxes and avoid paying license fees to station and network owners.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/FilmOn Introduction 5-13.mp4[/flv]

FilmOn’s introductory promotional video features some boastful claims from founder Alki David that are perhaps more wishful thinking than reality, but PlayOn has persisted despite broadcaster lawsuits by creating and distributing original live and recorded programming.  (8 minutes)

All Arcadia, N.Y. town supervisor Dick Colacino wanted was for Time Warner Cable to consider using some of their profits to expand their cable system by one or two roads a year to offer service where it has earlier refused to go.

Time Warner Cable’s response? No.

But Time Warner might turn that “no” into “yes” if customers offer to cover the cable company’s estimated cost of $22,000 per overhead mile to extend cable service down ignored rural roads. Underground wiring costs much more.

Every year, elected officials in just about every small town and village get an earful of complaints from bypassed residents who cannot get cable broadband service.

Arcadia (pop. 14,900) is a small community in Wayne County, east of Rochester. Time Warner Cable dominates western and central New York, with cable service from Albany west to Buffalo. In Wayne County alone, Time Warner is the only cable provider in the 23 largest municipalities. But the company has routinely skipped over potential service areas it considers not worth a wiring investment. That leaves bypassed residents with one choice for broadband — Verizon Communications, which has not expanded DSL service in the area for some time.

The New York Public Service Commission has mandated that cable service must be available to any area where 35 homes per mile are located within 150 feet of the road.

Time Warner representative Chris Mueller says the cable operator has already cut that benchmark to 20 miles per home, but areas remain that do not meet even that reduced standard. Without an appropriate return on investment within a certain time frame, Time Warner Cable won’t wire those areas for service.

Colacino told Mueller he was very unhappy with that decision and intended to pursue the matter at franchise renewal time, possibly in coordination with other communities that also have a number of bypassed residents. A community can negotiate for changes during franchise renewal talks, but in almost every case, the incumbent cable operator holds the strongest position, knowing a community looking for another provider will be unlikely to find one willing to serve.

Colacino has battled with the cable company since at least 2010 because of complaints from area residents and businesses who cannot get service.

That year, a Time Warner Cable government affairs representative offered Colacino a novel solution to the problem — agree to refund collected franchise fees to Time Warner Cable, after which the company would consider using the money to expand service to more roads in Arcadia.

The only problem with that solution is that it is illegal.

“You can’t do that,” town attorney David Saracino responded. “It’s an unconstitutional gift of public monies.”

Despite findings from an independent consultant that reported West Virginia wasted millions on a broadband expansion effort that effectively built a private, taxpayer-funded fiber network for Frontier Communications, the governor’s office abruptly canceled a 2011 follow-up state audit of the $126.3 million project.

The Charleston Gazette reports Gov. Earl Ray Tomblin’s office said it dropped the audit because Frontier “answered or addressed” issues raised in a memo produced by an out-of-state independent consulting firm.

ICF’s document was so scathing of the state government’s handling of federal broadband stimulus funds, the governor’s office kept it secret until a copy was independently leaked to the Charleston newspaper. The governor’s office said it initially withheld the “internal memorandum” produced by Vienna, Va.-based ICF International because it proved “embarrassing to some people.”

Among ICF’s findings:

• Taxpayers underwrote the construction of a Frontier Communications’ owned and operated fiber broadband network so fragmented in its construction, the only entity likely to benefit is Frontier Communications;
• ICF found West Virginia’s broadband grant program created an “unintended monopoly” for Frontier Communications, and an unusable ‘open access’ network except for Frontier;”
• Frontier’s documentation and expense reports, submitted for reimbursement by taxpayers were inadequate and could have resulted in double billing;
• Frontier overbuilt its network with excessive numbers of fiber strands three to six times above industry standards, driving up construction costs.

Frontier’s called the ICF report “worthless” and accused the consultant of using inaccurate and stale comments that repeat “previously repudiated allegations.”

Frontier also produced its own company-sponsored “external audit” of its work on the $126.3 million broadband project that found “no material deficiencies.”

But ICF says it is standing by its report, and documented instances where the state authorized Frontier to spend significant sums to build fiber connections to community institutions that were later scaled back by the company. Whether Frontier was paid for the originally scheduled work, or for the scaled back construction eventually completed, is unknown.

At this point, ICF reports it is resigned to the fact Frontier will be a major beneficiary of the taxpayer-funded fiber infrastructure and the state has few options to fix the problems they created. The consultant firm says the only workable option would be a joint effort by Frontier’s competitors to build, at their own expense, a “middle-mile, open-access network” that can interconnect with Frontier’s taxpayer-funded network, assuming Frontier will allow it.

A major critic of the broadband stimulus program in West Virginia, Citynet President Jim Martin, has long said the broadband project was primarily going to benefit Frontier.

In September 2010, Martin told the Gazette, “Frontier is going to have the state’s business forever. No other company will have the money to come in and build the network.”

Two months later, Martin was back ringing the alarm bell before more than $126 million in taxpayer funds were spent.

“The state represented it would build a ‘middle-mile’ network reaching 700,000 homes and 100,000 businesses, and it would be this great new superhighway and do all the things the federal government is seeking,” Martin told the Gazette. “But afterward, Citynet and others got to look and it looks like it is a windfall for Frontier Communications only.”

“We’ll ultimately prove this was a complete sham and didn’t benefit anybody,” Martin said. “We’re here. We’re not going anywhere. We totally recognize this is going to be a long battle unless the Broadband Council or the new governor or the next governor does something. We’re going to be on this for however many years it takes. We’re going to hold the state accountable for every single dollar they’re spending. At the end of the day we will show that no jobs were created, there’s no benefit to the citizens of West Virginia. Hopefully we’ll show this was all about Frontier.”

Three years later, Martin is still trying to get accurate broadband maps that depict exactly where Frontier has laid its publicly funded fiber infrastructure. Apparently they are secret, too.

“I will be dead in the ground before Verizon gets around to restoring my phone line, and I have been their customer for 72 years,” says Irene, 95, one irate now-ex Verizon customer in New Jersey.

She, like many others, lost her Verizon landline during Hurricane Sandy and has waited for its return ever since.

“She has the patience of a saint, but if Verizon was in charge of admitting people beyond the Pearly Gates, there would be a line stretching endlessly across the heavenly clouds,” shares Irene’s daughter Agnes.

Irene and her late husband had their telephone hooked up by Verizon’s predecessor three days before Pearl Harbor. For the non-history initiated, that was Dec. 4, 1941.

President Franklin D. Roosevelt called Dec. 7, 1941 a Day of Infamy. Irene’s family calls Oct. 29, 2012 “The Day After Infamy” after Hurricane Sandy slammed ashore in the northeast and wiped out phone service up and down the tri-state coastal area. She is still waiting for her dial tone to return on her 1972 rotary dial phone.

“Everyday I pick it up just to see if there is anyone there, and of course there isn’t,” Irene tells Stop the Cap! “I used to worry about the cat knocking the phone receiver on the floor, but it does not make much difference anymore.”

Irene cannot understand why Verizon is allowed to get away with such shoddy service.

“Just a few years ago, if your phone was out for three days you would have a supervisor apologizing and sending repairmen out even if their supper was waiting on the table getting cold,” Irene remembers. “Those days are over I suppose.”

Irene lives with her daughter in a home that escaped the worst of the storm, but unfortunately her phone service was not so lucky. Verizon has not provided fiber optics in her part of New Jersey yet either, so FiOS is not an option.

“You call Verizon and they are very apologetic on the phone and keep writing up service calls, but unfortunately nobody ever comes and nobody will tell us anything,” Agnes said. “We even tried praying, but Verizon answers to a different God.”

Irene’s great-grandchildren visit with cell phones in hand and cannot understand why Irene still bothers with her home phone, and the family purchased her a cell phone for Christmas to use in the interim but Irene has thrown it in a drawer.

“My phone has been with me since Richard Nixon was in the White House and it is all I have ever needed or wanted,” Irene says. “Agnes will answer the cell phone and hand it to me but the sound on it is terrible, like everyone is in the shower when they are calling.”

Agnes also dials outgoing calls for Irene, and her grandchildren helped her compose the e-mail sent to Stop the Cap! asking if we could help.

“My kids told me Verizon has installed these wireless boxes and screwing them into the wall and I don’t want that,” Irene insisted. “I just want them to fix the phone line and leave it be.”

Irene adds she has paid The Phone Company more than her fair share during the last seven decades.

But during a recent emergency family meeting, a decision was made to deal with a half-year of the “Verizon Problem” once and for all. After corresponding with us, they are signing up for Comcast phone service instead.

“The man at Comcast said I could keep my current phone and I don’t have to have an ugly box screwed into my wall, which suits me fine, but they should know I don’t care for their prices or all of that nonsense they put on the television.”

Comcast installed the family’s phone service yesterday and all is well, at least until the cat knocked the phone off the hook again.

Irene asked her last name be omitted for privacy.