The economic planning agency of the People’s Republic of China says it suspects the country’s two dominant telecommunications companies — China Telecom and China Unicom — have created a cozy duopoly between themselves and are overcharging consumers for broadband Internet access.  That’s a fact of life many Americans and Canadians are also familiar with, but in China, regulators are preparing to do something about it.

The National Development and Reform Commission is launching a comprehensive investigation in response to a torrent of complaints from customers that both companies are charging high prices for Internet access and delivering slow speeds.

“With such a dominant position in the market they practice price discrimination, raising prices for companies that are competing with them while giving discounted prices to non-competitors,”  said Li Qing, deputy director of the price supervision and anti-monopoly department of the NDRC.

Although some large Chinese cities now have access to broadband service at speeds far faster than what American and Canadian consumers can purchase, the Chinese government agency tasked with ensuring compliance of the country’s anti-monopoly laws reports most Chinese consumers buy slow speed, high-priced DSL.

China still follows a Communist political philosophy, but has entertained capitalist free market reforms within the state-planned and managed economy.  Too often, the result has allowed state-owned enterprises to leverage their size and status to create unfettered oligopolies.  As government controls and oversight ease, marketplace abuses have become rampant, often at the consumer’s expense.  Government subsidies for the super-sized, state-owned companies have also made private sector competition more difficult.

The Xinhua News Agency notes the two dominant broadband companies in China control 90 percent of the marketplace.  China Telecom, the state-owned phone company, was directed in 2002 to open its network to private Internet Service Providers who can purchase Telecom’s wholesale broadband service and resell it to consumers.  But Telecom simply boosted prices for wholesale access, pricing many would-be players out of the market.  Some companies complained they would have to charge double or triple the rates China Telecom charges itself for the same level of service.

Liu Zheng, information director for business solutions at the research company Analysys International, told the Global Times that the probe may reduce costs for small operators and eventually benefit consumers.

“I don’t expect a reshuffle in the market,” Liu said. “Penalties won’t lead to decrease of their market share. It’s more of a warning to the two operators.”

Both companies are listed on the Hong Kong Stock Exchange and shortly after news of the investigation reached shareholders, both suffered heavy losses in share prices.

Verizon Communications, a highly-profitable multi-billion dollar corporation, has not paid a penny in taxes for the past three years.

That charge comes from a new report issued by two non-profit groups that want America’s tax burden spread more fairly.

“Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010,” released by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, scrutinized financial reports from nearly 300 profitable Fortune 500 companies.

At least 30 companies — including Verizon — were found to have maneuvered their way through corporate tax breaks and incentives, exporting revenue offshore, and other creative accounting to avoid paying a cent in taxes over the period.

Some of Verizon’s unionized workforce, fighting company efforts to curtail benefits and reduce pay, call the news a disgusting development.

“We wouldn’t mind if Verizon wasn’t paying taxes if they used the money saved to invest in American jobs,” said Myles Calvey, business manager of the International Brotherhood of Electrical Workers union Local 2222. “Instead, while they dodge paying taxes in the U.S., they’re eliminating jobs and opening centers in Mexico and India. They wonder why the union hates them.”

Verizon disputes the findings, which do not allege the company broke any laws while trying to reduce the company’s tax bill.  In fact, American corporations have exported billions of dollars to offshore bank accounts specifically to avoid America’s corporate tax rate.  Some of those companies, including Verizon, now want the government to provide a special discount on corporate taxes in return for an agreement to repatriate corporate earnings.

Phil Santoro, a Verizon spokesman called the report “union-orchestrated” and says the company isn’t avoiding taxes, it is deferring them through government incentive programs designed to boost the economy.  The company also says it invested $16.5 billion over the time period in infrastructure expansion.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CNN Companies Avoid Taxes 11-3-11.flv[/flv]

CNN reports on the growing number of American corporations that no longer pay taxes thanks to special tax breaks and incentive programs available only to them.  (3 minutes)

Genachowski

The cable industry is expanding so-called “lifeline Internet service” to more households in an effort to combat what a government agency calls “a persistent digital divide.”

Next spring, Time Warner Cable, Cox, and Charter Communications will launch low-speed Internet service for $9.95 a month for two years.  The offers will echo Comcast’s Internet Essentials, which launched earlier this year as part of a deal with the government to win approval of the cable company’s merger with NBC-Universal.

The Federal Communications Commission calls the effort “Connect to Compete,” and suggests the public-private initiative will help rural Americans and low-income minorities get affordable Internet access. A study by the National Telecommunications and Information Administration found just 55% of black households and 57% of Hispanics currently subscribe to broadband.  More than 72% of Caucasian households and more than 81% of Asian homes use broadband by comparison.  The rural southern states of Mississippi (52%), Arkansas (52%) and Alabama (56%) have the lowest broadband penetration rates in the country.  In contrast, more than 80% of Utah residents have broadband in their homes.

“In this difficult economy, we need everyone to be working together on solutions,” FCC Chairman Julius Genachowski said. “Broadband is a key to economic and educational opportunity and these kinds of commitments to close the digital divide are powerful.”

But not every poverty-stricken American will qualify for the discount programs.

Cable operators are following Comcast’s lead, restricting access to families with at least one school age child enrolled in the free school lunch program.  Customers must not have existing broadband service during the last 90 days and customers with past due balances cannot sign up.  Don’t have children or fell behind on your cable bill?  No discount Internet for you.

Pilot programs will be launched by each operator in around a dozen cities total starting next spring, with plans to roll programs out nationally by the start of the 2012 school year.  Broadband speeds, usage limits, and other fees were not disclosed.  Comcast’s Internet Essentials operates at 1.5Mbps with upload speeds up to 384kbps.

Comcast’s program sells a netbook computer loaded with Windows 7 Starter Edition for around $150.  The $250 computers expected to be provided by Microsoft will include Windows 7 Home Premium operating system and Microsoft Office.  An additional vendor will sell refurbished computers to interested program participants for around $150.

The program will primarily reach urban residents who cannot afford current Internet service plans that are sold for $40-45 a month.  Rural residents are unlikely to benefit much because most cable operators do not deliver service in rural areas.

CenturyLink announced its own version of discounted DSL Internet in October to sell for $9.95 a month, but with numerous “gotcha” fees and surcharges.

One group unlikely to take advantage of the program: older householders, particularly those ages 65 and older, where just 45% have broadband at home.  The biggest reason the rest don’t?  They don’t believe they need the Internet at any cost.

This ad was ruled misleading by an Australian judge because it buries the extra costs in the fine print.

One of Australia’s largest Internet Service Providers used misleading advertising to offer “unlimited broadband” for $29.99AU that hid the extra costs that came with the deal.

TPG Internet is well-known across Australia, and the company pitched its unlimited offer across newspapers, television, radio, and even movie theaters.  Consumers were offered unlimited Internet access — still a rarity in Australia — for just over $31US a month.  But when those interested phoned up TPG, they found the great deal had some significant costs:

1. An installation fee of $129.95AU.
2. Consumers had to purchase a home phone rental agreement for an additional $30 a month.

Australian consumer law mandates that providers disclose any up front, required costs to take advantage of a promotion, and TPG blatantly disregarded the law, the justice found.

Justice Murphy said the dominant message of TPG’s ads was that consumers would only pay $29.99 a month, not a substantial setup fee and phone line rental that doubled the price.

The Federal Court justice added that the desire for unlimited Internet service was so great, consumers were likely to sign up for unlimited plans even if their monthly usage was low enough to save money with a usage-limited plan.

“There is a tendency in some consumers to purchase the biggest, the best, or the highest quality product or service, seemingly regardless of whether that service is appropriate to their needs,” Murphy ruled.

The judge plans to meet with the offending ISP to discuss an appropriate penalty for the breach in advertising standards regulations.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/WBGH Binghamton Verizon Supports Occupy Binghamton 10-28-11.mp4[/flv]

Verizon employees in upstate New York are joining the “Occupy” movement that began protesting Wall Street, but has since broadened to include criticism of some of America’s largest corporations.  Company employees are arriving at “Occupy” protests holding signs attacking the company for “destroying the middle class” through job and benefit cuts.  The protests are also impacting cable operators.  Several arrests were made this week by protestors at Comcast headquarters in Philadelphia.  Most of the protestors are concerned about jobs and the pervasive influence corporate lobbyists have on American public policy.  WBNG in Binghamton covers the protests against Verizon.  (2 minutes)